Customer Segmentation What is Customer Segmentation? Dividing the market into meaningful subgroups What is it good for? Finding underserved consumers Targeting.

Customer SegmentationCustomer Segmentation

What is Customer Segmentation?•Dividing the market into meaningful subgroups

What is it good for?•Finding underserved consumers•Targeting products or marketing to a specific user group•Understanding who your consumers are

Customer SegmentationCustomer Segmentation

What Should I Segment By?•Demographic – Age, Gender, •Socioeconomic – Income, Education•Product Usage – Usage level, Purchases per month•Important Product Benefits – Cost, Color, Brand•Geographic – City, Region

Customer SegmentationCustomer Segmentation

Methods Of Customer Segmentation•Quantitative• Ask Around, Mental Exercise

•Qualitative• SPSS• Pivot Tables

Customer SegmentationCustomer Segmentation

New Electric Orabrush

•Known: Cost will be $60

•Which consumers would want an electric Orabrush?•What would they expect to pay?•What channels should we sell it through?•What features should it have?•Etc

Customer SegmentationCustomer Segmentation

Methods Of Customer Segmentation•Quantitative – Do the mental exercise, try to drill down

• Pros – Cheap, Fast, Easy, Better Than Nothing• Cons – Subjective, No New Data

Newlyweds Insecure Teenagers Salesmen

30% 50% 20%

Price Color Performance

Online Online Brick & Mortar

$15 $10 $40

Customer SegmentationCustomer Segmentation

Methods Of Customer Segmentation•Qualitative – SPSS – Build and run survey, input and massage data

• Pros – Data Driven, Finds non intuitive answers, Robust• Cons – Expensive, Time Consuming, Hard to learn

Customer SegmentationCustomer Segmentation

Methods Of Customer Segmentation•Qualitative – Pivot Tables – Build and run survey, input and massage data

• Pros – Data Driven, Finds high level connections, Cheap• Cons – Not very robust, Somewhat Subjective

Customer SegmentationCustomer Segmentation

Pivot Table Customer Segmentation

Sent out a survey to heavy users asking• Demographic Questions

• Job• Age• Gender• Location

• Product Feature Questions• Most important feature• Preferred sales channel• Expected Price

Customer SegmentationCustomer Segmentation

Identify Segments

$ 30 $ 40 $ 50 $ 60 $ 70

Female

Newlywed 13 5 1 6%

Salesman 6 4 10%

Teenager 17 2

Male

Newlywed 5 14

Salesman 2 7

Teenager 5 15

• Female Salesmen and Newlyweds are good segments

Customer SegmentationCustomer Segmentation

Identify Segments

• East is a better location

Row Labels $ 50 $ 60 $ 70

Female

Newlywed

East 4 4 2

West 5 3 1

Salesman

East 1 4

West 3 2

Customer SegmentationCustomer Segmentation

Identify Segments

• Age is not relevant for segmentation

Row Labels $ 50 $ 60 $ 70 FemaleNewlywed20 4 130 4 140 1 2 150 4 1

Salesman20 330 1 140 2 150 1 1

Customer SegmentationCustomer Segmentation

Identify Product Features

• Performance and cost are the most important product features for their segments

Row Labels Color Cost Performance

Female

Newlywed

East 2 5 3

Salesman

East 1 4

Customer SegmentationCustomer Segmentation

Identify Product Features

• Performance is most important product feature

Row Labels B & M Online

Female

Newlywed

East 5 5

Salesman

East 5

Customer SegmentationCustomer Segmentation

Target Consumer Segments

East Coast Female Salesman10% of populationValues performanceWilling to spend $65Shops at B&M Stores

East Coast Female Newlywed6% of populationValues costWilling to spend $61Shops at B&M Stores