Establishing 'Making it Happen' as a 'Formal & Predictable' Discipline

What is Customer Segmentation?	Customer Segmentation Actions

ENCYCLOPEDIA→ Functional Management → - Customer Management → - Customer Segmentation and Profiling →

Customer Segmentation Parameters

Customer segmentation can be done on multitude of parameters, This is just an indicative list. The key is to make sure that you are focusing on the parameters which are important for your business. One should avoid the trap of making customer segmentation too complex an exercise.

One can segment customers on variety of parameters. As mentioned before, one should optimize on the level of segmentation and the number of parameters you want to do the segmentation.

Segmentation Parameter Hierarchy:

A class of parameters for customer segmentation is called ‘top level’ parameters, which generate primary set of actions to address those segments. These can also be called ‘segmentation defining’ parameters. Few examples are: Income-group & Social strata, Customer Age Group, customer value.

Another class of segmentation parameters belongs to ‘fine-tuning’ parameters, which help you further improve OR fine-tune your actions. For example Customer location, Customer occupation

There is no standard rule to tag parameters as ‘defining’ OR ‘fine-tuning’, as it depends on the organization context. Though it is an iterative process, it is important to define these distinctions before you invest heavily into segmentation and start building your segment-based actions.

List of Customer Segmentation Parameters

Customer

Demographic Parameters: Age, Sex, Location, Language spoken, Education
Life Cycle Stage: Studying, working, marital status, children, retired.
Occupation: Self employed, unemployed, service, practicing professional..

Income

Total income
Disposable Income
Assets owned- Owning a house, Car, Investments

Customer Life-Style

Memberships to clubs
Vacations
Entertainment patterns

Customer Behavior in Usage

Usage patterns of aligned products: A company launching a new electronic gadget will be interested in people who have bough high configuration laptops.
Usage volumes- A customer having a higher usage of mobile phone, will be a good target for video and song download service. Another example is- A customer utilizing the limits of the credit card, could be a good customer for introducing limit enhancements.

Risk profile:

Payment patterns in terms of timeliness.
Income-group alignment with the payment terms.

Customer Value & Profitability

Level of revenue generated from the customer (current as well as lifetime projection)
Level of profitability from the customer (current as well as lifetime projection)