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Customer Segmentation Analysis

In several workshops I was asked to share some tips on how to conduct Customer Segmentation Analysis. So let me share my thoughts in 350 words or less!

A single product or service will seldom meet the needs of all your customers. Customer segmentation helps to divide your customers into groups of similar individuals using specific criteria, such as age, gender, interests, spending habits, occupation, etc.

This focuses your marketing efforts by identifying those segments that share common needs and will yield positive returns.

TIP 1
Look at your current market to see what segments have yet been defined. (For example, a simple product like gum has multiple flavours, packages, etc. to meet the preferences of different customer groups. Why not dig further (e.g. gum to help treat sensitivity, teeth grinding, dry mouth) and uncover new segments?

TIP 2
Avoid generalities in describing various subgroups. Make sure your segments are:

  • Measurable: Attributes (e.g. # potential customers) can quantified
  • Substantial: Segments are not too small and unprofitable.
  • Accessible: You have the budget to reach that segment
  • Actionable: Effective marketing strategies can be developed by the segment chosen.

TIP 3
Clarify how you are defining “customer segment”, (e.g. if you are an association does “customers” mean members, sponsors or both?)

EXAMPLE

  • You work for an American US courier is assessing the viability of entering the Canadian market.
  • A first step is defining the key customer segments, followed by determining what the % of total industry sales each segment accounts for.
  • Recognizing that courier companies typically structure their waybills from the customer segments they have defined, you’re not surprised to discover that UPS, FedEx and Purolator waybills all have similar delivery options: same day, rush , service, overnight and next day.
  • These service options become the template for segmenting the market and estimating % of sales:
Delivery Options % of Total Sales

Same Day

 17%

Rush

5%

Basic

26%

Overnight

23%

Next Day

29%

 TOTAL

100%

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