Value based segmentation, or how to get bottom-line results.

Customer segmentation has been around forever, and many companies have used it as a marketing tool.  But in our experience, few get the bottom-line results that they should.  And since most agree that all elements of a good strategy—from product design to pricing to distribution to competitive positioning—should in some way derive from the goal of meeting the key requirements of target customers, customer segmentation itself is a critical tool for strategy development.  Why, then, do many companies not see bottom-line results?

Most often it is because the output ends up being interesting but not actionable, or the results are used only for limited marketing purposes, not as a strategy tool to guide the entire organization. Segmentation divides customers into groups based on the underlying needs or characteristics driving their purchase decisions.  Truly distinct customer segments respond to different value propositions and require different strategic approaches. When properly used, segmentation helps to allocate resources throughout all levels of the operator to create value propositions that uniquely serves the target client’s clusters.

Customer segmentation is at its most powerful when used as a fundamental part of the strategic process, instead of just as a marketing tool. A sound segmentation allows operators to choose from the vast spectrum of potential clients and focus on the distinct clusters that the operator is best suited to serve. After aligning the organization to serve these clusters, the marketing departments will be able to define a differentiated and defensible value proposition which its competitors will have difficult emulating.

Here’s mmC Group’s point of view on value based segmentation. Hope it helps. Enjoy the reading!

CVA