by Adam T. Sutton, Senior Reporter

Marketers have proven that targeted messages can improve performance in almost any channel. In email marketing, targeted messaging begins with segmentation.

Only by understanding the differences in your audience can you move away from batch-and-blast emails and toward targeted content. Targeted emails connect more directly to subscribers' interests and convince them to open, engage and convert more often.

"It is dramatically effective," says Wendy White, Senior Marketing Strategist, Global Media Division, Acxiom. "If someone is not segmenting, then they are leaving money on the ground. There is gold in segmentation; diamonds."

The value of segmentation has been proven through case study after case study, but some marketers struggle to get started. We've pulled together six steps based on tactics from four experts and data from MarketingSherpa benchmark reports to show you how.


Step #1. Convince your team it's worth it

Segmenting your database will require resources. Whether you need money or a few man-hours, you will have to convince co-workers that your plan is worth the investment.

- Prepare for the skeptics

Arthur Hughes, Founder of the Database Marketing Institute, has encountered resistance to segmentation in some companies. This resistance is due to the affordability of email and the false impression that email is equitable to direct mail.

"The whole point of segmenting in direct mail is to avoid paying postage for people who are not going to respond, and saving yourself $0.40 or $0.50 a piece to put stuff in the mail. But email is so cheap, there are no savings by eliminating some people," Hughes says.

However, email marketing is not direct mail marketing. There are hidden costs to sending irrelevant emails, Hughes notes. A steady stream of generic messages can encourage recipients to ignore emails or mark them as "spam." This can undermine the quality of your entire program. Be sure to explain this to any skeptics.

- Arm yourself with info

Do your homework and present skeptics with case studies on companies in your industry that improved their email programs through segmentation. Some email service providers publish such case studies, and MarketingSherpa has published quite a few, as well. You can also recruit someone from your ESP to help support your case.

- Outline the process

As you'll see below, the experts we interviewed emphasize that marketers should start small with a single segment. One benefit of this approach is that it signals to your team that you are avoiding a massive project.


Step #2. Prepare the key components

Three assets you'll need to effectively segment:

- Email database

Segmentation relies on data. You do not need an elaborate database with 50 fields of information for each subscriber, but you need more than a list of email addresses. Even the most basic data, such as whether your subscribers are prospects or customers, is enough to get started.

"If you are tracking opens and clicks, you have enough information to dramatically improve your performance of your emails," White says.

If you do not have enough data, then you need to start collecting it. Here are a few places among the many you can pull from:

o CRM system
o Subscriber preferences center
o Third-party data append services
o Your ESP's tracking data

This chart from the MarketingSherpa 2011 Email Marketing Benchmark Report shows the most popular types of data collected on subscribers and the percentage of marketers who use them.




Click here to see a larger version of this chart


- Testing process

The goal of segmenting your database is to send targeted messages. The only way you can be sure your messages will improve performance is to test them against a control group. Unfortunately, only 39% of email marketers routinely test emails, according to the report.

- Content

Each new segment you target can multiply the amount of content you need. This is true whether you are altering a single email for each segment, or launching targeted newsletters. This is another reason to start small.

"Once you get into segmenting, you start to realize you don't have one list. You have a bunch of little lists that you had previously been managing under one roof, and so you break those out and you start to treat them as individual campaigns," says Justin Premick, Director, Education Marketing, AWeber.


Step #3. Select your starter segments

Just in case we have not been clear, we want to emphasize this point: start small. Segmenting and sending targeted content is likely to expand your usual routine and require more resources. You want to be comfortable with the changes before scaling up.

- Two basic segments

An "absolute best segment for every industry" does not exist. Marketers have used many successful segments, and not all of them are relevant to your company. The experts we interviewed suggest that first-timers start with one of these two options, both of which require minimal data.

1. Active vs. inactive

This approach separates the people who enjoy receiving your emails from the people who are less interested. For example, you can separate subscribers who have clicked an email within the last three months from those who have not. Then you can test different messaging or frequency options for the inactive subscribers who are hurting your response rates.

"This is a really basic segmentation that I advise clients on," says Ryan Tuttle, VP, Strategic Services, BrightWave Marketing. "If a user hasn't clicked on an email or opened it in several months, even if they haven't unsubscribed from the list, they are emotionally unsubscribed and they need to be treated differently."

2. Converters vs. non-converters

For an e-commerce company, this approach can be used to separate subscribers who have purchased (customers) from subscribers who have not (prospects).

"If it's for lead generation, then it's downloads versus non-downloads for a whitepaper, or sign-ups versus non-signups for a webinar," says Hunter Boyle, Senior Manager, Business Development, AWeber. "They're going from potential action to confirmed action."

- Tag the groups and monitor

Once you pick an approach, you do not need to dive into targeted messaging. A safe way to start, White says, is to tag the people in each group and monitor their performance over a few weeks. This can help reveal the preferences of each group.

This approach can also show where to set the boundaries for a time-based segment. For example, if you're interested in segmenting by activity level, you can assign tags to users who have opened and clicked an email within the following time periods:

o 0-3 months
o 3-6 months
o 6-9 months
o 9-12 months
o 12-18 months

"There will be a natural break where, after a given time, openers and clickers will stay active," White says, and that can be where you establish the segment.


Step #4. Send test messages to the segments

Every expert we spoke with emphasized that you need to A/B test your emails to tailor your messaging for each segment. Testing will reveal the best approach for each group.

What you choose to test should depend on your overall program and the tools and resources available. For example:

- Do you regularly send promotional emails?

If so, you can test sending promotions only to the subscribers for whom they're most relevant. This will help you avoid over-emailing subscribers who are less interested in the message, which helps protect your sender reputation.

"Who you send an offer to is more important than what the creative is," White says. "I would strongly advise marketers to focus on their lists and then their offer and then their creative."

- Do you have a newsletter, and is it in a flexible template?

If so, you can test changing some of its content to more closely align with each segment's preferences. This can require far fewer resources than launching a new newsletter for each group.

- Gradual approach is safer

It can be helpful to gradually increase the amount of targeted content you send. This will help you invest resources wisely.

For example, "we will send out one email [to a segment] and then maybe a second one if we're getting interest," Tuttle says. "Then, if we start to get good results, we'll put them into a regular email cycle. The trick here is to not send too much email, because if that person is still getting the general promotional information and the niche promotional information, they could get flooded."


Step #5. Segment new subscribers on arrival

Many of the tactics we have discussed deal with segmenting current subscribers. For subscribers entering your program, you should start on the right foot by segmenting them at the outset.

Make sure your registration pages and preference center allow subscribers to declare which segment they belong to. You can do this by asking them to select a topic, product, industry or other area of interest.

- Meet their expectation

Subscribers who declare their interests will expect you to send targeted content. If you're asking for this information, make sure you can deliver on it. Failing to meet the expectations you have set is likely to hurt response rates.


Step #6. Choose a path forward

Do not dive off the deep end once you have improved results within a targeted segment. You should gradually establish new segments to avoid drowning your team.

Only by analyzing what you know about your customers and looking at your data can you identify the best way forward. However, marketers have discovered that certain types of segments tend to outperform others, as you can see in the chart below from our benchmark report.




Click here to see a larger version of this chart

Clearly, more marketers report that segmenting by subscriber behavior is more effective than personalizing emails or segmenting by sales cycle. Behavioral segmentation is a broad category and can be based on data such as:

o Purchase date, frequency, or volume
o Email engagement rate
o Sales team engagement
o Topic of interest, as determined by click activity
o And other data

Also, keep your eye out for emerging segments. For example, some of Tuttle's B2C clients have databases where 15% of their emails are opened on a mobile device.

"It's getting to the point where that 15% is a significant enough portion of the database that we need to start thinking about giving those users different content because they're behaving differently on their smartphone than they are on their computer."


Useful links related to this article

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MarketingSherpa 2011 Email Marketing Benchmark Report

Email Marketing: Good preference centers can hold onto subscribers even as they change

Email Marketing: Two ways to add relevance, and why you must be correct

Email Relevance Kaizen: 4 categories of data beyond the email database

Email Marketing: Finding the time to improve results

Members Library - Email Relevance: 8 tactics for leveraging timing, segmentation and content

Members Library - Email Marketing: Segmenting a database and delivering more targeted content without overwhelming your team

Members Library - 'Mind Type' Segmenting Lifts Email Donations 42.5%: 6 Steps to Find Subscribers' Underlying Motivations

Members Library - How Segmenting by Best Customers Raised Revenue 300%

Acxiom

AWeber

BrightWave Marketing

Database Marketing Institute