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Marketing: Segmentation and Targeting

Marketing: Segmentation and Targeting

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Marketing eBook - Segmentation and Market Targeting
Marketing eBook - Segmentation and Market Targeting

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Published by: Hrvoje Repak on Apr 21, 2013
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Creating Engaging Email

:
Segmentation and Targeting
By David Daniels, The Relevancy Group LLC Authored By David Daniels, CEO, The Relevancy Group LLC

eBook 2 of 5

Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Executive Summary:
With all of the marketing messages that bombard consumers each day, segmentation is a necessary tool to improve message relevance and stand out in the crowded inbox. This Alterian eBook, the second in a series on how to Create Engaging Email, will leverage The Relevancy Group’s Connected Marketing Framework and data to provide proven subscriber segmentation and targeting tactics. This eBook provides marketers with cutting edge tactics on how to further customer relevance with a myriad of segmentation and targeting tactics that have proven to improve results for marketers across industry segments. This eBook offers insight not only into segmentation schemes, but also into the operational tactics to marry them to welcome, win-back and buyer re-activation campaigns. Additionally this eBook provides a guide to create an engagement index as a tool to discover customer segments, as well as introduces strategies to identify the best and worst performing segments as well as methods on how to engage with them. Furthermore, this eBook touches segmentation strategies across every channel that define the brand and influence the customer’s experience. David Daniels, CEO, The Relevancy Group LLC

Table of Contents
• • • • • • • • • Page 4 – Many Marketers Are Missing Key Segmentation Opportunities Page 6 – Ensure Your Data Is Available and Organised For Segmentation Page 8 – Use a Variety of Segmentation Strategies to Improve Message Relevance Page 14 – Use Sequenced and Triggered Messaging to Improve Subscriber Targeting Page 16 – Identify Key Performance Indicators and Create an Engagement Index Page 20 – Email Marketing Is A Science Balanced By Art And of Relevance Page 22 – Alterian – Turning Email Relevance into a Science Page 24 – About The Relevancy Group Page 25 – About Alterian

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Many Marketers Are Missing Key Segmentation Opportunities
The Relevancy Group surveyed 674 email marketers in the US and UK in April 2010. We asked them what data attributes they use to segment their audiences to target their email marketing mailings. While more marketers are using geographic and demographic data, which are the data cornerstones to direct marketing, far fewer are using import data attributes such as email click behaviour (see figure 1). More than half of the marketers are missing key segmentation opportunities that will improve the relevancy and results of their marketing campaigns. Marketers must use easily accessible data such as open and click data in their segmentation strategies in order to not only improve message relevance but also begin to win back subscribers that are showing null/lapsed behaviour. The Relevancy Group data indicates that many marketers continue to mail to the same subscribers over and over again regardless of their engagement, treating all customers the same way. This type of blasting approach will hardly catch the attention of the busy multi-tasking subscriber and as marketers we must identify subscriber segments based on their level of engagement.

Many marketers ARE MISSING KEY SEGMENTATION OPPORTUNITIES

60% 50% 40% 30% 20% 10% 0% 50% 48%

44% 38% 31% 31%

Geographic Data

Demographic Data

Customer Satisfaction Survey Data

Email Click Behaviour

Customer Profitability

Social Influence Rate

Segmentation attributes used by marketers to target email marketing messages

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Ensure Your Data Is Available and Organised For Segmentation
Marketers need to ensure that the organisation has collected data consistently across all touch points throughout the organisation to normalise the data that is collected. Although subscriber acquisition was written about in great detail in the first Creating Engaging Email eBook “Driving Customer Acquisition” it is important to ensure that data is organised in a way to improve subscriber segmentation and targeting.

Understand language and subscriber location: Use the country domain information that is embedded in the email address, or simply ask what the customer language preference is. This is vital when launching localised language versions of your web-site for use in foreign countries. Having language associated with this data will allow you to tie it to the most appropriate foreign language character set when your message is deployed.

Use a unique customer identifier other than email address: Using a customer record key other than the client’s email address will allow you to have a unique number to roll up a variety of customer data, including their twitter, LinkedIn or Facebook profiles or other types of customer data. For example when linking to offline customer data, or enlisting address correction or appending services, it will give you a unique identifier to match the customer record against in the event the subscriber uses a different email address than the one you have on file. Additionally this will provide the ability to household the customer or email addresses. That is, rolling up a number of customers that are residing at the same address or a variety of email addresses related to an individual customer. This is becoming increasingly necessary as the majority of consumers have multiple email addresses. Standardise the collection of subscriber information: Collect the same amount of information and the exact same type of information from your customers and prospects at every different acquisition source. This ensures that you will be able to normalise your segmentation schemes across all of those customers.

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Use a Variety of Segmentation Strategies to Improve Message Relevance
The following are segmentation strategies that can be applied to business to business or business to consumer email marketing programs. These segmentation techniques can be used in a singular fashion or layered together to create rich detailed audience segments.

For example, a luxury cosmetics retailer found that, while they were building their list, 20% to 30% of these subscribers were inactive. They used a clever subject line “Are You Breaking Up With Us” which, while edgy, was brand appropriate for them. The creative in this mailing featured two primary attributes: 1. A free colour consultation in one of their stores 2. A poll that allowed the user to select one of three choices that best described their affinity to the brand While they saw about 10% of this inactive segment finally show some signs of life to the offered content, this ‘lapsed’ subscriber’ behaviour further helped the retailer to identify which subscribers were now ‘back to life’ and most importantly which offers and sentiments most resonated with them. The cosmetics retailer was able to prove that reactivating even just about 10% of their lapsed subscriber saved the company hundreds of thousands of dollars. This calculation was based on typical new customer acquisition costs for them which they then compared to the cost and effort it took to execute such a reactivation effort. Clearly, click based segmentation is useful as it can be used on prospects as well as on customers

Focus on Behaviour: Subscribers’ behaviour should be central to your segmentation strategy. Create engagement rules (e.g. number of subscribers clicking on at least one link during past three or four mailings vs. those clicking more frequently and those not clicking at all). This approach will create a behavioural segmentation framework to drive subsequent mailings and remarketing campaigns, providing an effective means of targeting. Email clickthrough behaviour is an important segmentation attribute as you will clearly identify those subscribers that are not engaged with your mailings or who are dormant or lapsed customers. You can then take appropriate marketing actions not only to win them back but also to potentially remove historically unresponsive customers from your list so that they don’t create inbox delivery issues. Tailoring your message to the list of subscribers that are not engaged is a good tactic to spur those subscribers into action using popular methods such as sending them polls, contests or more discount laden messages, as these messages typically garner higher open and click through rates.

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Implement Classic Recency, Frequency and Monetary (RFM) Segmentation Schemes: Used as a segmentation scheme in direct marketing for decades, RFM segmentation and audience analysis is an excellent way to segment customers based on how much they have spent, how frequently they are ordering from you and how recently they last purchased from your company. Creating segments of buyers based on the RFM scores, such as value and time periods, is necessary to target customers that fall outside of your typical average order values. Using this segmentation scheme is a clever way to target customers with discounts and incentives to drive customers into the next more profitable segment of customers. For example, this was something I used with great success at Micro/Mac Warehouse, which for the last decade has been a major part of CDW. Even in the dawn of the online economy at Micro/Mac Warehouse, well before the CDW operations, we used the RFM segmentation approach to discern our 1 month, 6 month and 12 month buyers. Segments that fit each element had bearing on not only the mailing frequency (online and offline), but also the level of discount or offer that was used to support the call to action. We would test this. For example, while we typically charged $3 for overnight shipping, we would offer a dollar or percentage off the order once the order was greater than the average order value for that segment. I can’t go into more details other than to say that in the early 1990’s that company booked approximately $200 million dollars and then there was the IPO that surpassed $1 billion dollars in the 1990’s, culminating in the final sale which manifested into CDW. RFM subscriber segmentation was the basis of this marketing strategy.

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Social Attribution and Influencer Segmentation: It is important to segment subscribers by their social influence. The ability to listen to what consumers are saying about your brand in the social sphere and also to identify them can be a powerful segmentation attribute. Recognising your brand advocates as well as detractors and marketing to them accordingly can drive advocates to further evangelise your brand or repair relationships with disenchanted customers. Data from The Relevancy Group in an April 2010 survey suggests that less than half of marketers are actually making efforts to understand and value subscriber social contribution. While there are many examples of brands understanding the value of creating a worthy social marketing program (see Oreo’s Double Stuff Wars), few companies have or will go on record about how much social segmentation is driving client acquisition and worth. Why? Typically because the real cost of acquiring a client via social as well as through other well documented corporate channels is quite simply un-documented and messes with corporate/public accounting. Also social acquisition and fanning the flames of your brand’s social influence fire can be so effective that it makes other sources and channels look less so. Using social data as a segmentation attribute is the easy part, selling its worth to corporate is not, and is a whole different topic altogether.

Leverage Web-Analytics Data as a Segmentation Attribute: While integrating and harnessing web analytics data can be a daunting task, it can provide insightful behavioural data for segmenting and targeting subscribers. Focus on specific web analytics data to make this a more meaningful task. For example, one retailer was having problems selling a particular line of sweaters and they were going to have to liquidate the goods. They turned to their web-analytics solution and identified email subscribers that had viewed these sweaters but not purchased them. The retailer sent a targeted email to these subscribers featuring the sweaters at a discount and was able to move through the inventory without having to liquidate them for pennies on the dollar. Additionally marketers can use this same approach in targeting visitors that abandoned items in their shopping cart.

Segment Subscribers Based on Preference Center Data: Clearly the ability to use demographic information such as gender and location can be a meaningful way to segment subscribers, but stated subscriber preferences can also be very effective for segmentation and targeting tactics. For example, one pet supply retailer asks their subscribers during the registration process if they consider their pet to be part of the family. Those subscribers that state “yes” typically purchase more supplies and do so more frequently. This simple question is a primary segmentation attribute that this retailer uses to target these subscribers with appropriate emails that drive purchase behaviour. Given the rise of Group Commerce and the expected growth of hyper-local social attitudes in places and check-ins, it is imperative for marketers to collect location and combine these with preference data. Beyond the commerce opportunities that it may present, geographies are necessary for understanding the correct rules of permission and operational opt-in/opt-out regulations that guide marketers working across national boundaries.

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Use Sequenced and Triggered Messaging to Improve Subscriber Targeting
Given the marketing department’s typical resource constraints, marketers must use triggered and sequenced messages that utilise existing segmentation schemes. Welcome campaigns are one example of these types of sequenced campaigns, and we covered tactics for building an effective welcome campaign in the first Alterian eBook. Here are several other examples of sequenced and triggered messages.

Map out continuity campaigns for leverage: An ancillary benefit of using sequenced strings of messages is that much of the work involved in creating individual messages within campaigns to be reused (needs to be reworded). Coupling this approach with a behavioural segmentation strategy will enable you to craft mailings triggered by behaviours and/or events, thus reusing messages designed for other subscribers. This approach can also be applied to some transactional and service opportunities, such as follow-up cross-sell offers or customer surveys that get triggered after these events occur. Automotive and equipment manufacturers such as HP will often time their message not only to where the subscriber is within their lifecycle, but also within the lifecycle of the product or service they are selling. Tie campaign triggers to product lifecycles: Understand the lifecycle of your products and services and trigger mailings around the different stages of that product lifecycle. For example one bank sends mortgage rate notices for those subscribers who have opted in to get their mortgage information. However the bank only sends these messages for 45 days, because they have found that this is the lifecycle for when people are in market for a mortgage. These product lifecycle mailings can also be tied to subscriber segments that have indicated interest in these products either through their stated preferences or by their online web-site behaviour.

Tie subscriber life-stage to sequenced messaging: Based on segments that are established from subscriber demographics, these segments can be used to steer relevant messages that map to the customer’s life-stage. The ability for the marketer to adjust creative elements that are targeted to certain subscriber demographics will improve the relevance of the message and the message’s ultimate performance. For example, one of the two major US auto makers changes the creative for their welcome message email based upon the age and demographics of the user. A request for vehicle information from one segment may render the creative image of the vehicle with surf boards or skis on the roof, while to a different segment it may show an older couple riding through the lovely fall colours of New England. Content remains king and this approach to life-stage sequenced messaging require marketers to tie content to segments in the most relevant manner.

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Identify Key Performance Indicators and Create an Engagement Index
In order to identify segmentation schemes that are working and measure their effectiveness, it is important for marketers to measure key performance indicators. Marketers can then use these KPIs to create an engagement index which not only measures the overall engagement of subscriber segments, but also influences the index more broadly to identify the most desirable segments that need further marketing attention. In other words, this tool will not only allow you to simply measure the here and now of your audience’s engagement, but will also provide a pulse meter for the overall health of your email list. This engagement index must be viewed as a living tool – a living document that allows you to focus on segments that may need less or more attention to drive the desired action. An engagement index is essentially a score tied to the performance of your mailings; whether that particular index is trending ahead or behind of its usual performance will indicate what operational actions need to be taken to drive the KPIs to their standard level of performance or greater. These detailed measures can be a meaningful way to identify segments for targeting or re-targeting.

To produce an engagement index, you must create KPIs that detail performance across three distinct categories: Barometer measures, engagement measures and infrastructure/list measures. • Barometer measures are metrics that show at a high level the performance of a mailing and include the following measures: • Aggregate open-rate (number of total times the message was opened) • Aggregate click-through-rate • Revenue generated per subscriber • Average order value • Click to conversion rate • Profit margin per mailing

• Engagement Measures are more specific to subscribers and include: • Unique open-rate (a subscriber oriented view of the open rate) • Unique click-through-rate • Unique conversation rate • Unsubscribe rate • Forward rate • Infrastructure/List measures detail the operational performance of your list and include: • Opt-in rate • Value of email subscriber or address over time • Address churn rate • Complaint rate • Delivery rate • Bounce rate • Unknown user rate

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Combining these measures into one macro engagement index will help in trending the performance of your mailings over time. The index is designed to be a simple number that goes up or down based on the indexing of the aforementioned metrics. Ensure Behaviour is Monitored and Used in Subscriber Segmentation Schemes: A common mistake the majority of marketers make is that they continue to mail to their lists over and over again without removing inactive addresses or taking any substantial action to reactivate these addresses. Since it is costly to acquire new email addresses, you must have your reactivation strategy and tactics well laid out in advance to ensure that at worst you are simply back-filling dormant addresses on your list and at best are doing such a good job that your list continues to grow even with this churn. Use the following tactics to spur dormant subscribers into action:

Monitor subscriber behaviour: Understand the unique click rate of your subscribers so that over time you can monitor if your list is becoming more or less engaged. Target subscribers that are failing to click: Use discounts, surveys and sweepstakes, if it is appropriate for your brand, to drive dormant subscribers into action. Use other channels: The call center and other in-person interactions can be a valid means of re-engaging your dormant subscribers, but also consider direct mail. Many retailers will mail letters or post cards to subscribers asking them to reconfirm or update their email address. Purge addresses: While this might seem like a nonsensical thing to do, given the negative effects on deliverability that emailing a massive number of inactive subscribers can have, you must at some point shed those addresses from your list. After you have tried these reactivation tactics and the address shows no interaction for a period that exceeds 10 to 12 months, you should consider removing them from your list altogether.

Repeatedly Emailing Inactive Addresses Won’t Work
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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Email Marketing Is A Science Balanced By Art And of Relevance
At The Relevancy Group, we are often asked how we define relevance. We define relevance as “the intersection of content and context that is metered by frequency.” So what does that mean? To be relevant, clearly you need to understand the context. What is context? Well, these are the strategies and tactics that we have provided here in this eBook, the notion of known and unknown; of discovered and undiscovered … the notion of knowledge of your audience’s interaction with your company or brand. The better you can measure and understand this context, the more it will accelerate your ability to segment your audience into a fabric that is not simply just buckets of subscribers, but buckets that are wrapped in a fabric of action. Segmentation is largely a discovery endeavour which for many of us may seem as captivating as a black and white film with foreign subtitles, but it is these frames, these segments, “these buckets”, that once found, will drive interaction. Interaction points that are discussed in this paper relate to sequenced messaging around those segments, which would be the action portion of the film. Full of colour, full of explosions … the dialog is light, the correct marriage of segmentation and operational targeting in the form of sequenced messaging should be measured in explosions – in action, in conversion. One of the hidden gems within this eBook is the engagement index recipe, and I urge you to determine not only your index – are your subscribers alive or not, but to use this to meter your relevancy stake and perhaps your email fate. As leading marketers, you must understand and measure attitudes, behaviours, spending and engagement. Your ability to achieve success relies on your ability to segment and understand your audience against these measures.

No doubt as you continue your journey to acquire knowledge and skills that inform your marketing prowess, you will want to watch for upcoming eBooks in this series, as well as download the previous ebooks, if you haven’t already. Each of them will tackle different challenges that marketers face when driving their email marketing efforts, such as
• • • •

Driving Subscriber Acquisition Measuring Email Performance Leveraging Web-Analytics Harnessing Social and Mobile

Visit http://email.alterian.com/resources/creating-engaging-email/ for updates on the ebooks David Daniels CEO, The Relevancy Group

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

Alterian – Turning Email Relevance into a Science
As a marketer, delivering highly relevant emails to your audience should be your number one goal. Email provides one of the most measurable ROIs of all marketing channels, and has long been the backbone of on-line marketing campaigns. However, many brands feel that delivering relevant email is guesswork. Hard guesswork. Once upon a time, there was no choice. Not anymore. We’re proud to partner with David Daniels, as we share the same approach to segmentation and targeting: The belief that only by harnessing data from across the organisation – not just email clicks and web analytics, but by integrating the transactional, attitudinal, and other data contained in CRM applications and other databases – can marketers deliver relevant emails that are valued by their audience at an individual level and deliver results.

In his summary, David wrote about understanding the context of your audience based on their behaviour and characteristics and he gave a number of aspects for marketers to consider. We’d add a couple of other aspects for you to consider:
• •

Device preference (email isn’t just the inbox anymore, is it?) Personalisation (beyond first name and number of loyalty points)

It’s no use segmenting and targeting your audience if you can’t then provide dynamic content to them based on those segmentations, down to the individual level in the hundreds of thousands. The best customer service is provided by understanding and delivering on your customer’s explicit and – more importantly – implicit preferences. Want to learn more about implicit preferences? Visit email.alterian.com to see example of the amazing results that can be achieved from delivering on implicit preferences. Want to understand what you can do? Give us a call on +1 312 704 1700

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Creating Engaging Email: Segmentation and Targeting

Creating Engaging Email: Segmentation and Targeting

About The Relevancy Group
The Relevancy Group is dedicated to educating the market on the imperative tactics needed to foster trust with consumers and improve an organisation’s relevance within the broader online economy. Working with the leading vendors and associations serving the household names that comprise our economy, The Relevancy Group acts as an educator and trusted advisor in the aim of optimising cross-channel marketing strategy and tactics. For more information, please visit: www.relevancygroup.com. www.relevancygroup.com. David Daniels, CEO, The Relevancy Group – Bio According to Direct Magazine, David Daniels is “one of the most influential experts in email marketing, if not the most influential.” Until January 2010 he served as Vice President and Principal Analyst with Forrester Research and JupiterResearch. David is co-author of the book “Email Marketing An Hour A Day” and has been a contributor to the Weekend Today Show on NBC. David has held senior level positions at Apple Computer, Urban Outfitters/Anthropologie, Micro/MacWarehouse, ProTeam and CDA Computer Sales.

About Alterian
Alterian (LSE: ALN) enables organisations to create relevant, effective and engaging experiences with their customers and prospects through social, digital, and traditional marketing channels. Alterian’s Customer Engagement solutions are focused in four main areas: Social Media, Web Content Management, Email, and Campaign Management & Analytics. Alterian technology is utilised either to address a specific marketing challenge or as part of an integrated marketing platform, with analytics and customer engagement with the individual at the heart of everything. Working alongside a rich ecosystem of partners, Alterian delivers its software as a service or on premise. For more information about Alterian visit www.alterian.com or the Alterian blog at www.engagingtimes.com.

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North American Headquarters T +1 312 704 1700 Corporate and European Headquarters T +44 (0) 117 970 3200 Continental Europe Headquarters: T +31 (0)35 625 7890 Asia-Pacific Headquarters: T +61 (2)9968 2449

Website: www.alterian.com Email: info@alterian.com Twitter: @Alterian YouTube: www.youtube.com/user/EngagingTimesLive uStream: www.ustream.tv/channel/alterian-s-engaging-times-live LinkedIn: linkedin.com/company/alterian SlideShare: www.slideshare.net/Alterian iTunes: Alterian’s Leadership Series Blogs: www.EngagingTimes.com www.TheMarketingMojo.com www.ConnieBensen.com

© Alterian 2010. All trademarks belong to their respective owners.

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