Segmentation allows companies simultaneously to lower marketing costs and increase sales. The results speak for themselves. I have seen segmentation benefit many media firms and publishers. Actual outcomes include:
- 50% increase in email conversion
- 10 point increase in profit margins
- 15% increase in sales
- $300,000 reduction in marketing spend without affecting sales
Segmentation involves finding groups of similar people within your audience so you can target them in the way they want to be targeted. It means narrowing your focus rather than trying to be everything to everyone.
But doesn’t focusing on a narrow piece of the market limit my sales?
No! This is a common concern. Many are afraid to zoom in on a subset for fear that it will reduce chances of success. The opposite is true.
One company I know segmented their database and focused only on their most engaged fans. They reduced the number of customers targeted from 6 million to 2 million and sales went up!
If this still makes you nervous, remember once you figure out the best way to target one niche, you can move on to the next one, then the next one, etc.
Why does it work?
By focusing on a segment, firms can precisely dial in on the needs and wants of their target audience. Content becomes more relevant. Voice and tone resonate. Marketing campaigns convert.
Once you develop an understanding of the target market, you can do a better job at making tradeoffs. For example, let’s say you have resources to implement only five out of ten possible features or campaigns. If you have a good grasp on your target, you can prioritize options based on that target’s preferences.
How Do I Segment?
The four primary ways to segment your customer base are: behavioral, demographic, psychographic, and geographic. I go into detail on each of these in this article.
We have a portfolio of segmentation techniques we use with clients, depending on their size and desired objectives. For something straightforward and inexpensive just to get started, try this approach to segment your email list.
- Create a spreadsheet that lists all you customers and has three columns of information:
(A) days since last email opened (recency)
(B) number of emails opened in past 12 months (frequency)
(C) amount of money spent last 12 months (monetary)
- Sort by each column and assign every customer a 1, 2, or 3 on each dimension (recency, frequency, and monetary). The people who opened recently, opened often, and spent a lot will get three “3s” while those who have not opened for a while, open only infrequently, and have spent zero will get three “1s”
- For the segment that gets all 3’s – these are your most engaged fans. You should be talking to them to figure out what else they want, so you can sell them more
- For the segment that gets all 1’s – you should consider removing them from marketing efforts or at least reducing the number of campaigns you send them to reduce costs
- For the segment that is high on recency and frequency but low on monetary – you should spend time experimenting with many different offers and messages to see what will drive conversion
This is a simple example. Segmentation can become much more sophisticated, complex, and powerful. I urge you to get started – something is better than nothing. By using customer segmentation, you can work more purposefully. You can develop products and marketing campaigns that appeal more strongly to each target market. You can reduce your costs and increase your sales!
***Want to learn more from Rob? He’ll be speaking at the Niche Digital Conference September 19-21***
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Rob Ristagno
is the CEO and Founder of The Sterling Woods Group, a firm that builds new revenue streams for media companies and publishers. He is an expert in direct monetization of content. Prior to creating The Sterling Woods Group, Rob served as a senior executive for several niche media and e-commerce companies. He most recently was the Chief Operating Officer of America’s Test Kitchen, considered to be the gold standard in the niche media world for building diversified – and often digital – revenue streams.
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