The Role of E-mail in Micro-segmentation
E-mail Marketing Not Only Makes Delivery More Efficient and Less Expensive, But it Also Make Micro-Segmentation Options Almost Limitless
By Steve Trollinger
Catalogers have long practiced the art of segmentation within the customer housefile as a method of targeting groups of customers for specific offers or varied contact strategies.
The segmentation process is commonplace. Recency, frequency and monetary (RFM) values are used to build a hierarchy of customers for marketing purposes, or a customer file model is used to score buyers on a continuum from best to worst.
Whatever the segmentation practice, buyer groups are analyzed for prospective opportunities. Can the "best" customer segments be mailed more frequently? Do you have a segment of buyers who you should be encouraging to spend more? Could your "older" buyers be reactivated with a special offer?
Answering these questions to exploit the opportunities with a print catalog generally means special creative, and special creative generally means increased costs. For many catalogers, though, the size of the housefile can be a hindrance to taking advantage of opportunities like those listed above. If a cataloger's housefile has only 200,000 records, for instance, it may be difficult to build reliable segments using RFM information.
For example, if the cataloger in this case wanted to segment its 200,000-record housefile into one-time, two-time and three-time-plus frequency, looking at five levels of monetary and four levels of recency within each category, it would have 60 unique cells in its house list inventory. On average, each cell then would have 3,333 customers. Of course, this is a simple example, but the point still can be made—it would be difficult to justify additional spending on creative to address an opportunity in a group of 3,000 customers.
Even if five groups could be combined for a common message, the incremental cost of addressing the opportunity might never be recovered through the targeted message or offer.