August 9, 2008

Why Segmenting Your Email Is Critical For A Boost In Sales

Many of use use Constant Contact, Vertical Response or some other email marketing service to manage the sending of our emails. These programs are very good and quite ideal for smaller businesses who want an easy and low cost solution to sending email newsletters to clients, prospective clients and others.

Beyond just sending the email, however, if you want to really use email marketing as a powerful sales tool it's important to be able to dive deep into your email marketing numbers and know the Recency, Frequency, and Monetary value (RFM) of each customer.

I had never heard of RFM until reading a case study from iPost, an email marketing company. RFM is an old school metric used in the catalog business to get a better idea of what customers are really driving the sales from catalog mailings. Imagine if you send out hundreds of thousands or even just hundreds of catalogs throughout the year. These catalog cost money to print and mail. Wouldn't it make sense if you knew which customers and how many, were your most profitable customers?

Email marketing is the same. Sure, it's cheaper to send 5,000 emails than it is to send 5,000 catalogs, but you still need to maximize your email marketing and be able to segment your customers so you can reach each one most effectively.

iPost has a service called Autotarget which helps email marketers know more about the RFM of the recipients of their email campaigns.

The Eastwood Company sells tools and supplies for hobbyists and small businesses that restore or customize motor vehicles. The company has been in business for thirty years and is renowned for its quality and innovation. Eastwood sells through multiple channels: about half of their business is Web-based and 40% through their catalog.

According to iPost's case study The information automatically derived by Autotarget allowed Peter to readily determine that 34% of total response to Eastwood's emails came from just the 4% of customers with the highest RFM ranking, while a further 57% came from the next 33%. Peter found that these “strong responders” not only buy often, but also welcome frequent emails.

By contrast, the remaining 63% of the list generated just 9% of responses. These “weak responders” generally opt out at higher levels and are more likely to report email as spam.

With this information, Peter was able to target his email campaigns much more selectively. Segmentation, which used to take him half a day, now takes five minutes and gives better results. In addition, Autotarget constantly and automatically updates the segmentation data with the latest information about customer behavior, so it is fresh and accurate.

Lesson learned?

Email marketing is essential to grow your business. But if you want to really maximize your email marketing and get the most out of it. It is absolutely critical that you know more about each customer - how often they are opening your email, which email links they are opening, how often they are the clicking through to your web site, how often and in what dollar amount are they buying from you based on the email, what are they buying and more.

These kind of answers often cannot be easily determined from the traditional email marketing services, but takes a higher level of understanding about each email sent out and how each customer responds to the mailing.

tags: autotoarget , constant contact , email marketing , ipost , vertical response | 0 comments