List segmentation can feel scary for a small business. There’s usually little time to try new things when the old ways seem to “work just fine.” However, small businesses can easily take advantage of simple list segmentation to ensure they are leveraging customer interactions with their previous e-mails and past buying behavior. Most small businesses have easy access to this information.
Many e-mail service providers offer list segmentation tools that allow for more targeted e-mail campaigns. But small businesses often become overwhelmed by the task of creating list segments that will drive results — which segments will get the highest open rates and how do I entice unresponsive subscribers?
Small businesses can leverage simple segmenting options such as the tried-and-true RFM method. RFM, simply put, takes into account how recently a customer has purchased or interacted (recency), how often they purchase (frequency), and how much the customer spends (monetary). With e-mail marketing metrics you have even more data to work with when using the RFM method.
So let’s take a look at a simplified segmentation. Divide your lists into the following nine buckets. First three for recency: people who have purchased, clicked on or opened an e-mail 6–12 months ago, 3–6 months ago and 0–3 months ago. Then, three for frequency: people who have purchased, clicked on or opened an e-mail 1–3 times, 3–6 times and 6–12 times. Finally, three for monetary: Define low-, medium- and high-spending individuals over their lifetime.
Now take a cross section of each. For example, Segment 1: recency 0–3 months, frequency 6–12 times, monetary value high; Segment 2: recency 3–6 months, frequency 3–6 times, monetary value medium; Segment 3: recency 6–12 months, frequency 1–3 times, monetary value low.
Once you have your segments, track how differently they react to your messaging with opens, clicks and purchases. If you usually give a 50% discount on your products because you don’t segment your list, you may find certain segments will drive the same revenue without any offer. For example, if testing the above scenario shows that Segment 1 still drives the same revenue with no offer, you could save your offers to win back Segment 3 with aggressive discounts.
If you’re segmenting by clicks, and you find that Segment 2 has higher open and click rates than Segment 1, this might suggest that your e-mails to new customers are ending up in the junk folder. Or perhaps your customers like to be communicated with every quarter instead of monthly.
Janine Popick is CEO and co-founder of VerticalResponse. Reach her at [email protected]