Customer segmentation

One of the first consideration in setting up a marketing plan to to consider customer segmentation. Regardless of the business your current customer base buys different products and services from your company. Some customers buy more than others. Some are more profitable. It's critical to begin your marketing plan by understanding your customer base.

80/20 rule


The old 80/20 rule states that 80% of your sales volume will come from 20% of your customer base (Group A). I always encourage new customers to look at this first to see where their 80% actually comes from. Since 80% of your volume comes from 20% of your customers then respectively 20% of your customers only sent you 80% of your sales (Group B). In both the 80% and 20% segments you will find additional customer segmentation.

After segmenting your clients into an 80/20 bracket take each group and look at their buying information to break each group into additional segments. Look at segmentation in several areas. For example:

• Sales volume
  
• Profitability
  
• Frequency of purchase
  
• Type of product purchased
  
• Age of the account as a customer
  
• Logistics
  
• Demographics such as age, gender, married/single, children

The more you understand about your current clients the better you will be able to create a marketing campaign to target each segment. Often companies using this process as a starting platform will find existing customers in Group B with the same profile as customers in Group A. That means they have missed sales opportunities by not recognizing the similarities in buying habit or customer profile.

Once your team has segmented your current customer base it's wise to perform a SWOT (Strength, Weakness, Opportunity, Threats) analysis on each segment (after performing one on your company). This will give you additional insight into what may be affecting client buying habits as well as events that may affect future buying decisions. Though SWOT analysis is normally used in continual improvement programs throughout a company it can be very effective in helping you understand what strengths you can use in your marketing and what opportunities could be key targets for marketing campaigns.

Emerging Solutions Now works with clients to help them re-think sales and marketing programs. Marketing requires an understanding of what has been done in the past, sales trends and industry shifts. With this information new programs can be designed to drive customer retention, increase the opportunity for customer sales and improve new client prospecting. For more information on our products and seminars please contact us at roger.buck@emergingsolutionsnow.com or visit our website at www.emergingsolutionsnow.com.