October 30, 2008, 12:00 AM

Read Me

How segmenting e-mail lists can help a marketing message stand out in consumers’ overstuffed in-boxes.

Imagine an Internet retailer, Acmebikeshop.com, which sells bicycle wrenches, tires and other accessories, items that both men and women buy. But the retailer also sells bike jerseys for men and for women. For its next e-mail campaign, it can either send its entire list its usual e-mail with links to a dozen products. Or it can create two slightly different e-mails-one featuring top-selling jerseys for women, and the other best sellers for men.

With the right technology, it can easily create separate lists for men and women, and put a subject line highlighting men’s jerseys in the e-mails to men, while touting women’s jerseys in the messages women receive.

With just those few steps, the retailer might increase open rates, click-throughs and conversions by 10% to 20%, estimates Loren McDonald, vice president of industry relations at e-mail services provider Silverpop Systems Inc.

That’s a very basic example of the power of segmenting e-mail marketing lists. Some e-retailers employ much more sophisticated targeting strategies. But plenty of others haven’t even attempted basic segmentation, and continue to hit everyone on their list with every e-mail.

That blanket e-mail approach contributes to overstuffed in-boxes and message fatigue among recipients, eroding the value of one of the most cost-effective marketing strategies for online retailers. The average cost per order from an e-mail marketing campaign was $6.85, compared with $12.27 for affiliate marketing and $19.32 for paid search, according to a survey of online retailers this year by Shop.org, the online arm of the National Retail Foundation, and Forrester Research Inc.

Low cost is one big reason so many marketers rely on e-mail. 92% of retailers polled in that survey do regular e-mail marketing to their house list, and 93% planned to place even higher priority on e-mail in the coming year.

Where to start

But while almost every marketer sends e-mail, segmentation is less common. The Shop.org/Forrester survey found only 58% of e-retailers segment marketing e-mails based on customers’ stated preferences or purchase history, and only 42% segment based on a consumer’s behavior on the retailer’s web site. Yet those who’ve tried such segmentation say it works-67% who do preference-based segmenting rate it very effective, and 73% say the same for behavioral segmentation.

So why don’t more e-retailers segment their marketing e-mail? Many don’t know how, says McDonald of Silverpop. “They know where they need to be, doing trigger-based e-mail, behavior-based e-mail, lifecycle messaging, because they see their peers and their competition dong these things,” he says. “But they don’t know where to start.”

For Accessoreez, which sells handcrafted jewelry, the place to start was with the customer’s mailing address. Besides selling online, Accessoreez generates about half its sales from art shows around the country, and thus puts a high priority on getting customers to those shows. The retailer, which had been sending two e-mails a month to its entire list featuring new items available online and a design of the month, recently added two more mailings segmented by customer ZIP codes and by whether they made a purchase at an area show.

In advance of a regional art show featuring artists who sell on the site, director of marketing John Huston sends customers in the area an e-mail alerting them to the event, along with a 10% off coupon. Recipients open virtually 100% of the geographically segmented e-mails, Huston says.

Blending data

While gender or geography are two basic ways to segment, retailers can generate even better results by creating segments that blend multiple pieces of data about a customer.

EBay subsidiary StubHub.com, which enables consumers to resell event tickets to others online, already was segmenting its marketing e-mail based on region using the e-mail automation services of Responsys Inc. E-mail subscribers would receive monthly e-mails with offers of tickets to concerts or baseball games in their areas. E-mail alerts-for instance, a reminder that pop singer Madonna would be performing locally in two weeks-also were segmented by region, based on ZIP codes captured from customers’ credit card data.

“It was successful, but we wanted to take it up another step,” says Albert Lee, e-mail marketing manager.

To be able to segment by preference as well as geography, StubHub created a section of its web site where customers could indicate their interests. Fans who select Madonna, for example, receive Madonna updates and concert alerts. Lee says StubHub has seen a 10% higher unique open rate-that is the number of invididual recipients who open an e-mail-on e-mail based on preference than on e-mail segmented by region, as well as a 6% higher unique click-through rate. And when e-mails are segmented by both preference and region, Lee says ticket sales are 172% higher per delivered e-mail than for e-mails segmented by region alone.

Lee’s considering other ways to take advantage of what StubHub knows about its customers. For instance, it might send a buyer of Madonna tickets a thank-you e-mail that promotes an upcoming concert by Natasha Bedingford, a performer in the same genre.

Targeting by behavior

Another way to segment e-mail is by what customers do when they receive an e-mail. For example, a retailer could categorize the links it puts in its marketing e-mails, such as by shoes or electronics, and track which links a recipient clicks on, says Ben Ardito, vice president of professional services at e-mail services provider e-Dialog. “We can capture that information and create business rules that say, if over time, this recipient clicks on the shoe category 50% more than any other category but doesn’t make a purchase, that triggers a shoe offer to them,” Ardito says.

Some retailers create special e-mails aimed at consumers who put items into carts but do not complete the purchase. Danskin.com, which makes women’s active wear, is currently testing such retargeting e-mails, but doing so carefully, says Jessica Koster, director of e-commerce marketing for Danskin.com.

“We have a largely female audience, and we wanted to make sure this didn’t come off as stalker-ish,” Koster says. In e-mail conversations with a group of customers who’d abandoned carts within the past 60 days, Danskin learned that shoppers left carts for many reasons. Some were interrupted, while others wanted to shop around for better deals or had difficulty understanding how to place on online order.

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