A complete guide of customer segmentation: Analysing models and strategies

Let us start with an analogy. Imagine the cultural ethos of various communities living in different parts of the world. Their interests, food habits, taboos, customs and communication patterns differ in numerous ways. That established, think of organizing a party and inviting one member each from these communities. As the logic goes, there would be a lot of heterogeneity in the hospitality and this would be customized according to geographies. In a nutshell, this is what customer segmentation analysis is all about. Tailoring the products, marketing and processes of a business in accordance with the needs of the customer is what lies at the heart of customer segmentation.

This article provides a bird's eye view of the major models and strategies which are used in the domain of customer segmentation.

Customer segmentation: Why does this need arise?

The need of customer segmentation arises from the fact that knowledge about the specific needs of particular customers is a key to business development. Channelizing the content of a company as per the requirements of clients is what differentiates that particular company from others. It also enables a company to run targeted marketing campaigns that resonate with customer choices. Moreover, by virtue of this technique, a company is able to distinguish it's most valuable customers from the generalized ones. Another benefit of customer segmentation analysis is that it paves the way for development of new products, softwares and solutions.

Bringing models into equation

After the need for customer segmentation is understood, this brings us to the various models that are used in customer segmentation.

1- Value based segmentation model- In this type of model, segmentation is done on the basis of economic value of a particular niche of customers.

2- Technographic segmentation model- Technological apparatus like mobile, laptop, software, applications etc are used as a customer segmentation tool.

3- Psychographic segmentation model- Ethical standards like morals, values and principles are used for segmentation purposes.

4- Behavioral segmentation model- Segmentation is done on the basis of frequency of activity, product usage and transactions.

5- Regional segmentation model- Based upon the region of customers, segmentation is carried out.

6- Needs based segmentation model- Depending upon the requirements of particular customer groups, segmentation is carried out.

7- Demographic segmentation model- When the customer segmentation tool makes division on the basis of gender, age or income, segmentation is said to be demographic.

Chalking out the strategies

Customer segmentation strategies broadly fall into four different categories. The first strategy depends upon the determination of customer segmentation goals. The second strategy is that of classification and clustering of customers into groups. The third strategy is all about the drafting of communication frequency with customer segments. Lastly, after reaching out to the customers and taking appropriate feedback, various adjustments are made.

Concluding remarks

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Created on Mar 2nd 2021 12:55. Viewed 245 times.

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