Customer Segmentation M

Description
Customer Segmentation is the subdivision of a market into discrete customer groups that share similar characteristi
unmet customer needs. Companies that identify underserved segments can then outperform the competition by d
Segmentation is most effective when a company tailors offerings to segments that are the most profitable and serv
help companies develop marketing campaigns and pricing strategies to extract maximum value from both high- an
the principal basis for allocating resources to product development, marketing, service and delivery programs.

Methodology

Customer Segmentation requires managers to: Divide the market into meaningful and measurable segments accor
profiles;
Determine the profit potential of each segment by analyzing the revenue and cost impacts of serving each segmen
Target segments according to their profit potential and the company's ability to serve them in a proprietary way;
Invest resources to tailor product, service, marketing and distribution programs to match the needs of each target
Measure performance of each segment and adjust the segmentation approach over time as market conditions cha
Common uses

Companies can use Customer Segmentation to: Prioritize new product development efforts;
Develop customized marketing programs;
Choose specific product features;
Establish appropriate service options;
Design an optimal distribution strategy;
Determine appropriate product pricing.
Performing Customer Segmentation Analysis and dividing your customer base into different segments based on diff
and alternatives for growth in those segments. Customers within one customer segment have similar characteristic
understanding your customer segments can give you competitive advantage in your marketplace. For example, the
you are in developing customized offerings, products, services or simply you are able to develop better sales and m
allocate and optimize your company wide resources.

Effective Customer Segmentation groups your customers in meaningful segments which are well defined and meas
with customized sales and marketing approach. Also, well defined and measurable segment allows you to plan and
structures to target the customer segment. If you develop effective customer segmentation you will also be able to
Companies can improve their profitability and benefit from customer segmentation in many ways such as better pr
effective logistics and distribution decisions, improved product development and product positioning in the marke

Customer segmentation is critical and challenging. Understanding and quantifying your current customer base is th
process requires decision makers to analyze the customer data. You need to define your current and relevant custo
as well as your current revenues for each relevant segment.

Consumer Segmentation
- Demographic Segmentation - age, gender, sex, social class, income, education
- Geographic Segmentation - region, country, city, zip code, climate
- Psychographic Segmentation - lifestyle, attitude, activities, interest, personality
- Behavioral Segmentation - loyalty, product preference, price perception
mentation Matrix
that share similar characteristics. Customer Segmentation can be a powerful means to identify
perform the competition by developing uniquely appealing products and services. Customer
e the most profitable and serves them with distinct competitive advantages. This prioritization can
mum value from both high- and lowprofit customers. A company can use Customer Segmentation as
ce and delivery programs.

d measurable segments according to customers' needs, their past behaviors or their demographic
pacts of serving each segment;
them in a proprietary way;
atch the needs of each target segment;
time as market conditions change decision making throughout the organization.

efforts;

fferent segments based on different criteria is a great exercise for discovering profitable segments
ent have similar characteristics and are driven by similar needs and preferences. Analyzing and
marketplace. For example, the better you know and understand the segment the more competitive
to develop better sales and marketing approach. Customer Segmentation allows you to better

ich are well defined and measurable customer groups. Once defined each segment can be targeted
gment allows you to plan and develop alternative go-to-market strategies and plan appropriate cost
ntation you will also be able to measure your market performances for each of your segments.
n many ways such as better pricing and profit margin decisions, better customized offerings,
duct positioning in the marketplace, more effective promotional tactics, etc.

ur current customer base is the starting point for any successful segmentation. This step in the
our current and relevant customer segments and quantify the segment size - number of customers
 Customer Segmentation Matrix
Product / Service Customers Potential Segments