Segmentation: Learning From Best Buy

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Best Buy has a successful new strategy that produced an 8.4 percent increase in in-store sales for the last quarter, including an impressive 30 percent revenue increase in one California store. It’s profiling its customers, identifying the most profitable segments, reconfiguring its brick-and-mortar stores, and retraining in-store associates accordingly. So what does this have to do with email?

Lots.

Best Buy is taking online concepts, which are the foundation of great email marketing, and applying them offline. The lengths it’s going to are impressive. For its "Barry" segment, which represents wealthy professional men, it’ll add leather couches to some stores to create a comfortable environment for watching large-screen TVs and listening to high-end sound systems. Stores targeting "Jills," who are soccer moms, train sales associates to help customers without using such terms as "gigabytes" and "megapixels," which may be intimidating.

These changes are a major capital and training investment for Best Buy. It’s much less expensive to implement this type of strategy with email. So why don’t more organizations, even big ones with household names, do it?

• All our customers are the same. You’d be surprised what you can learn about people if you look past what they buy. One real strength in Best Buy’s segmentation model is it looks at the way people shop for things, not just what they buy. Jills aren’t as comfortable in electronics stores as Barrys, so sales associates work harder to make them feel at home. Your prospect base probably differs in some way, in either their comfort and knowledge about your offering or the way they’ll use it. If you’re not sure, look back over past sales. Identify different approaches you’ve taken with different customer types. Then determine why you took the different approach and how to identify other prospects for whom that approach might work.
  
  
• We don’t have the necessary information to segment. Get it. If you have a good relationship with the people you email, if you provide them value, and if they like what you send, they should have no problem giving you additional information. Explain you want to better target your content. Also, offer an incentive, either something for everyone (special reports, a discount on an upcoming purchase) or a chance to win something bigger (free conference admission, a gift certificate of a significant amount). It’s a quid pro quo. They give you something of value, you provide something of similar or greater value. For more tips, check out "Know More About Your E-Mail Subscribers".
  
  
• We don’t have the ability to implement. It’s 2005, folks. If your email-sending system can’t manage and implement targeted campaigns based on segmentation, upgrade! E-mail isn’t an experiment to be dabbled in. It’s proven itself as a viable marketing channel. Part of its success, however, is being able to use the channel to its fullest. That means segmentation and targeting. There are server-based and email service provider (ESP) solutions to fit every budget, and most provide some segmentation and targeting capability (cross the ones that don’t off your list). E-mail service offerings that don’t offer tracking, reporting, segmentation, and targeting are behind the times; don’t waste your money on a subpar system. E-mail is too important to your business’s future.
  
  
• It’s too expensive. It does require some investment, but if you have a solid plan, it should pay off. Calculate your breakeven point. Gather your information on costs, then figure out how much of a revenue lift you need to break even. The higher the price of your product or service, the fewer sales it will take to break even.

I was curious to see if Best Buy was pursuing a similar customer profile strategy online; it appears to be. Questions about how I use my computer (work, digital photos, gaming), how knowledgeable I am about technology, and whether I visit consumer electronics stores just to browse would seem to give the company the necessary information to segment me. I look forward to seeing what email it sends me based on my profile. And coming from someone like me, who already gets more email than she can read, that in itself is a victory.

Want more email marketing information? ClickZ E-Mail Reference is an archive of all our email columns, organized by topic.