10 Stats That Demonstrate the Power of Segmentation

10 Stats That Demonstrate the Power of Segmentation

There are very few things in business that lower risks while increasing returns. Segmentation is one of those “free lunches,” and that’s why we are such firm believers in incorporating segmentation into your strategy. Segmentation can help you better target your audience with appropriate marketing messaging, design new products that address the needs of specific customers, and create sales strategies to win over each unique segment.

But don’t take our word for it. We’ve rounded up 10 statistics that demonstrate the power of segmentation. They show how real-life businesses have generated impressive results by segmenting their audiences.

1. Give Your Email Campaigns a Boost

One area of marketing that can benefit greatly from segmentation is your email campaigns. When you send a generic message to everyone on your list, you miss out on the opportunity to speak directly to the needs of each of your customers.

Segmentation, on the other hand, empowers you to send targeted messages to different subsets of your audience. This, in turn, improves customer response.

A survey from Mailchimp found that segmented campaigns had open rates 14.31 percent higher than non-segmented campaigns. They also saw a 101 percent increase in clicks over non-segmented campaigns, while also noting lower bounce rates, unsubscribes, and incidences of spam reporting.

2. Generate Greater Returns on Sales

McKinsey took a look at segmentation in the retail space and found that it garnered benefits when it came to increasing returns on sales. A retailer in Europe who used segmentation techniques saw a three to five percent increase in returns on promoted sales.

How did segmentation help them do that? They took a look at customers’ past behaviors during other promotional periods. By seeing how they reacted across various marketing channels, the business was able to tweak their strategies to set prices based on consumer behavior.

3. Tap Into New Markets

Every business would love to reach new markets. But without segmentation, it can be hard to identify those opportunities. However, when you better understand who your existing customers are, you can sniff out gaps in who you’re reaching and fill them using targeted marketing campaigns.

Take this case study on Canon as an example. While the camera company had many customers who used their photography equipment for professional use, they realized there was a big opportunity to grow in the low-end digital camera market. And who did they find to target with those products? Interestingly enough, they turned to children.

While many adult amateur photographers simply rely on their smartphone cameras to capture the moments in their lives, parents are hesitant to buy their kids smartphones. Because parents don’t want their little ones texting, calling, and using apps, Canon realized that parents buying low-end digital cameras for their kids represented a great opportunity.

They launched a marketing campaign that played into children’s interest in photography and art and 40 percent market share in the low-end digital camera market within a year of launching their campaign. Without research into their existing segments, Canon would have struggled to identify this unconventional opportunity to snatch up market share.

4. Add New Customers Who Look Like Your Existing Ones

While segmentation can help you find new audiences for your products or services, it can also help you reach prospects who look like your best existing customers (who we like to call your whales). Take the Royal Canadian Mint, for example, which mints and distributes Canada’s coins but also creates and sells collectible coins.

In looking for new customers for this side of its business, the Mint turned to segmentation. This case study shows how the Royal Canadian Mint took all of its customer data and distilled it down to create a persona that represented their highest-potential clients—those people who had purchased from them in recent years and had the capacity to spend even more.

Armed with that information, they tweaked their entire marketing campaign and created online and print messaging that spoke directly to that high-potential segment. They added 140,000 of these types of customers in a single, targeted campaign.

5. Reduce Customer Acquisition Costs

Once you identify those new, promising customer segments, you need to spend some money upfront on the marketing and sales tactics it takes to win them. With the creation of personas and smarter segmentation, you can reduce the cost it takes to acquire those customers.

This case study from Harvard Business School outlines how insurance giant MetLife managed to do just that. Rather than sorting their customers based on age, MetLife turned to more complex segmentation methods and created personas based on attitudes and behaviors.

They found that some of their customers took a lot more legwork to convert, with a high need for personalized attention from the sales team. They decided instead to focus on customers that represented a large portion of the market and needed less hand-holding along the way.

By providing their sales team insights into the personas they should be pursuing, they created an opportunity for their sales team to focus energy and attention on those customers with the highest conversion rates and the lowest need for one-on-one attention. Consequently, MetLife announced a target of $800 million in annual savings, which they expect to realize through boosting the efficiency of their sales process.

6. Build More Effective Websites

When it comes to creating effective messaging for your various personas, it’s not just about the emails you send and one-to-one conversations your sales team starts. You can also tailor the content on your website to address specific segments. Research from HubSpot found that segmentation helped businesses create websites that are two to five times more effective than those that provide the same content for all users.

Many businesses create more effective websites by allowing different segments to self-select the content that is most relevant for them. Take, for example, a clothing retailer that has separate pages for men’s, women’s, and children’s apparel. By allowing customers to select the tab that has the types of products they’re looking for, businesses keep superfluous information out of the way and build a more streamlined user experience.

Technology also allows you to show different content to different segments of your audience as needed. If you’re a clothing retailer that has stores across the US, you can target people visiting your site from Massachusetts with product pages filled with parkas and sweaters, while your Southern California customers will see shorts and t-shirts.

7. Eschew Generic Messaging

The secret sauce when it comes to segmentation is creating personalized experiences for your customers. It eliminates generic messaging and makes each segment of your population feel seen, heard, and understood by your business.

Why does personalization matter so much? Because today’s consumers expect it. A survey from Epsilon found that 80 percent of consumers are more likely to do business with a brand that uses personalization techniques. If you’re still sending the same exact message to all of your customers and prospects, you’re engaging in behavior that’s a major turn-off for most consumers.

8. Drive Impulse Buys

While a great many consumers will write off a business entirely if they don’t send them personalized messages, the benefit to personalization goes beyond simply keeping prospects on the hook or retaining customers. Personalized messages also play a major role in impulse buys. Forty-nine percent of consumers said they bought something on impulse because it was presented to them with a personalized message.

When you convince your customers that you know them better than they know themselves, you eliminate some of the hemming-and-hawing in their purchase decision process. Instead, they’re comfortable jumping right to the sale.

9. Exceed Revenue and Lead Goals

Ultimately, every business’s goal is to hit their revenue targets and (dare to dream!) maybe even exceed them. A great way to set yourself off on the right track to do so is to engage in personalization.

Research from Cintell found that, of the businesses that exceed their lead generation and revenue goals, they’re much more likely to engage in segmentation than their counterparts who reach or fall short of their goals. They’re 2.3 times more likely to research the motivations of their buyers and 1.6 times more likely to understand the fears and challenges their buyers face.

By understanding the inner workings of their customers’ minds, they’re able to build products and services that address customers’ needs and craft marketing messaging that resonates. This all comes together to help them smash revenue goals.

10. Improve Your Value Proposition

A great value proposition can be a secret weapon for your business. When your value proposition addresses your target customer, proves how you meet their needs, and establishes your superior value over your competition, you create the opportunity to attract even more viable prospects and customers.

And what better way to craft an effective value proposition than by building a deep understanding of the needs of each segment of your customer base? ITSMA finds that 82 percent of B2Bs who developed personas reported an improvement in their value proposition.

If you want to jump-start revenue growth for your organization, you need to start by finding and attracting more customers. And the only way to do that is to understand who your existing customers are and what they love about you. From there, you can create new messaging and products that speak to those needs and will attract new fans.

But very few businesses have just one type of customer. By understanding the different personas you serve and crafting different messaging and products for each subset of your population, you make those customers feel seen and heard—and all the more likely to turn to you for help in solving their problem.

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.