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How to Improve EE & DR Program Marketing with Segmentation

You're trying to build awareness for a new energy efficiency or demand response program, while developing a marketing funnel that will convert that awareness to program enrollments and completed projects over time. You have approximately three bajillion eligible customers, a marketing budget of nearly $7 and a request to reduce your program's overall cost per enrollment. Sound familiar?

I'm exaggerating of course, but sometimes that's how it feels to be a utility program marketer. What can we do to make our lives a little easier, improve our results and achieve our goals (while cutting costs)? Market segmentation. It's a drum I like to beat loudly, because I whole-heartedly believe that by combining data, analytics and good marketing we can be more successful.

Let's start with the basics: 

  1. What is market segmentation? Simply put, it's the process of dividing a market of potential customers into groups (segments) based on different characteristics. Those groups could be zip codes, or census blocks, or vertical markets, or psychographic profiles, or a combination of zip code and psychographic profile, or a score based on a propensity model. Segments are like buckets - how you determine those buckets can be done simply in Excel or in a more complicated manner using regression analysis and predictive modeling. And you know what? It works to help improve your marketing. For example, we've found that email open rates between geographic segments can vary as much as 297 percent within the same utility, with the exact same offer! Since knowing our average open rate in a specific program can help us fine tune our ability to forecast our marketing outreach, the variation between segments is important to know. 
  2. Why is market segmentation helpful? Market segmentation is helpful because by marketing to a smaller number of eligible customers with a common set of characteristics, your marketing can be more tailored and therefore more effective. If you know from your market research that Zip Code A is in an urban area with older homes and a diverse population, then you can develop creative and copy that reflects this, and target it to the eligible prospects in that area. When people see themselves in your marketing, they're more likely to respond. We tested this assumption in a home energy audit program with a series of Facebook ads. When the images in the ads reflected the demographics and psychographics we identified in our market research, the click through rate (CTR) on the ads was 85 percent higher! That's bananas. 

Sometimes people are intimidated by market segmentation and believe it to be some sort of voodoo magic they'll never be able to to wrap their brain around. Possible? Yeah. Market segmentation can get complicated. When you're talking about building propensity models, you're talking about econometrics classes and statistics lessons you may not have thought about since college. When you're talking about psychographic segmentation, you need a way to identify your segments, then apply that to your customer list. Both are probably going to require some outside assistance from either industry experts or appended data, or both.

But basic segmentation? That can be done by just about anyone using commonly available tools like Excel. Do you know how to set up filters in Excel? Awesome. You can segment a list. The key to being able to do basic segmentation in house is doing some market research beforehand to determine the characteristics you want to segment on - from there, it just requires compiling the data into a spreadsheet, then filtering it on the relevant characteristics, then tailoring your marketing collateral to that audience persona and developing a campaign that takes them on a journey to accomplish your program's goals. It will take some time, but it is totally do-able. And it will help you improve your marketing.

Here are some tips to keep in mind when developing your segments:

  • Each segment must be well-defined and large enough to substantiate investment. We want to avoid over-segmenting and focus on creating just enough segments where you will see an increase in conversion rates through more personalized outreach.
  • There must be a practical way of identifying and targeting the segment, combined with a cost-effective means to reach each segment. The data you want to segment on must be something you can get, and something you can afford.
  • Segments can be based on needs, preferences, motivations, purchasing patterns, media usage, lifestyle, lifecycle stage and various other demographic, firmographic and psychographic variables. The options are virtually limitless, but over time, you'll begin to learn that certain segments work best for your needs and you can replicate those for future, similar programs.

Ideally, market segmentation becomes a tool to identify high-value customers and helps you create a compelling strategy to reach them, with an efficient cost of acquisition. Sometimes this scares marketers, prompting a fear of missing out (#FOMO) on opportunities that might be available outside the target segments. But that's not true. You're not preventing anyone from participating in your programs, you're just being more strategic with your limited marketing resources, time and budget to focus on those most likely to act. Outside your target segments, you'll always have adjacent segments with similar needs that you're able to focus on after focusing on your primary segments. And on top of that, there will always be those customer who find you - tools like Google AdWords or utility websites with enrollment forms can help you capture those you aren't directly targeting, but who may be interested in participating in your program.

Market segmentation is the foundation for great marketing campaigns. It allows us to target prospects most likely to convert and helps us develop collateral and a marketing mix for our campaigns that will increase conversions.

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Danielle Marquis
Written by Danielle Marquis

Danielle Marquis is a true powerhouse in the world of demand side management marketing, leveraging her digital marketing skills and industry experience to drive program marketing innovation and reduce cost per acquisition for our clients. She leads corporate branding, digital marketing, marketing product development and marketing strategy for Franklin Energy, and that’s just the beginning. Danielle also serves as the vice chair of education on the Association of Energy Services Professionals (AESP) board of directors and is a regular speaker at industry events. She has presented thought leadership sessions on sustainability branding, advanced market segmentation, data-driven marketing and brand positioning, to name a few. Danielle holds a law degree from the University of Colorado at Boulder School of Law and various digital marketing certifications.

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