Customer SegmentationAll customers are vital to your business, but some are more vital than others. Some customers provide significant revenue today but will decrease over time. Others are small today but have huge growth potential. Some customers demand enormous resources and support, while others don’t and some customers are great references, recommenders and a major source of new customers for your business.

“Good customers are an asset which, when well managed and served, will return a handsome lifetime income stream for the company.” – Phillip Kotler

Your customer base is not homogenous. It is made up of sub-groups that buy, consume and behave differently. If you want to accelerate adoption of your product or service you must accurately separate your customers into segments categorized by how they use your product/service and then align all your Sales and Marketing actions with those differences. Think: segmentation = divide and conquer. WARNING: Ignore customer segmentation at your own peril.

Key Questions:
1) Should you treat different customers differently?
2) How can you do this intelligently?
3) What is the best way to group or segment your customers?

“A meaningful segment is any group of customers that meets three criteria: they are identifiable by common characteristics, they are profitable, and they are growing.” – Brent R. Grover, Evergreen Consulting, LLC

Conventional segmentation criteria are*:

  1. Industry verticals
  2. Size of enterprises served (Small, Medium, Large)
  3. Geographies
  4. Age brackets
  5. Education levels
  6. Gender
  7. Everyone

*Segmentation criteria 1-3: B2B, 4-7: B2B Buyer Personas/B2C

A better segmentation method is to create customer segments based on the answer to this question:

“What job is the customer hiring the product to do?”Clayton Christensen

Confusing Customers with the Channel:
The first and highest payback question is about your customer’s business. “Do they integrate, add value, resell or distribute your product or service, or are they the End User/Consumer of your product or service? Failing to make this separation and confusing the two groups will result in serving each group inappropriately or at best ineffectively and will create considerable frustration for your Channel Partners and Customers alike.   

Segmenting customers carefully can help you plan for the future, knowing where to invest and how to develop clear value propositions that appeal to the channel and customer segments. It can also help you maximise profitability by knowing which customer groups to protect, as well as those who require additional resources and support, and those who should be migrated to the competition.