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Understanding Customer Segmentation for More Effective Campaigns

Lalith Raj
Reading Time: 4 minutes

Want to get more out of your direct mail marketing campaigns?

You want your mail pieces to reach the correct individuals and achieve tangible outcomes. The reality is…most campaigns fail because you’re marketing to everyone.

Here’s the problem:

Sending the identical unpersonalized blast to your entire list is quick, but it’s also a recipe for disaster (and wasted money). Audience segmentation is key for improved response rates and ROI.

Without segmentation, your direct mail marketing just won’t perform.

Learn how customer segmentation works and how to leverage it for smarter, more profitable campaigns.

Let’s get into it!

Here’s the breakdown:

What Is Customer Segmentation?

Customer segmentation divides your audience into smaller groups with similar characteristics.

These traits can include:

It’s simple. You want to deliver the right message to the right person at the right time. Rather than sending one generic mail piece to your entire list, you create targeted messages that will resonate with each group.

That’s why customer segmentation is the foundation of every successful campaign. It’s also why you’ll see more brands working with professional direct marketing services to ensure their direct mail marketing is spot on from day one. Proper audience segmentation means your mail pieces will feel personalized, relevant and hard to ignore.

Pretty simple, right?

Why Direct Mail Marketing Needs Segmentation

You might be wondering… why does segmentation matter so much for direct mail marketing?

Here’s why:

Direct mail costs a lot of money. Every piece you send is money spent on printing, postage, and design fees. Throwing mail away because it wasn’t relevant costs you big bucks.

Segmentation eliminates this problem by ensuring that every dollar you spend reaches prospects that care about your offer.

Even the statistics support it. 88% of marketers report that personalized direct mail increases response rates. Segmentation allows you to do this at scale. That’s a huge boost to campaign performance.

And it gets better…

Personalized direct mail has a 6.5% response rate versus 2% for unpersonalised direct mail. That’s over three times as much, by customizing your message for the right segment of people.

Segmentation gives you:

That’s a win-win-win.

The Main Types Of Customer Segmentation

There are four basic customer segmentation strategies. The best direct mail marketing campaigns utilize all four.

Demographic Segmentation

This is the most basic form of segmentation. You split your audience by:

Demographic information is simple to gather and provides you with a great baseline. Let’s say you own a high-end retailer. You may choose to only send expensive catalogs to households that make over a certain amount of money. Easy, effective.

Geographic Segmentation

Geographic segmentation splits your list by location. That can include:

One benefit of direct mail marketing is that you can market location specific deals. Let’s say you owned a café franchise. You would only send mail to consumers who live within driving distance of each individual location. You won’t be wasting postage on consumers who can’t easily travel to your store(s).

Behavioural Segmentation

Behavioural segmentation looks at what your customers actually do. That includes:

This type of segmentation allows you to slice your audience very strongly. Someone who purchased recently will react very differently than someone who has not purchased recently. Segmenting by recency allows you to tailor your offer to specific groups.

Psychographic Segmentation

Psychographic segmentation splits people by:

This is the most advanced form of segmentation. It requires more work to obtain this information, but it’s worth the effort. When your message touches a prospect’s values or lifestyle, they feel like the mail was custom written for them.

How To Segment Your Audience Properly

Now onto the fun stuff. Here’s how segmentation works in practice.

Gather Your Data

Begin with data. You can’t segment unknown customers. So gather all available customer data you already have:

The more data you have, the sharper your segments will be.

Choose Your Segments

You now need to decide which segments are most important for your business. You don’t need hundreds of customer segments. Begin with 3 to 5 segments that are distinct and represent actual differences in your customers.

Keep campaigns small. If you have too many things going on at once it will water down each campaign.

Build Tailored Offers

Every segment requires a unique offer, message and design. A first time buyer requires a welcome offer. A lapsed customer requires a win-back offer. A high value loyal customer requires a VIP offer.

Make each mail piece feel like it was made just for that group.

Test And Refine

Continue testing forever. Send variations of your mail to small subsets of each segment first. Monitor:

Rinse and repeat what works. Stop doing what doesn’t. Build an ever-evolving system that improves with each campaign.

Common Mistakes You Should Avoid

Even smart marketers slip up here. Watch out for these mistakes:

Avoid these and you’ll be miles ahead of your competition.

Bringing It Home

Segmenting your customers is one of the most effective methods to increase your direct mail marketing returns. Here’s the truth… Sending the same message to everyone is a quick way to deplete your budget and have nothing to show for it.

No, segment your list, customize your offers and measure your results. When done correctly each piece of mail you send will have greater impact, better conversion and a larger ROI.

To quickly recap:

Implement this strategy and your next direct mail campaign will yield your best results ever.

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