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Market Segmentation Mistakes That Are Setting You Back

Market Segmentation Mistakes That Are Setting You Back

There is no doubt that market segmentation offers plenty of benefits, from increase open rates to better engagement. Segmented campaigns are fast becoming the norm for email marketing experts who are aiming to get more effective results from their efforts.

To show just how much of an impact segmentation can have, MailChimp sampled about 2,000 users who sent around 11,000 segmented emails to nearly 9 million recipients. The results of these campaigns were compared against non-segmented campaigns.

Their study showed that segmented emails had an open rate that was 14.31% higher than non-segmented campaigns, and a click rate that was 100.95% higher than non-segmented campaigns. Bounces meanwhile were 4.65% lower than non-segmented mails, and abuse reports were 3.90% lower.

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While market segmentation works wonders when it is effectively implemented, it does not mean that it is immune to mistakes however. One of the few challenges of marketing automation in general is that automating a broken process can end up causing more harm than good. The secret to reaping the rewards offered by market segmentation comes down to knowing what to avoid, right from the start.

Avoid These Market Segmentation Mistakes

So, what are the biggest mistakes that you can make when it comes to market segmentation? Let's have a look:

  1. Defining your lists without backing it up with data

As much as it can be useful to segment your lists according to customer profiles or personas, defining your lists by instinct alone is never a good idea. There is no room for assumption in any marketing automation strategy. The very thing that makes marketing segmentation so effective is that it allows you to target your audience on a far deeper level. If you are creating your segments without using data, you may well end up wasting your time at best. At worst, you could lose out on opportunities when you realise that you have a list that is not accurate.

Data should be carefully reviewed before creating segments. You should have data that has been built up over the course of your business' growth. If you are a start-up or new business, you could consider A/B testing and other similar email marketing strategies to help you get the data you need to proceed. Once you can accurately segment your groups based on behaviour as well as interests and demographics, it will be far more simple to create segments that are accurate.

  1. Failing to factor in duplicate names and email addresses

Be very careful if you are using monetary, frequency and recency for your segmentation. While most marketing automation tools should factor in the risk of duplicate information, some may not. The best way to prevent this is to use as many qualifying details as possible to ensure that each person in your segment is easily recognised.

What happens if there is duplicate information? For one thing, if two people have the same or similar name and/or address, they may end up being segmented incorrectly. The last thing you want is for a brand new customer to receive a triggered email welcoming them back if they have just made their first purchase.

  1. Segmenting without a clear strategy in mind

Much like it is never good to segment without using your data to guide you, it is also a bad idea to forgo strategy when defining your market segmentation lists. How will you define your segments? Will you use behaviour as your primary criteria? How will you gauge behaviours such as frequency? A strategy is the simplest and best way to be sure that you know what you are doing at all times. Problems occur as a result of segments that are made randomly, without planning. Without a plan, you may end up with misleading results.

The difference between good and bad segmentations comes down to whether or not you have a plan in place. Ideally, you should be aiming to develop a clear idea of what market groups you intend to target. Your segments should be not only easy to identify, but also profitable. If your segmentation efforts are not achieving those goals, it could be due to a lack of planning.

  1. Focusing on demographics and attitudinal responses over behaviour

Demographics should certainly never be completely ignored. And neither should attitudes. With that said, behaviour is the most effective way to segment your target audiences. In order to predict or at least estimate future behaviour, you need to look at past behaviour. For example, a customer that spends more or less a similar amount at your online shop each month after payday will very likely continue to do so. Likewise, someone who spends a large amount once in a while can also be relied on to behave in a similar way in the future.

Behaviours to note include how frequently customer buy, what types of things they typically buy, what sort of time of day, week and month they buy, and which channels they use to communicate, for instance. If on the other hand you are focusing on factors such as age, location, gender and how well your audience responds to content, you may not be able to predict future behaviour.

  1. Defining segments too broadly

Another mistake to avoid is making your segments too broad. The whole purpose of market segmentation is to target users in a way that increases the chance of conversion and engagement. If your segments are too broad or too vague, you will end up wasting time and resources. You may miss out on specific segments, which in turn puts you at a disadvantage when your competition has segments that are targeted narrowly and carefully.

The traditional approach to segmentation was to define audience groups into smaller groups sharing characteristics. Demographics was a popular way to define groups. Today, segments are far more flexible, with any number of ways to segment groups. Personalised emails can only be effective when groups are targeted properly. With so much data available, it would be a huge waste to not take advantage of the targeting opportunities you have on hand.

  1. Segments are not differentiated enough

Last, but not least, you may find that even though you have defined your segments narrowly, they are not different enough from one another. What this means is that your groups need to be different enough to warrant segmentation. Groups that share too many similarities will end up having messaging that is almost the same.

Instead, be sure to plan your segments carefully so that each one is unique. If you create segments that are the same within but different between, you will be sure that you are getting the full benefit of marketing segmentation without the worry of segments being too similar to truly target them uniquely.

To learn more about how marketing automation can help you get the most from your market segmentation efforts, download our free Tip Sheet or contact the Grapevine team today.

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