How to avoid segmentation for segmentation's sake

If you’re sending a marketing email, you can make your job a whole lot easier by segmenting your audience. A more specific segment means a more relevant message, which should mean a more successful email.

But as with everything, segmentation has tradeoffs. You need to be aware of these tradeoffs when you’re segmenting, because otherwise you can fall into a trap where the costs of segmenting your audience outweigh the benefits of doing so.

Surely an audience this big is worth segmenting?

The main cost of segmentation is your time. Every email has certain fixed time costs, such as getting your list, attaching your list and proofreading your email. The more you segment, the more of these fixed costs you incur, so you need to make sure these costs are worth imposing.

Some easy ways to measure your tradeoffs

You can quickly measure the impact of your segmentation by asking a few questions:

1) What do you expect to gain from this segmentation?

As with anything, your segmentation should have a clear objective. There should be a clear reason why one segment of your list should get one message, and another segment should get another.

This is often obvious. For example, if you run a chain of retail stores, and you want to tell customers about a sale, with directions to their local branch at the bottom of the email, it makes perfect sense to segment by region.  Telling people that there’s a sale, and it’s around the corner from them, is much more useful than telling them there’s a sale but they need to find their way to it on their own.

Other times, this is less obvious. For example, assume you’re a retailer, but you don’t have any stores - it’s all online. You could still segment by region, but what would be the point? Would the benefit of “great deal in [your suburb]” outweigh the costs of segmenting your emails? Not likely.

2) How many people are you contacting?

Remember that your initial numbers need to be pretty big, as they quickly get whittled down. Let’s assume just emailing everyone on your list would give you a 20% open rate and a 3% clickthrough rate. Broken down for 100,000 and 1,000 people, your results would look like this:

Now, assume that segmenting your list into five parts increases your open rate to 25% and your click through rate to 5%. Now your numbers look like this:

he proportional change is pretty stunning - you’ve more than doubled your click throughs. But the volume change for the second group is pretty pathetic. You’ve only added an extra 7 people, in exchange for spending the time and money dividing your mailing list into five parts, then loading, writing and proofing five different marketing emails.

If 7 extra customers are really worth all this extra effort, you’d be better off just calling them on the phone.

This exercise will give you a much more realistic number of people who may click through, which in turn informs your decision-making around how much segmentation to do. Even if you don't know how much value your segmenting will add, you can work through this exercise to figure out how much it needs to add to be worth doing. If it turns out you need something like an 80% open rate and a 30% clickthrough rate to get the results you need, you're probably better off not segmenting. 

3) How different are these segments?

It’s easy to get carried away with your segments. I once was given a set of 11 different segments for a set of marketing emails. I took a look a the different segments, and realised that while they were different, a significant number of them actually needed the same message - so  I was able to whittle the number of segments down to just three. This made life easier for both me and my client, without compromising the relevance of the emails. 

A good way to test how different the segments are is to ask yourself why the people in those segments should follow the call to action you’ve chosen. If the answer is the same, or highly similar between two different segments, then those segments are probably one segment.

Wrap it up

While segmentation is great, you need to make sure you are segmenting in a smart way that gives you a good return on your time investment. Critically examining your segmentation with these three questions will help you ensure that you’re segmenting in a way that adds value, rather than just segmenting for the sake of segmenting.

Image credit: James Cridland via Flickr