The best analogy I can think of for communicating the value of a segmentation strategy is the gun range. Now, I’m not a gun guy, but bear with me.
An un-segmented marketing strategy is like trying to fire an uzi one-handed while facing away from the target. Bullets are going to go everywhere, spraying indiscriminately (and dangerously) around the room.
Segmentation, on the other hand, is like lying down and resting a sniper rifle on a tripod, relaxing your body and breathing in and out – eye trained down the sight and with no pressure.
I’ve never fired a gun in my life, but I’m confident even I could hit the target in those conditions.
What is segmentation?
Market segmentation is the act of subdividing your market or contacts into groups with similar characteristics, needs, or interests who are likely to exhibit similar purchase behavior.
Segmentation increases everything from email open rates to customer loyalty. It’s incredibly effective in all areas of your marketing and sales funnel (but I’ll be giving you a few segmentation strategy use-cases below, so be patient for a second).
There are two primary kinds of segmentation:
- Explicit Segmentation: Characteristics of a lead or customer which are given clearly to your business either through conversation, lead generation, or purchase behavior.
- Implied Segmentation: Characteristics of a lead or customer which are implied in their actions, demographics, or purchase behavior.
A few examples to make those a bit clearer:
Explicit segmentation would be things like…
- Customers who bought in the past 6 months.
- Leads who selected B2B as their industry type in a landing page.
- Customers who live in Canada.
Implied segmentation would be things like..
- Customers who downloaded the Guide to Landing Pages, and are likely to be interested in that subject.
- Leads who viewed our pricing page twice in two days, and are likely to be interested in buying.
- Customers who purchased a wet suit, and are likely to be interested in watersports.
Why you need to be careful of explicit segmentation…
People are more complicated than what they look like, their gender or their geographic location. You know that.
The difficulty arises, of course, because segmentation is generalization. We’re generalizing that a selection of our merchants who act and behave a certain way represent a larger whole – and we’re budgeting for that generalization.
Yet (particularly with explicit segmentation) this can be dangerous. For instance…
On the surface, we could say that all 40-something mothers with a high yearly income will be interested in receiving advice about healthy cooking strategies. We could create an entire marketing strategy around that assumption: create content which nurtures 40-something mothers towards an annual subscription to receive organic, local food on a bi-weekly basis.
Except some 40-something mothers don’t like to cook.
But should that stop me from segmenting by explicit characteristics?
No, of course not. You can’t please everybody all the time. If you find that a statistically significant indicator of interest is having a couple kids and a six figure income, then run with it.
I just want you to be aware that segmentation is only so powerful, and (as with literally every marketing strategy out there) testing is a crucial element.
What are you looking to achieve through segmentation?
There’s no point in segmenting your business’ contacts unless you can establish how to alter your marketing strategies based on that segmentation.
Here are a few things you need to identify about a segment once they’ve been defined:
- Establish their beliefs and attitudes towards your business or your industry (if they’re not familiar with your business specifically).
- Establish what drives them to choose a business that supplies your product or service.
- Establish what interest they’re likely to have in specific elements of your product or service.
- Establish what marketing channels are likely to be effective in targeting them.
- Establish if there are details which might be more easily measurable than your current model. (i.e. Can we simply ask leads for explicit characteristics than define their segment from implicit actions?)
The 5 Characteristics of a Strong Segment:
For segmentation to be useful, it has meet these five requirements:
#1. Focused but significant:
There’s no point in segmenting so specifically that creating a tailored marketing program for that segment would yield a negative ROI. Your segment should be “the largest possible homogeneous group worth going after.”
Segments must be easily distinguished from each other, as well as likely to respond differently to different marketing approaches and strategies.
Segments must be structured such that the knowledge aids your business’ marketing goals.
There’s no point in segmenting your SaaS customers by hair color, as the information is useless to you. Equally, there’s no point in segmenting your hair salons’s customers by the size of their business.
It must be possible for a marketing team to create strategies which will effectively attract and serve the segment.
Stability of a segment is paramount in executing a long-term strategy for it. If your segment is likely to change in composition or purchase-inclination over time, the effort you put into marketing to that segment is less likely to succeed than if that segment is stable.
Sources; (Kotler, 2004 & Ederewhevbe, 2013)
- Land or region
- Rural or metropolitan area
- Age, sex, marital status
- Income, occupation, education
- Religion, nationality, ethnicity
- Social status
- Personal type
- Intensity of product use
- Brand loyalty
- User behaviors
- Intermediary or final consumer?
- Type of corporation (public or private sector)
- Size of corporation
NOTE: When segmenting by demographics, many businesses fall into the trap of believing (as they’ve already segmented) no further segmentation is needed. This is particularly prevalent when we’re talking about businesses doing business abroad or towards one gender – where the obvious segmentation is “often overemphasized and inappropriate.” (Source)
Segmentation Strategy Statistics:
Email Segmentation Statistics:
Global Segmentation Results
When Mailchimp measured segmented email campaigns across their entire platform, these were their results:
14.64% higher than non-segmented campaigns
10.68% higher than non-segmented campaigns
59.99% higher than non-segmented campaigns
0.02% lower than non-segmented campaigns
6.15% lower than non-segmented campaigns
7.46% lower than non-segmented campaigns
Segmentation by Date Added/Signup Date
When they measured those segments that were organized by the date the lead or customer was added to the list (used most effectively to track inactives/recents), these were their results:
26.27% higher than non-segmented campaigns
23.14% higher than non-segmented campaigns
54.65% higher than non-segmented campaigns
78.71% higher than non-segmented campaigns
29.49% higher than non-segmented campaigns
32.84% higher than non-segmented campaigns
Segmentation by Interest
When they measured by emails sent based on a lead or contact’s interests (see above), these were their results:
11.08% higher than non-segmented campaigns
6.74% higher than non-segmented campaigns
74.53% higher than non-segmented campaigns
13.70% lower than non-segmented campaigns
19.63% lower than non-segmented campaigns
321.22% lower than non-segmented campaigns
Email Segmentation Takeaways:
Segmenting by the interests of your leads and customers seems to be the most effective segmentation strategy for email marketing. This makes sense though, right?
Wouldn’t you rather receive emails based on what you actually care about. Isn’t not doing that the definition of spam?
Segmentation by interest improves those metrics which matter most to email marketers: increasing click-through rates by 74.5% and reducing unsubscribe rates by a whopping 321%.
Sales Case Study:
In 2011, UK gym Beaumont’s was looking to increase membership and meet their bottom-line annual objectives.
The gym set out to “map the existing member addresses to identify catchment areas […] and then profile these members against the Sport England market segmentation.” This enabled the gym to know “where people who join Beaumonts live and what ‘type’ of people they were. [Creating] a clear target market to promote to.”
Previously the gym used generic adverts to engage with all 400,000 households in its general local area. Segmenting that area enabled them to send “highly targeted postcards to the top 15,000 local addresses of non-members who were profiled as likely to join the gym.”
The ROI report demonstrated that an initial investment of £7,000 in this campaign resulted in over £40,000 of new annual income from more than 250 new prep-paid members – an ROI of over 450%, with evidence to prove the direct impact of this campaign.
Complete Walkthrough of Implied Segmentation Use-Case
I’ll actually use a Wishpond example for this, as it’s one I’m confident works.
If your company engages in inbound marketing, which many modern businesses do, you will have created content which touches on every element of your product or service.
For Wishpond, we continually create email-gated content built around lead generation, lead nurturing and marketing automation (the three pillars of our platform). But, after conducting polls and conversations with our users, we recognize that many people come to us for only one of those services.
So a fantastic way for us to better nurture our leads into sales is to segment them based on which of those three services they’re most interested in.
Below is an example of a leads list built by combining all the leads who convert on email-gated content related to landing pages:
Creating a list like this one allows me to do all sorts of things, from send interest-specific newsletters or interest-specific promotional emails to better optimize onboarding strategies and inform my customer profile down the line.
To learn more about creating and optimizing email-gated content, check out my Complete Guide to Gated Content. To learn about how you can nurture your leads based on interest segmentation, see 5 Behavioral Lead Nurturing Ideas & Examples.
Complete Walkthrough of Explicit Segmentation Use-Case
Not all potential customers are created equal. Some, we have to admit, are worth a bit more investment than others.
And when you attract a high-value potential customer, the last thing you want to do is let them slip through the cracks because you weren’t paying attention.
Firstly, you need to get the information from your lead about their high-value. The simplest way to do this is ask. Below is a simple lead-gen form which includes company size as one of its fields:
By the way, if you’re interested in creating beautiful, mobile-optimized, no-code-required, landing pages,
Once you’ve gathered this valuable lead information, you need to do something with it.
Firstly, create your segment:
This sets the conditions of your list to be “leads who are part of large, high-value businesses, but have not yet signed up for our platform.”
And here’s a few strategies for automatically taking action on these high-profile leads with marketing automation:
- Send an internal email to your sales associate, prompting them to send a custom email or set up a call.
- Send a series of personalized (but templated) emails over the course of a week, prompting high-value leads to convert sooner than later.
Wrapping it Up
Hopefully this guide has given you a bit more insight into the value and practice of implementing a marketing segmentation strategy.
My chief recommendation is to measure your segments carefully. Read over those five primary characteristics of a strong segment again and ensure your meeting them all: large enough to be worth your energy but small enough to respond uniquely to stimulus.
And let me know if you have any questions in the comment section below!
Read more: Marketing Well Done
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