Matching the email marketing message to customer type and expectations improves response and engagement. Testing targeted email marketing to see how it affects results is a part of every successful marketing strategy.
Email campaigns are one of the easiest places to test. Here’s a look at why targeted messages can increase sales and profitability.
Blast methods are still being used to send emails to customers and prospects. This is where everyone on the list gets the same message. Buying behavior and relationships are ignored in this lazy man’s approach to email marketing.
Despite the best efforts of email purists, blasts will never go away because they work. Email marketing is so economical that even the worst message will generate a profit if it is sent to enough people. The marketing process works so well, it can be challenging to convince people to invest more resources to make it work better.
There are three very good reasons to invest time and effort into modeling emails around buying behavior. They are response, revenue, and retention. Carefully crafting individually customized emails improves results.
You don’t have to have the analytics chops of a large company to do this well. Even small changes can make a difference. The following case study is from an ecommerce company that historically sent sale or discount emails to customers every week. They conducted a test to see how discounts and segmentation affected sales.
Prior to the test, their email strategy was simple. Once a month, the promotions were planned for the next month. The offers varied based on the season, but they typically included free shipping, $5 off $25, or a discount of 15%, 20%, or 25% off the total order.
The test was simple. Customers who had purchased from the top four product categories were chosen to participate. They have comparable average orders and buying history. Each category group was split six ways into subgroups. Six different offers were sent to the subgroups:
- 15% off any order
- 20% off any order
- 25% off any order
- $5 off any order of $25 or more
- Free shipping for any order of $50 or more
- New items in specified category (no discounts or free shipping offers were included)
Here are the results for the discount offers that were sent to customers who previously purchased items from the best-selling categories:
|
Segmentation |
Offer |
Bounces |
Opt-Outs |
Opens |
Clicks |
Resp. Rate |
Avg. Order |
Gross Margin |
| None | Sale: 15% off any order |
4.8% |
0.3% |
15.8% |
25.7% |
5.2% |
$ 35.60 | $ 15.13 |
| None | Sale: 20% off any order |
4.7% |
0.4% |
19.2% |
40.8% |
7.6% |
$ 38.20 | $ 15.28 |
| None | Sale: 25% off any order |
4.8% |
0.5% |
22.1% |
34.3% |
8.1% |
$ 32.57 | $ 12.21 |
| None | Sale: $5 off $25 or more |
4.6% |
0.3% |
13.8% |
19.9% |
6.3% |
$ 27.32 | $ 11.16 |
| None | Free Shipping $50 + |
4.5% |
0.3% |
16.4% |
26.1% |
3.4% |
$ 54.62 | $ 17.95 |
Looking only at the discount offers, 20% off any order was the winner. Free shipping had a higher gross margin and average order, but the increased response rate for the 20% discount offset them and generated the best return. (The return is not included in the chart at the company’s request.)
The results for the four category emails are below. There were no discounts or promotional items included in the messaging. Each email featured new products from the specified category.
|
Segmentation |
Offer |
Bounces |
Opt-Outs |
Opens |
Clicks |
Resp. Rate |
Avg. Order |
Gross Margin |
| Best Selling Category | New Products |
0.3% |
0.0% |
33.3% |
39.7% |
9.4% |
$ 42.53 | $ 21.27 |
| Second Selling Category | New Products |
2.2% |
0.1% |
23.0% |
28.8% |
8.9% |
$ 39.73 | $ 19.87 |
| Third Selling Category | New Products |
2.6% |
0.6% |
17.2% |
34.7% |
9.1% |
$ 39.21 | $ 19.61 |
| Fourth Selling Category | New Products |
3.1% |
0.0% |
21.8% |
24.4% |
8.8% |
$ 36.84 | $ 18.42 |
Interestingly, the categories performed exactly like the category ranking with the best results coming from the top selling category. All four category segments out-performed the discount tests.
After the test, the cost of the additional resources needed to create the different emails and segment the customers was included in the return on investment analysis. The segmented category mailings delivered 23% more profits than the discount ones.
To begin segmentation marketing, start with the five basic customer behaviors and build from there.
- Hit and run shoppers are the ones who make a purchase or two and then never come back. Their behavior is need driven. Use your email marketing to help identify them early in the cycle so you don’t invest unnecessary marketing dollars.
- Discount buyers love a sales and promotions. The higher the discount the more they buy. Make sure that they get plenty of opportunities to buy. This segment is very valuable for inventory liquidation. Create fun events that encourage them to buy quickly.
- Seasonal shoppers only buy certain times of the year. Anticipate their needs in advance to provide highly customized marketing. Seasonal shoppers have a tendency to be category shoppers too. Sending timely emails that include the right categories has good results.
- Loyal buyers need special appreciation and rewards. Loyalty programs work because they provide benefits for being a loyal customer but they do not make people feel appreciated. Create special emails for your most loyal customers that show them how much you value their business.
- Category shoppers are only interested in certain items. Sending them emails that have non-relevant categories reduces their open rates. If the majority of the messages miss the mark, they will opt-out or simply stop opening your emails.
Amazon allows people to review products they own, even if they didn’t buy them from the company. The information is then used to send customized emails like this:
Companies that allow people who didn’t purchase from them to participate in the review process receive more information that can be used to improve marketing. The better you can target the message, the better the results.
Debra Ellis is the founder of Wilson & Ellis Consulting, which specializes in improving customer acquisition and retention using marketing, analytics, service, and strategic planning.