It Pays to Incorporate Segmentation

This year at our annual Integrated Marketing Summit, I taught a workshop discussing the ways retailers should incorporate segmentation to boost topline sales and increase bottom-line profits. Segmentation and relevancy would also help to counteract the continued decline in open and click-through rates as indicated in our annual benchmark report below.

As the volume of emails continues to rise year over year, key customer conversions percentages continue to suffer as a result, but revenue continues to climb.

The paradox of email marketing is that by adopting a “one-size-fits-all” approach of sending mass emails typically results in a “one-size-fits-none” outcome, despite revenue remaining strong. I would argue that brand engagement (and enjoyment), even though stable, will continue to decline without segmentation and personalization. The average person receives approximately 75 emails each day with competition in the inbox. It’s no longer enough to send emails for the sole purpose of keeping in touch. While it is essential to keep the broader organization in mind, maintaining a laser focus at the individual customer level is foundational for success. By the way, maintaining this relentless focus on the individual customer level is vital for your other marketing channels, too.

Is Email Marketing Really Evolving?
At this year’s Summit, Ross Kramer, the CEO of Listrak, discussed four key levels that retailers will fall into (see below). While email volume has exploded over the last decade, sadly the evolution of email strategies and tactics have not. According to Ross, nearly 80% of retailers are stuck at level 1 with few retailers graduating to Level 2 or above. In this article, we will discuss the importance of segmentation strategies to move your brand into Level 2.

All About the Data
As direct marketers know, data is our lifeline! And this is where tried and true direct marketing programs can be invaluable for any email marketing program. In our world, segmentation and relevancy increase engagement metrics, decrease fatigue, and thereby improve ROI. Recency, frequency, and monetary (RFM) values are still the ideal way to understand customer behavior, and remain today the most frequently adopted segmentation techniques in direct marketing.

Amongst the three RFM measurements, recency is the most important. Frequency and monetary could be considered as functions of each other by adding a secondary and tertiary dimension to rank customer behavior.

The simple hypothesis of this approach is that people who most recently and frequently engage with your business will be the most likely to buy again (have not churned) from your business.
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