Businesses are constantly looking for shortcuts to generate growth without needing to spend a huge budget. One surefire way to do this is through customer segmentation. It’s been estimated that marketers who send segmented campaigns see as much as a 760% increase in revenue.
If you have never heard the term “customer segmentation,” it’s the practice of grouping your existing customers (and email subscribers) together based on criteria that you define. Examples of this include the amount of money they’ve spent, the number of orders they’ve placed, where they’re located, or how they’ve interacted with your brand in the past (i.e., opened an email or clicked on an email). By grouping these customers/subscribers together based on common characteristics, it’s easier to personalize marketing to that specific audience, which, in turn, will lead to greater revenue growth.
How does customer segmentation work?
Pretend that you are a sock brand, and due to the rising advertising costs and small profit margins coming from your product, it is becoming more difficult for you to make profit on the sale of socks to first-time purchasers. As a result of this, you need to tap into your existing marketing subscribers to drive these first-time purchasers to hit your sales goal for the month.
By using customer segmentation, you can build a segment of subscribers that have interacted with your brand (as in, they have clicked on or opened an email from your brand) in the past 60 days but never made a purchase from you. This particular segment indicates that these subscribers have some interest in your brand but need an extra push to get them over the finish line to completing a purchase.
What are the benefits of customer segmentation?
After you have created this segment, you can market to your customers more efficiently, through email, for example. The key benefits of this segmentation strategy for the sock brand include:
- The ability to deploy a personalized message speaking to why your socks are different from other socks. Keep in mind that you know that these subscribers have already shown interest in your brand (given that they have opened or clicked an email), but they may need a bit more convincing to get them to make a purchase. Now is your time to personalize your message and sell these subscribers on why they should purchase them.
- The ability to offer a special promotional code to this segment of subscribers. This will eliminate marketing a generic site-wide 30% off sale to all site visitors. By sending this segment a targeted offer through email, you will be preserving valuable margins by eliminating promoting a sale to existing customers who may have purchased from you anyway, regardless of whether or not they had a discount code.
Leverage your existing data to drive growth
One of the more important aspects of segmentation is that you are leveraging your existing data to build segments. You do not need to go out and purchase or acquire more data—you simply are leveraging what you already have to drive more revenue. And once you build a segment, that segment is dynamic, meaning that every time one of your subscribers/customers fits the definition of your existing segments, they’ll automatically be pulled into that segment, which will make it easier for you to create marketing for this segment again in the future.
Customers’ expectations have evolved in that they expect the brands they shop with to know their preferences. As a result, they have come to expect the messages and offers they receive to be tailored to their preferences And that’s why segmentation can drive value to your business, whether you have 100 subscribers or 100,000.
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