Most of what you've been told about segmentation is either a lie or a wasted effort.
"Personalization!" and "Hyper-segmentation!" are the buzzwords thrown out by marketers as key levers to growth.
But neither of these platitudes takes into account human behaviour's unpredictability and transient nature.
Here’s why we need to re-think conventional knowledge regarding segmentation strategy in Klaviyo or any ESP you’re using to target customers.
Predicting Customer Behaviour is Hard
Let's say you own a supplement store.
You create 3 types of campaigns for each bucket of customers in your campaign strategy.
That's 3 sets of copy, creatives and distinct strategies based on this initial buying behaviour.
And then you realise something...
John, who initially wanted to build muscle last winter, is now trying to get shredded before his summer holiday.
But you've been excluding John from all your marketing campaigns for fat burners because you assumed he only wanted to build muscle based on his first purchase.
The problem? Customer behaviour changes over time.
People's goals and interests are not static - they have overlapping reasons they buy from you.
It makes sense to treat customers differently with automation in their first interactions with you to maximise conversions and guide them through their journey.
But it's illogical to think they won't alter their beliefs further down the road.
So if you're a store with a well-defined niche and proposition, go BROAD with the majority of your targeting in campaigns.
You want to maximise impressions/reach, TOTAL conversions, and minimise resource allocation & maximise profitability.
"Right message at the right time" is much easier to predict when somebody is interacting with you for the first time.
You can give somebody a mohawk the first time they sit in a barber's chair based on what they tell you.
But you wouldn't run the clippers over their head in the same way 1 year from now the next time they visit without first asking them what they want.
“Are you proposing we treat everybody the same with segmentation?”
No - I’m saying we naively overestimate our ability to predict customer behaviour, leading to inefficiencies within any organisation that bleeds cash.
I also think marketers gloss over the concept of resource allocation and labour costs because they want to feel clever and sophisticated.
A basic segmentation strategy feels underwhelming because it doesn’t require a lot of thinking.
But your goal isn’t to feel as though you’ve spent a lot of time feeling clever, and it’s to maximise the results of the brand in terms of the most profitable strategy possible.
And creating 3 lots of creatives and strategies (as in the example above) without clearly defined cohorts will lead to 3 X the production costs.
This is fine if there is a clear route to ROI to warrant the additional investment, but poor resource allocation if not.
“But segmentation improves click rates!”
As email marketers, we're always told to monitor click rates to gauge the effectiveness of our campaigns.
While click rates do provide good insights into how effective our content and offer resonates with our audience, it's wrong to track this metric in a bubble.
Because segmentation can dramatically improve click rates by narrowing down your audience to increase the relevancy of the offer.
...but you'll also narrow down your audience.
And if you're a marketer, your goal is to maximise your campaign's total reach and conversions for the highest ROI.
Let's consider 2 scenarios.
Let's say you have 100k subscribers.
With hyper-segmentation, you start sending to a cohort of 10k per month, and you're pretty happy with your 5% click rate, which generates 500 visitors to your website with each send.
If you send 10 campaigns per month, that's 5,000 engaged subscribers visiting your website.
Pretty impressive on the surface.
This marketer goes broad, and after some deliverability and analysis to ensure they're not battering the database, they decide to target 50k customers per send.
Click rate drops to 2%, which generates 1,000 visitors to your website per send.
If you send 10 campaigns per month, that's 10,000 visits per month - a 100% uplift on your previous segmentation strategy.
Not to mention the brand equity that comes with the increased impressions from going broad.
You've reduced your click rate but increased your campaign's traffic, conversions and impressions.
Which strategy would you prefer for your business?
Now, there are definitely other considerations here I skirted over, such as unsubscribes + costs of your ESP for the additional sends (minimal) that need to be considered, but the logic remains the same.
Your goal is to maximise the number of impressions and conversions from each campaign.
Falling into the trap of isolating click rate in a bubble will feel good as a channel marketer but be bad for the business you serve as a whole.
A good starting point for segmentation for most campaigns
I recommend using basic engagement tiers to target your audience on a campaign level based on the recency of activity, using 30, 60, 90, and 180-day engaged segments, blending together site activity and email responsiveness, like this:
Depending on how you’re managing consent, you’ll also need to have a condition in there to include “In Newsletter List” as well in some scenarios.
Are there exceptions to the rule?
Yes - many.
The above example I provided is a generic starting point. I’m not saying it’s the be-all and end-all of segmentation - it isn’t. Lots of additional factors will influence your strategy, such as the eCommerce businesses:
- Diversity of product catalogue (i.e. large retailer VS niche offering)
- Seasonality of product catalogue and buying behaviour
- Purchase latency between SKUs or category
And many, many more I’m probably skirting over.
However, suppose you are a niche eCommerce brand with a very clear offering (i.e. yoga store, dental care, bodybuilding). In that case, you should keep the majority of your campaign strategy focused on broad targeting to maximise efficiency and ROI.
Even if you have a large, diverse store offering a multitude of products serving differing customers, never forget that your goal is to maximise efficiency and reach as many people as often with your campaigns to generate the best possible economic outcome.
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