Segmentation

Customer Segmentation

Segmentation allows organisations with large customer bases to better understand and communicate to their customers.  Better understanding of customer behaviour by segment, their respective drivers and demographics allows for the formulation of appropriate strategies per segment, enabling the business to market to them in the most effective way.

WHAT IS CUSTOMER SEGMENTATION?

A comprehensive customer segmentation analysis is a valuable tool for marketers and decision makers.  By grouping customers into manageable segments based on demographic likeness and behavioural similarities, marketing strategies can be adapted to reflect the differing needs of a particular segment.

A segmentation can help identify which segments offer the biggest opportunities, then target those customers who generate the greatest ongoing profit.  It can be based on products, customers, outlets (e.g. fire stations or retail stores) or even an entire market – it’s therefore useful when there is a need to classify people or things.  Datamine can group similar customers or products purchased in combination (e.g. for the purposes of developing marketing strategies and/or driving communications).  Like in customer profiling, we can use client data as well as potential external data (Census, Westpac, market research etc.) in order to populate any shortfalls that may exist.

The first step of this process is determining what the client is looking for – what are they going to do with the segmentation?  How will they use and apply the segments?  This will impact how we create the segmentation from the outset and craft the final outputs.  The best way to facilitate this is through a workshop, where stakeholders from across the client's business can come together and collate their respective goals for the segmentation, offering everyone a chance to voice their opinion on how they want to see the outputs applied.  In the workshop, together we’ll determine what the best type of segmentation is for your specific business challenge.

Customer Segmentation Large

 

1. Strategic segmentations: Designed to look at large scale shifts in customer behaviour and identify macro opportunities – this is the most stable segmentation as it usually considers a wider variety of longer term variables.  This type of segmentation is used for:

  • Big strategic initiatives based on customer dynamics
  • To identify gaps in current product offerings or skews in customer base
  • To identify key differentiators that drive customer behaviour
  • To provide a common language for talking about customers and a rounded picture of them
 
2. Marketing segmentations: Designed to identify and capitalise on opportunities for revenue generation – these are less stable, as they incorporate shorter term variables and focus on changes in customer behaviour and value.  This type of segmentation is used for:
  • Targeting communications based on actual behaviours
  • Identifying upsell, cross-sell and retention opportunities
  • Providing a framework for monitoring campaign effectiveness
  • Helping know where to best allocate marketing budget
 
3. Operational segmentations: Designed for highly targeted activity – these are made up of potentially thousands of segments, each derived from a smaller set of behavioural variables specific to one activity.  These micro segments are unstable, so this type of segmentation is about identifying certain ‘states’ and using certain customer attributes to deliver the most targeted action for that predefined state.

BENEFITS & INDUSTRIES

Benefits

  • A better understanding of customer types and their importance to the business
  • Ability to differentiate between business and marketing activities and measure the effectiveness
  • Monitors movement between segments to measure impact of marketing activity
  • Creates a framework to monitor effectiveness of marketing strategies
  • Can help with budget allocation
  • Useful for a number of different functional areas, including marketing, production, logistics and customer service

Industries

  • Telecommunications
  • Banking and Financial
  • FMCG
  • Entertainment
  • Retail
  • Government
  • Insurance
  • Utilities
  • Not for profit

CASE STUDY

201806 Generic FMCG segmentation PPT UPDATED-1

WHAT NEXT?

 

Check out the following blog post related to customer segmentation: 

Retail Churn

 

Have a read of our other insights on customer segmentation:

Schedule a free phone chat with a Datamine consultant:
Interested in learning more about how Datamine could help you segment your customer base?  Fill out the form below to schedule a call with us.