Using Segmentation to Improve Your Marketing ROI

Using Segmentation to Improve Your Marketing ROI

Data has changed the way we approach so many things in business. From product creation to customer retention to inventory management, data can improve efficiencies across the board.

Marketing is no exception. By using the data you have on hand to segment your audience, you can boost your marketing ROI.

Access to data on prospects and customers helps you create messaging that resonates. This in turn leads to greater engagement and ultimately more revenues. Plus, digital marketing platforms allow you to direct your ads at specific audiences and track the results of each campaign.

Businesses who use segmentation in their marketing see tremendous results. CampaignMonitor found that marketers who segmented their email campaigns reported a 760 percent increase in email revenue.

Segmentation can generate results across all of your marketing and advertising efforts. Here are some smart steps to get you started with segmentation so that you can make a positive impact on your marketing ROI.

Find the Right Targets

You could create the greatest ad in the world, but if the wrong audience is seeing it, it won’t do you any good. They’ll walk, scroll, or drive right on by.

Creating targeted campaigns begins with understanding your existing audience. By identifying the shared characteristics of your best customers—or as we like to call them, your whales—you can create detailed personas for the types of prospects you’d like to target.

Wanna Get To Know Your Whales? Set a Time To Talk.

To understand your whales, it’s best to go straight to the source. Identify your top ten clients, and ask if they have some time for a one-to-one conversation. When you get together in person or connect over the phone, ask them some meaningful questions about your business.

What is it that they appreciate about you? Is there a specific value you bring to the table that they see lacking in your competitors?

It’s also important to get to know the whales themselves. How did they discover your business? What messaging really resonated with their pain points?

Once you’ve interviewed this small segment of top-tier clients, you can open things up to your broader base of whales. Craft a survey based on what you learned during your whale interviews. Reformulate some of the common themes into a handful of questions that you can ask your other whales.

Again, these should be a mix of how they feel about your business and some background information about the whales themselves. This kind of primary research data will help you create clear sketches of the types of people you serve.

Build Your Personas

Once you understand your existing customers, it’s time to create portraits of your dream whales. These personas should be based on what you learned in your primary research.

Very few businesses are so narrowly focused that all of their customers are exactly the same. Instead, it’s common for businesses to have a handful of distinct personas. These personas might be broken out by a number of segmentation techniques. Sometimes those segments will be based on demographics and geographics, while other times they will be based on the way personas think, feel, or behave.

For example, a high-end home goods store might decide to segment psychographically. Since they’re a luxury store, segmenting by a demographic metric like income might not be useful—anyone spending big bucks on furniture is likely at a certain income threshold. 

However, their customers might have different attitudes and beliefs that affect the way they buy. Young families might be motivated to buy expensive furniture because they expect that it will hold up well to the wear-and-tear the pieces will experience with kids and pets in the picture. Retirees might want to invest in better pieces because they’ve worked hard their entire careers and feel they’ve earned the chance to fill their homes with nice, classic, sturdy pieces of furniture.

How to Align Message and Audience

Once you’ve settled on your segments, it’s time to seek them out online. How do you ensure the right people see your specific marketing messages? Segmentation takes different forms in each marketing channel.

Allow for Self-Selection on Your Site

On your website, allow your segments to self-select into the appropriate group. You see retailers doing this often, creating different product categories in their navigation bars that align with the different segments they serve.

For example, a bookstore like Barnes & Noble groups its products by factors like literary genre and age group. Whether B&N’s shoppers are looking for a mystery novel or a textbook for school, the retailer empowers them to find the section of the website that’s right for them by creating clear segments in the navigation bar.

Segment Your Email List

When it comes to email marketing, you can segment your mailing list based on specifications you define. You can create custom audiences and drop individuals into each bucket you create.

Yes, you should start your segmenting with your newly established personas. But with email marketing, it’s possible to segment in a variety of additional ways, and you can even put one customer or prospect onto various segmented lists.

The way you slice-and-dice the audiences is up to you. Perhaps you want to divvy things up by where people are in the customer journey—prospects will see messaging that’s different from what active customers receive. And those customers who have ghosted you will hear something different from happy customers who keep coming back for more.

Just be sure not to get too segment-happy. If you have multiple people on a number of segmented lists, they might start to feel email overload. Soon, they may lose interest in hearing from you at all.

Consider Lookalikes on Social Media and Paid Search

One of the benefits of using digital marketing platforms is that they can handle some of the segmentation for you. Facebook and Google allow you to create lookalike audiences, directing your advertising at people who are demographically similar to your existing whales.

There are certainly benefits to this kind of segmentation, but using lookalike or custom audiences does come with a caveat. As with many things in life, it’s about quality, not quantity.

The AdEspresso team undertook an experiment to see if broadening out the size of the lookalike audience for their ads garnered better results. In the end, they found that the opposite was true.

Displaying ads to a narrower segment of their lookalike audience led the team to a more favorable cost-per-lead. When they targeted only one percent of the potential lookalike audience in the US, they saw a cost-per-lead of $3.75. For their ads that targeted 10 percent of lookalikes, the cost-per-lead was $6.36.

Lure In Whales with Content

Now that you’ve discovered who to target with your advertising and how and where to reach them, it’s time to create the right content to draw them in. The first step is to craft your marketing messaging to speak to each group.

Let’s return to the example of the furniture retailer above. While the young family and well-heeled retirees might be looking at the same pieces of furniture, their motivations for purchasing them are very different.

Generic messaging will likely have both of them scrolling past your ads or tossing your email in their junk folders. Instead, take what you know about these personas and put that to use in your marketing messaging.

For the young family, you’ll want to include a bright image of a happy family, piled on the couch for game night. Your text might highlight that your upholstered furniture is stain-resistant and made from durable materials.

When it comes to creating messaging for the retiree, perhaps you show a living room set in a home that overlooks a beautiful mountain or seaside vista—something that indicates the setting is a well-appointed vacation home or a relaxing permanent residence. With the text for these ads, you might mention how easy you make it to customize each piece, with a selection of hundreds of different upholstery options to fit with any decor.

And when we talk about content, it goes beyond the ad or email or social media post itself. When you do create an ad or special offer to be shared via email, it’s important to build out a custom landing page on your website.

You should tailor this landing page to the content of the ad or email. The prospect or customer clicked on your ad because they were interested in that specific product or service. Don’t take them to your homepage and make them scour your website for the information they need. Instead, direct them to a landing page that contains all the relevant information. Finish it up with a clear call-to-action that makes it easy for them to take the desired conversion step.

Continue to Refine Your Approach

As with all data-driven business endeavors, your final step should be to measure your results and refine your approach from there. Collect data and create a dashboard with key metrics to see how each campaign performs.

For those that do well, replicate your approach and messaging in other campaigns. If one attempt is a dud, scrap that idea for your next round of campaigns.

As you continue to experiment with different segmentation techniques and marketing content, you’ll see a steady lift in your marketing ROI. With each campaign and new iteration, you’ll get smarter about what works and what doesn’t, and that helps you focus on only the most effective techniques and strategies.

About the Sterling Woods Group, LLC

The Sterling Woods Group’s mission is to help clients make sense of their data to predictably grow sales. We apply data science to help you optimize your sales funnel, improve your marketing ROI, launch new products successfully, and enter new markets profitably.

We use a hypothesis-driven, data-supported methodology to discover insights that no one else is paying attention to. Then, we help you assemble the right sales strategies, marketing plans, technologies, and resources to seize this opportunity.

About the Author

Rob Ristagno, founder and CEO of the Sterling Woods Group, previously served as a senior executive at several digital media and e-commerce businesses, including as COO of America’s Test Kitchen. Starting his career at McKinsey, his focus has always been on embracing digital technology and data science to spur strategic growth.

Rob is the author of A Member is Worth a Thousand Visitors and is a regular keynote speaker at conferences around the world. He has been featured on ABC, NBC, CBS, Fox, and Digiday.

He holds degrees from the Harvard Business School and Dartmouth College and has taught at both Harvard and Boston College.

Rob lives outside Boston, MA with his wife, Kate; daughter, Leni; and black lab, Royce.