MarketIntellibitsTM                        


July 15,   2005
Volume I   Issue 11


Segmentation

One of the basics of marketing is segmentation. Everyone knows that, so
many marketing organizations do segmentation.  Market segmentation.  
Customer segmentation.

They segment customers into big and little. They segment customers by the
type of business they’re in. They might borrow from the airline frequent
flyer programs and have Platinum, Gold, and Silver customers.

Or, they might not. They don’t believe in it. They believe that all customers
are good customers, and all must be treated equally.

Do you segment your customers? Even more important, do you have a clear
idea why you’re doing it?

Basically, you segment in order to differentiate the way you treat customers.
Does this make you uncomfortable? The key is to decide how and why you
want to differentiate.

It’s important to understand that differentiated treatment doesn’t have to
mean different quality or different price. It doesn’t even have to mean bad
service versus good service, or even good service versus better service.
Just different. Some examples of treatment that is not good or better, just
different:
•        Different customer service hours for east coast and west coast;
•        Customers who want delivery by rail get rail, and customers who want
delivery by truck get truck;
•        Different sales reps with different expertise based on the customer’s
type of business.

Common sense, no problems, people do it all the time. But it gets more
complicated. On a deeper level, we do treat customers differently, and we
treat some better than others. There are many subtle ways to differentiate,
from the Marketing VP who agrees to special service programs for an
important customer to the sales rep who buys more lunches for his favorite
customer.

But is that customer a favorite for the right reasons or the wrong reasons?

Some valid reasons why one customer is more valuable than another:
•        Sales volume
•        Loyalty
•        Profitability
•        Growth potential
•        Your importance to the customer
•        Cost to serve

Can you quantify the relative importance of these items to determine who
your best customers are? And then can you identify how you want to treat
them differently?  And is it wise to formalize and structure this or leave it to
the good judgment of your people?

To close the circle on this discussion, let’s go back to the beginning and the
idea that it’s not only about better treatment, but different treatment. If you
treat all customers the same, you might be losing money giving them things
they don’t value. Some buy on price, some on quality and some on service.

Do you know what drives each of your customers?   

Do your field tech service people pay more attention to those that buy
because of quality? Perhaps they should.

Do your customer service people jump through hoops for the customers
who push hardest and scream loudest, or do they jump through hoops for
the customers who buy because of service and are more profitable?

Does the customer who buys only on price get the same service? Of course,
he should get a quality product, delivered on time, but perhaps he should
place his orders via the Internet.

Are you segmenting your customers? Have you thought through all the
issues? If not, MarketIntell can help.

Look for the next issue, which will be a corollary to this issue and will re-
visit the subject of Platinum, Gold and Silver customers:

 Loyalty Programs


Need help assessing your competitive intelligence needs or building a
competitive intelligence function?  
MarketIntell can help.  Email Jack Miller
or call Jack Miller at 203 925 0326.



MarketIntellibits  is published semi-monthly  by MarketIntell,  a  Market
Intelligence consultancy founded by Jack Miller, a long time sales and
marketing executive in the paper industry.    

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