Divide and Conquer A Primer on Needs-based Segmentation
By Nick Poulos
Selection is the single most important set of decisions any business-to-business enterprise can make. The most successful firms consciously select the products and services they will provide, the customers to whom they will provide them, and the channels through which they will market them.
Running parallel to the selection process is one of the biggest challenges facing business today: how to invest the limited resources at our disposal—time, money and human resources.
Accordingly, targeted segmentation to promote conscious selectivity within your sales, marketing and service database becomes the most valuable prize of your business intelligence and customer knowledge management activity.
Recognizing the fact that not all customers are created equal, allows you to target your limited resources toward those who are most potentially valuable to you. It gives you a practical alternative: to invest your limited resources in direct proportion to your expected return.
I call this approach needs-and buyer-based segmentation. This is the segmentation strategy of choice, since it is needs that drive market behavior; and the simple knowledge of knowing when and how buyers act puts you leagues ahead of your competition. This approach is characterized by the clustering of customers—and later, prospects—according to common sets of needs and buying behavior.
Segmentation is a primary prerequisite to successful customer relationship marketing.
However, this is by no means a cookie-cutter process. Just as each company is unique, so its segmentation plan will reflect that diversity—guided by your marketing imagination.
The Basis for Segmentation
Seven guiding principles provide a framework for the segmentation process:
Step 1: Identifying your best customers
Earlier attempts at segmentation generally focused on certain demographic and firmographic characteristics, such as company size, SIC code, sales volume, and the like. This was—and is—certainly a start; but compared to today's segmentation strategies, it was like wielding a meat cleaver rather than a scalpel.