What if there was a different way of email marketing and customer segmentation that would give you more confidence in achieving your goals?
A familiar scenario:
You just completed a quarterly review and guess what? “Retention marketing” didn’t do much to impact your initial goal of increasing sales 15% over last year. So now you’re back to hunting for a new email agency to introduce the latest “customer segmentation” hack.
Even then, you still feel unconfident about your actual ability to hit your goal. But hey, you have new emails right?
You might not express this to anyone, but you feel like this whole thing is just a huge waste of time. And you’re probably right. Why does this happen though? Isn’t there a better way to this personalization and segmentation thing? Does it ever work in real life?
To answer this, we need to go back to basics.
Google and you’ll get a bunch of different answers. But the crux of it is this: Customer segmentation is a method of sending more relevant information to customers to increase the likelihood of conversions.
Strip out all the bells and whistles, this is it. More relevance = higher conversions = more money in for the brand.
And this is the basis on which we carry out all email marketing here at NLE.
You might have seen our graphic before, but it bears repetition because of how effective this is in understanding the whole customer segmentation concept.
Today’s Sales = New Customer Revenue + Returning Customer Revenue
Your sales on any given day comes from two places – customers who have purchased with you before, and customers who purchased for the first time.
And email is one of the many channels in which you get this revenue.
Why does this matter?
You’ve heard of the Recency, Frequency, Monetization (RFM) segmentation model, yeah?
Sounds fancy yeah? It is.
Impactful? It depends.
If you look at email campaign revenue makeup, about 70-85% of it is from returning customers. And surprise surprise, another 70-90% are returning customers active in the last 90 days.
For most brands with an email list of less than 250k, having so many segments is just going to overcomplicate things with marginal incremental improvement. Customer segmentation models like these have more impact with more impression. If each segment is only a few thousand, it might not be worth all the resourcing your internal team is spending to create dedicated promos, messaging and creative on emails.
Common segments used in email marketing segmentation are:
The list can go on literally forever, with variations and combinations to each.
What email marketers have fooled you believe is that the more segmented your list is, the better. That can’t be further from the truth, because what marketers fail to think about is resourcing required to manage multiple segments.
One-to-one marketing is great in theory, but completely unscalable as a business. One-to-many would be too unfocused. One-to-few is the sweet spot; whereby you want to make these “buckets” as wide as possible, with as much specificity as possible.
This is how you balance resource efficiency and activity effectiveness.
Let’s go back to this.
This ranks your focus with segmentation in order of impact on $, confidence of achieving goals and ease of implementation. Because these take purchase intent largely into account.
Before you come at us with the “it costs 5x as much to acquire a new customer than to retain one” quote. Or some nuanced “yeah but if you don’t monetize your prospects, you end up paying inflated costs” bla bla bla, that’s a different conversation altogether. Stay on topic, Bryan. (sorry if your name is really Bryan, lol)
The basis of all customer segmentation (and email segmentation) is to move customers through the customer journey, on to the next bucket.
That means:
With your welcome flow set up, new prospects to your list should be out of your main email marketing campaign cadence for the first 7-14 days. Reason being, you should have a solid sequence in place to monetize these people. Your welcome flow shouldn't just comprise random emails by best practice.
With 70% of customers converting within the first 24h, and 20+% of them converting within 7 days, your welcome flow should be hyper-segmented there already. Don’t confuse objectives with campaigns.
Over the next 7-14 days, there might be latent value capture, so send your best content to them, because by day 30, there’s low chance, if any at all, that they’ll buy. But just be careful to only send content that YOU would be angry to miss out on yourself if you were a customer – sale announcement? Yes. New product launch? Probably. Fall lookbook? Get that out!
Your goal is to monetize so they don’t sit in your list doing nothing (did I address your point now, Bryan?).
These people already love you, and they love email. This segment doesn’t require that much effort to maintain. Keep them in your normal cadence and you’re good. You DON’T need to create an extra special promotion for these people. That’s just “squeezing the sponge” and pulling revenue forward because these people would have spent anyway. You just brought their value forward and lost margin.
Anyone who deploys promo tactics on loyal customers is making a rookie mistake (unless there’s a different objective involved). But if it’s just pure revenue, no point here.
Your goal here is to just understand this segment’s preferences.
Then pass this info to your site and ad team to go find more people like that.
These customers have insane potential because they’ve experienced value from you the first time. And especially within the first 30 days, you want to build up the excitement.
You can do this with flows (especially with what we call Onboarding Flows), but also with campaigns. These folks don’t need the same amount of convincing to make an order, as new prospects do. Product discovery and replenishment is the main objective for first-time customers.
Because once people have made 2 orders, there’s a much higher chance they’ll come back automatically (just look at your cohort values by segment and you’ll see this).
This is why First time customers rank so high in our customer prioritisation list.
Yeah, it’s simple, but not easy. The reason why most email marketers obsess over segmentation (and frankly, brands too) is because it gives the illusion of activity. But activity and complexity does not always equal results.
Remember, we want efficiency plus INCREMENTAL gains. And the truth is…
I mean let’s be real, how many times have people talked about segmentation, yet end up with the same “Surprise, sale extended” message? Or have a lame 15% “Because we miss you” winback email?
So much for email segmentation right?
If you want to escape the cycle and actually yield results, you’ve got to adopt a new mentality.
Look at the data, segment from big to small, analyze the data again, iterate.