Customer Segmentation Research
What can Customer Segmentation Do for My Business?
- Customer segments allow you to consider dividing your current target customer into smaller groups which could be clustered by attributes such as: usage, feature/attribute needs, "whole product" desires that may include enhanced services, by company sizes or simply by geographic areas. In effect, customer segmentation allows your company to be more customer-focused and by revealing their key decision points allows your company to consider responding to their unique needs and wants (possibly while increasing the profitability of certain segments dramatically).
- You may want to explore the possibility of a certain segment of customers who primarily purchase from another competitor, but who would prefer to purchase from you, if only you made some inexpensive changes to one of your products, making your products much more valuable to their particular application.
- Segmentation can help to identify those customers who are especially valuable to your company's profitability and even those customers who demand more of your company than is justified by the revenue you receive. In this case you may be able to tier your customer support to ensure that the most profitable customers receive the highest quality in service and support.
- Segmentation can help to identify competitor's customers who are most vulnerable to switching because they're unhappy with one or more aspects of the brand's products or services, which have strong needs for one attribute or feature of your product and very little or no interest in other capabilities that are already bundled into the product. Perhaps you could modify a product at little cost in order to enhance the capabilities that are critical to that group of customers, strip out the unused features and gain a much higher market share of that particular customer segment?
- A strong segmentation can also help to effect your product development process by understanding which customer segment is most likely to purchase a certain product, allowing you to deepen your relationships with those vendors with which you would most like to conduct more business.
- Segmentation can also help to customize your communication efforts to ensure that you are touting the features/capabilities that mean the most to that particular customer segment - thereby increase your advertising effectiveness.
What is Customer Segmentation Market Research?
In recent years the mass market has exploded into dozens of smaller groups or clusters of customers with their own very different interests, lifestyle preferences and desires to have products and services that cater to their unique needs. Remember when Harry Ford proudly declared that his "customers can have any color of a car that they wanted, as long as it was black". Well those days are long gone and customers have grown accustomed to having products that are almost made specifically for them. They want variety, and that's at the heart of the practice of customer segmentation - identifying clusters of groups with very similar needs and expectations and working to deliver products and services that best meet their needs and wants. For years now, large companies have been forced to create "one-off" products by slightly adapting a "base" product with inexpensive slight variations into order be competitive within segments that in the past they would have simply ceded to the competition.
From the marketers standpoint their jobs have gotten much more difficult as a result of a single relatively homogenous group that has splintered into multiple smaller groups that demand special products that cater to their differing needs and expectations. Marketers are handling these differing expectations by producing special variants of their core products in the hopes that these minor changes will satisfy the unique needs of related but different customer segments. Understanding the characteristics and relative sizes of the different customer segments can be an enormous advantage to those companies that are flexible enough to cater to their unique needs - and the starting point is by having a customer segmentation that can act as a roadmap.
How Does Customer Segmentation Work?
Customer Segmentation Research is often a combination of qualitative and quantitative research, although quantitative research must be the backbone of the customer segmentation foundation. With the former trying to tie into the motivations of the different segments and the quantitative research being used to understand just how pervasive and how deeply these feelings go.
Customer Segmentation Research is typically one of the more expensive types of research due to the large numbers of completed surveys that must be gathered in order to compare the perceptions of consumers of key competitors one against another - at a statistically significant level. It's also possible that management may want to know how changes in other markets or even countries might effect their sales and profitability. At the low end Customer Segmentation Research may require several hundred completed surveys in order to perform the analysis required by Customer Segmentation Research - although if a market is especially complicated the number of necessary completed surveys could be significantly larger.
Customer segmentation is usually a highly technical endeavor with high end statistics, so you definitely don't want to go with the least expensive vendor on a project like this. The only thing worse than not having a segmentation model is having one that part of the organization believes and works with and that the other part of the organization doesn't think is worth the paper it's printed on. Segmentation is part science and part art - find someone who has some successful segmentation models under his belt to work with. (we know quite a few and can help you with that if you'd like)
