How to Build Customer Segments that are Useful
At Infinity Direct, what sets us apart from typical direct marketing agencies (aside from our direct mail expertise) is our commitment to reaching highly qualified audiences. One tool we use to find these audiences is by segmenting customers in ways that help to ensure our marketing efforts are both effective and efficient.
In this post, we’ll first discuss how to begin the process of creating customer segments that are purposeful. We’ll dig deeper into how we choose the segments to target and then what the benefits are for developing an audience based on the most relevant customer segments to the business objective. Finally, we’ll take a brief look into what’s to come for the future of customer segmentation.
Customer Segmentation
A successful customer segmentation strategy should have a specific business objective to determine how the segments are differentiated. For example, should the segments provide guidance on:
- How these segments react to different piece designs and creative themes?
- … to different offers?
- … to different messaging?
Creating audience segments is necessary to engage effectively with your target audience. This is due to people reacting to stimuli in different ways for many reasons. For example, different groups of people may react better to a gift card than they would to a BOGO offer. Or they might prefer digital offerings instead of direct mail. Nostalgia-themed creative could lead to higher engagement levels with adults age 55-plus.
Consequently, we often tailor these segments, which we call audiences, around the messaging, offer or type of creative we plan to use, aiming to capture the attention of potential customers. By leveraging machine-learning methods and considering the questions above, we identify audiences with a clear business purpose in mind. Whether it’s choosing the best offer or deciding on the creative for a digital campaign, each segment should be guided by a specific objective.
The ultimate goal of customer segmentation is to group individuals in a way that is useful. Sometimes, the most useful segmentation schemes are not necessarily the most interesting but the ones that are backed by data and, in practice, drive more orders.
It is important to base the audience-identification process on the characteristics of each client’s past customers. This is vital to consider as these people chose to buy the specific product offered. Why did they choose you over a competitor with similar products? Why did they choose that specific offering over other slightly different ones? Figure out the answers to these questions and you will be able to begin crafting an objective for a customer segment that is backed by data.
The Purpose of Audience Development
Audience development is beneficial not only to the businesses we serve but to our team as well. Post-campaign analysis of audience performance helps us understand which audiences excel and why. This insight is invaluable for refining future campaign strategies leading to more successful marketing efforts.
While it’s clear that data-driven audience development outperforms intuition-based approaches, validating this through actual marketing results is very important. Identifying which leads are generated by our direct marketing efforts can be complex, but it is essential for assessing the effectiveness of our efforts. We are looking for leads that are matched to the addresses that we mailed and that the company we’re working for directly attributes to our campaign.
If a lead does not fit into BOTH of these categories, it cannot be conclusively matched to our efforts. We examine the leads that are both address-matched and attributed to us to see if our customer segments worked well or if they need to be tweaked. This is done after each campaign as we continuously iterate on the past customer segment to improve it for the future. As we improve upon and further build out these customer segments, there will surely be technological advances that allow for improved personalization.
Future of Customer Segmentation & Audience Development
Looking ahead, the future of customer data and insights will focus on advancing toward 1:1 marketing. This would mean reaching the right person with an offer tailored specifically to them, at the optimal time. By targeting leads with highly specific offers, personalization, tailored designs and timing, we can continue to improve conversion rates. Higher conversion rates allow for more efficient marketing efforts and a decreased cost per lead.
Effective customer segmentation is not just a strategy — it’s an essential part of marketing that drives measurable results. At Infinity Direct, our commitment to understanding and categorizing your business’s audiences allows us to build targeted campaigns that resonate with potential customers, as evidenced by higher engagement and conversion rates. As we embrace advancements in technology and data analysis, the path to personalized marketing becomes clearer, offering exciting possibilities for future campaigns. By continuously refining our audience development processes, we help to ensure that our clients reach their goals. Join us as we navigate this ever-changing landscape to unlock new opportunities for your business to succeed.
