Customer Segmentation Methodology

A reader of the previous post asked "What is the best ways to define your customer segments?"

In order to implement a Customer Segmentation Methodology managers are required to:

• Divide the market into meaningful and measurable segments according to customers’ needs, their past behaviors or their demographic profiles
  
• Determine the profit potential of each segment by analyzing the revenue and cost impacts of serving each segment
  
• Target segments according to their profit potential and the company’s ability to serve them in a proprietary way
  
• Invest resources to tailor product, service, marketing and distribution programs to match the needs of each target segment
  
• Measure performance of each segment and adjust the segmentation approach over time as market conditions change decision making throughout the organization

This is an effort that takes time and resources but it reaps cuts marketing costs for Product Development, Marketing, and Service while improving revenue results for sales and marketing.

Segmentation: CRM Success Strategy, Stage 1.2

One of the reasons CRM got a bad reputation was ironically that it was often a solution initiative that overlooked the prime reason for CRM. Who exactly are our customers? Just importing in a client list and applying them to sales territories is the bare minimum.

Identifying Customer Segments, discrete customer groups that share similar characteristics, and determining how to best service them is a cornerstone of Successful CRM.

CRM helps you get closer to your customers but only if you know who the customers you should be actively pursuing are.

Avoid the trap of trying to find the solution inside the sales and marketing department. Marketing is like the X-Files, "The Answer is Out There!" You've got to talk to your customers in order to build your CRM requirements.

Once you have established your customer segments you can prioritize marketing campaigns, resource allocation, product development and pricing strategies to maximize economic value from high-profit and low-profit customers.

The Value Vision: CRM Success Strategy, Stage 1.1

“If you don't know where you are going, any road will get you there.” This Lewis Carrol quote from the 19th century sums up why so many people and companies never succeed.

Every success comes from a value vision; also known as a vision statement or value proposition. Think of it as three sentences that boil your business down to its essence. It's can be a source of inspiration and aspirataion while it guides your company's business decisions. A strong Value Vision should answer the following six questions.

1. Who are the customers?


2. What sector do you serve?


3. What do you offer as goods and services?


4. How are you different than everyone else in your industry?


5. Why would customers be motivated to do business with you, and only you?


6. What are you going to do with customers when you get them?

Does your company have a clearly defined business vision? If it doesn't then CRM isn't necesarily going to help your company be more successful.

However, when implementing CRM you have an opportunity to solidify and promote your vision internally, so that your employees can broadcast it externally.

Here are some different examples of Corporate VIsion:

Toastmasters International
Toastmasters International empowers people to achieve their full potential and realize their dreams. Through our member clubs, people throughout the world can improve their communication and leadership skills, and find the courage to change.

Wells Fargo
We want to satisfy all of our customers' financial needs, help them succeed financially, be the premier provider of financial services in every one of our markets, and be known as one of America's great companies.

Dupont Vision
Our vision is to be the world's most dynamic science company, creating sustainable solutions essential to a better, safer and healthier life for people everywhere.

Ever since 1988

This blog is about doing CRM right the first time, the CRM industry and how to improve what you've already got.

CRM became a part of my professional life back at Comdex Atlanta in 1988.

My CRM life started just after I'd just graduated from University. I was responsible for Public Relations and marketing support at a "revolutionary accounting software company." They made a product called NewViews.

Marketing Rules 101; risk adverse is a psychographic characteristic of accountants, so revolutionary is a brand message to avoid.

Still, we had won PC Magazine's "award for technical excellence in applications software;" a serious industry honor. Pat Sullivan, president of Conductor Software International stopped by our booth. He had a product called ACT! and we ended up trading work copies of our applications.

Pat promised me that ACT! would make me 20% more productive. I installed and later that day had my epiphany of what CRM could do for sales, marketing and customer service.