Customer Segmentation 101

One of the challenges of direct mail marketing is that not everyone will respond to your mail pieces. That's because everyone has different interests, hobbies, goals, and purchasing behaviors. Some people will want to learn more about your offering after receiving your letter, flyer, or brochure. Others will throw your mail in the trash because it doesn't appeal to them.

How can you make sure direct mail reaches customers interested in what you do? By segmenting your customers into specific groups! Understanding how customer segmentation works and how to do properly can take your direct mail marketing efforts to the next level.

Customer segmentation, explained

Customer segmentation simply means dividing—or "segmenting"—your target audience into smaller groups based on shared characteristics. These groups will all have something in common that makes them more likely to respond to your direct mail pieces. Perhaps they earn a particular amount of income, meaning they can afford an expensive product. Or maybe they have a common interest that increases the likelihood of them contacting you about your service. By targeting these groups, you can make direct mail advertising more successful. That's why segmentation is so important.

Here's an example of customer segmentation in action:

Meal kit delivery service provider Marley Spoon wanted to reactivate previous customers who had canceled their subscriptions. With the help of direct mail automation platform Lob, the company segmented its high-value audience based on user attributes and real-time events to reach people who would generate the most ROI. Doing so proved lucrative. Marley Spoon's reactivation campaign drove 20% of conversions.

How to segment

You can break down your target audience based on different variables and then create direct mail pieces that will resonate with these groups. Here are some popular customer segmentation types:

• Age
• Location
• Gender
• Family status
• Job type
• Income
• Purchasing history
• Purchasing behavior

Say you want to target younger customers with a particular product and send them a direct mail piece advertising this item. You can segment your audience based on age to ensure that you don't send mail to older customers who won't be interested in your product.

The type of direct mail you create depends on which customer segments you want to target:

• When targeting younger audiences, you might want to include a QR code on your direct mail. That allows these customers to scan your mail with their phones to learn more about products and services. When targeting older audiences, you might just want to include a phone number or website URL on a piece of mail.
• You can create different direct mail for potential customers in different locations. For example, you can include a photo of the Empire State Building in a mail piece for people in New York City, which makes your correspondence more relevant to that segment.
• You can use different call-to-actions in your mail depending on which groups you want to target. For instance, a CTA that says, "Follow us on TikTok" might be more effective for a younger audience than an older one.

Understanding what types of direct mail marketing materials work best for your segments requires A/B testing. That involves making two versions of a direct mail piece and sending them to different customers in a segment to see which one performs best. You can also create lookalike audiences—people who share similar characteristics, interests, and behaviors with an existing audience. This process helps you find the right marketing channels and messages for a distinct group of customers, which can increase conversions and ROI.

Customer segmentation tips

You can make customer segmentation even more effective by using the following techniques.

Target specific audiences

Customer segments should be as specific as possible. For example, you might want to create a direct mail campaign for customers who unsubscribed from your emails or those who haven't purchased anything from your online store in the last 12 months. That can be more productive than just trying to reach "churned customers," which is a much larger group of people.

Improve customer retention/loyalty

Segmentation can help you increase customer retention and loyalty. For example, sending direct mail pieces with offers to those who make frequent purchases from your online store can make these customers feel special and encourage them to do business with you again in the future. Additionally, sending cards to customers on their birthdays can strengthen your relationships with them.

Upsell/cross-sell more products

Segmenting audiences based on their interests and purchasing histories can make it easier to upsell and cross-sell products to them. For instance, you can upsell shoes to customers who have purchased footwear from you in the past.

Use list building

List-building tools help you expand your mailing lists so you can reach more customer segments through direct mail. The best software tracks potential customers on the web so you can learn more information about them for your campaigns. These programs also offer address verification, address verification, and other direct mail services.

Put these customer segmentation tips to work via direct mail

Customer segmentation is such a good idea because it lets you send the right messages to the right people at the right time in your direct mail campaigns. Follow the tips above to segment your audience more effectively, and consider using a direct mail automation platform. That way, you can make your campaigns more measurable, personalized, and scalable.

Lob turns your direct mail into intelligent mail. Book a demo, and automate your campaigns with this direct mail platform right now.