How Big Data Improves Customer Segmentation Analysis For Email Marketers

Customer segmentation analysis for email marketers is becoming exponentially better and more efficient with the help of big data. Here's how!

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January 27, 2019
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A number of our contributors have discussed the role of big data in digital marketing. They have mostly focused on the benefits of using big data to bolster search engine rankings and squeeze a higher ROI out of social media marketing campaigns. However, there are other applications of big data in marketing as well. Email marketing is a classic example.

Running a successful email marketing campaign depends on a clear understanding of your customers. You need to use data on your customers to segment your lists more effectively, which should lead to higher returns.

Big Data Improves Email Marketing ROIs by Using Better Customer Segmentation

How one of our customers rebuilt their email marketing strategy from the ground up thanks to customer behavior insights, segmentation and email automation. Here are some factors that marketers take into consideration when they look for ways to use big data to optimize their email marketing campaigns.

  1. The problem before
  • No email marketing strategy, just blanket approach
  • Little loyalty and repeat sales
  • No differentiation
  1. What data showed
  • Different purchasing behaviors – price ranges, products, frequency
  • Some products hurt the experience and customers didn’t come back
  • 1 price range performed far better than all the rest
  • Lots of untapped opportunities for re-engagement
  1. The email marketing strategy
  2. The results
  • The feedback
  • The personal answers
  • The increased loyalty and interest

This case study covers the complete overhaul – or rather creation – of the email marketing strategy of a jewelry direct-to-consumer brand. For the sake of protecting their business data, we will use the name Jewelry Co. although we will share the real numbers, decisions and results here.

Disclaimer: This case study is a result of our consulting work with a client where in addition to providing them with our analytics software Metrilo, we also help them find deeper meaning in the data and uncover more opportunities thanks to our experience with other brands.

So, what was the situation of Jewelry Co. when they approached us?

They didn’t have an email marketing strategy at all. They simply blasted emails to everybody on their list in hope to get an order.

This, as expected, had not been giving good results and loyalty didn’t exist and repeat sales were very rare. This was a huge blow on the owners’ confidence because they employ skilled craftspeople to make the jewelry and customize it in size. They wanted to differentiate their products, but somehow, they hadn’t managed to do so.

What did the data analysis show?

Overview of Jewelry Co.’s status at start of data analysis consultation project.

Customer base~ 12, 000
Returning customers~ 20%
AOV~ $300
Avg. LTV$373
Avg. LTV of returning customers$688
Avg. number of orders per customer1.3
Orders per customers (for returning customers)2.5

What we saw in the overview data is that there was huge potential for Jewelry Co. if they increase their retention rate and start getting more orders from old customers. Simple math showed that pushing only 2% of one-time customers to place a second order would generate about $57,600 in additional revenue.

2% of 80% of 12, 000 x $300 = $57,600

Repeat buyers spent 2.5 times more than one-timers – this became our focus point. To understand Jewelry Co.’s customers better and come up with concrete actions, we broke down the data further.

Different purchasing behaviors

Spending habits

The first breakdown we looked at is customers by their spending. Five tiers emerged: low spenders, average, silver, gold, and platinum. Not surprisingly, the first group was the largest and all other progressively decrease in numbers.

customers segment by buying

That finding led us to believe the more budget-friendly price range is the real cash cow of Jewelry Co. Although their products are made out of silver, their nature is sentimental and people most often buy them as a gift or for themselves as a way to preserve a memory. These are not products bought for status or grand gestures. They are a discreet and personal purchase, rather than a flashy one. That’s why hefty price tags have no place on Jewelry Co.’s website.

Data-backed decision #1

So, the first decision the company made backed by data was to concentrate on its budget range, products up to $300.

To do so, they created a new category on their site, labeled accordingly – “Silver jewelry under $300”, to make it easy for customers to find and even boost SEO. Since then, this category has been outperforming all others with a conversion rate of 8.7% (average site CR is 4.4%).

Purchase frequency

Another finding was the significant difference in time between orders on average and for loyal customers. While the average is 122 days, loyal customers would take only 105 days between orders. That’s almost 2 weeks difference, which can affect the cash flow a lot.

That finding meant that Jewelry Co. stood the real chance to make customers buy 4 times a year instead of 3.

Data-backed decision #2

Our action plan had to include an engagement effort to bring TBO down to about 90 days. Timing of emails and relevant offers were the obvious tools, but more on that in a bit.

Products inspiring loyalty

When analyzing Jewelry Co.’s retention, we could easily single out the products that drive retention and the ones that obviously don’t make people happy and they don’t come shopping again.

Data-backed decision #3

In line with the newly-found focus, Jewelry Co. decided to scale back their product range and keep the items that fit the good customer experience so they’re sure clients get satisfactory items and come back. So, they scrapped all items with retention rate under 18% (the overall retention rate for the company at the time of analysis) – about 40% of their product range.

This may sound strange, but actually they don’t keep inventory and make each item as an order comes in because they customize it with engraving, size, etc. So, downsizing didn’t mean losing inventory, only made the rest of the offers more clear and obvious to the customers.

The results were very positive: quantities ordered remain at the same level, AOV also was unchanged but retention rate climbed to 19% and continues to improve.

No engagement efforts in place

All findings led to one major conclusion: Jewelry Co. suffers in sales because they don’t take any steps to engage their customers further than the occasional promo email. This meant they effectively didn’t have email strategy or customer lifecycle management.

Data-backed decision #4

Taking all discoveries above into account, the founders of Jewelry Co. wanted us to work on an overall engagement strategy to tap in all other opportunities that lay in the data. Next we explain the strategy we put together for them.

The email marketing strategy

To take concrete actions, together with the Jewelry Co. team we outlined 8 cases and tailored a very specific email marketing strategy for each.

Newsletter engagement

This is how Jewelry Co. will generally keep its customer base informed about everything new in the shop. It is a great way to boost brand awareness. They would be sending it every two weeks and will provide value and relevant info – about upcoming holidays and gift ideas, for example.

Action item: newsletter sent to subscribers (regardless if customers or not) every 2 weeks

Win-back campaign for inactive customers

In order to stimulate more repeat orders, Jewelry Co. started with existing old customers who have bought something in the past but haven’t in quite a while.

Simple segmentation showed those inactive buyers fall in all spender categories so we decided to give different incentives for the different tiers:

5% off for low spenders

10% off for normal/ silver spenders

20% off for gold/ platinum

Action item: tailored discount emails based on spending habits

VIP sales

For brand positioning and differentiation, Jewelry Co. needed to boost social proof so more people understand their value prop. That’s why we suggested they choose a few VIP customers and engage them personally in the hope to get more word-of-mouth exposure.

The team chose 15 VIP clients by LTV (over $1000) and number of orders (4 or more). Together we crafted personal outreach to each one to ask for feedback and will reward them with a gift afterwards. Enclosed in the gift package is a small card with a hashtag that we hope will make them share about the experience on social media.

Post-purchase engagement

As explained above, Jewelry Co. realized the need of continuous engagement to prolong the customer lifecycle, get repeat orders and stimulate loyalty. Current repurchase rate of 19.8% showed great opportunities for improvement.

That’s why a major part of their email strategy is going to be email engagement after the first order. This is an automated email series with a discount ladder, tailored by product purchased.

  1. Trigger event (Places an order | product X | number of orders = 1)  => Break event (places an order) OR
  2. Email #1(Right after purchase | Meet the man who made your piece of jewelry)
  3. Email #2 (30 days after purchase | Care and cleaning tips)
  4. Email #3 (60 days after purchase | Offer complimentary products to make a full set)
  5. Email# 4 (90 days after purchase | 10% discount)
  6. Email #5 (120 days after purchase | 15% discount)

Action item: Automated email series with engaging content and discount ladder

Loyalty club

To stimulate loyalty, Jewelry Co. will be creating a special club with exclusive offers for members. We discussed two possible criteria for eligibility: LTV above a certain threshold or personal request to enter (via response to an email invite, for example). It was left to the team to decide.

However, the mechanics are as follows. It is an automated email engagement that will be constantly added to:

  1. Trigger event (Places an order | Revenue generated more than 300 BGN)
  2. Email #1(Right after purchase | An invitation to the Silvery Loyalty club)
  3. Email #2(Right after purchase | Welcome to our Silvery Loyalty club + 1st Incentive)
  4. Email #3 (20 days after purchase | Club Content)
  5. Email #4 ( 60 days after purchase | Ask opinion on new product in development)
  6. Email #5 (90 days after purchase | Club Content)
  7. Email #6 (120 days after purchase | Early bird access to new collection)
  8. And so on.

Action item: ongoing automated email engagement

Abandoned cart emails

Strangely, Jewelry Co. didn’t have such in place before our marketing audit so it was necessary to put it in place. With a cart abandonment rate of 55%, the company had about $6000 sitting and waiting to be recovered.

Action item: cart abandonment recovery series with 2-3 emails

Customer feedback series

Since Jewelry Co. wanted to differentiate itself on the market, customer feedback was vital for improvement. To get as much data as possible, we advised them to automate feedback gathering with Metrilo’s email automation, sending a request for feedback as often as after each purchase if needed.

This is how they were able to collect 300 responses in the first 4 days within launching the series – most of which contained not just numerical score, but qualitative data to work with as well. At the moment, feedback gathering is automatically being gathered at every second purchase.

Action item: automated feedback gathering

The results

Through data analysis, Jewelry Co. discovered profitability in customer engagement and retention. The main developments from implementing the above email marketing strategy are:

  • Useful feedback that helps create new products to customer’s liking
  • Great engagement on a personal level – got answers from individuals who were impressed with Jewelry Co.’s tailored approach.
  • Loyalty went up by 1% in the first week and continues to grow.
  • Response rate to the first VIP offer was 56% and made $3,600 additional sales.
  • Email is now responsible for about 24% of sales.

What does it mean for you?

Why is this case study replicable for your business?

Because you can, too, analyze your data and discover hidden opportunities. When Jewelry Co. came to us, they needed a tool to attribute their sales to marketing efforts. They ended up rethinking their strategy and improving overall marketing performance, building a brand in the eyes of their customers.

And because data is objective, it gives clear focus and it’s easy to set targets for improvement – and measure success after.

Final Thoughts: Customer Segmentation in Email Marketing Relies on Big Data

Big data is turning old email marketing strategies on their head. You can use big data to get a better understanding of your customers, which helps you make sure they are segmented properly. This is just one of the many ways that big data helps maximize the ROI of your email marketing strategies.