When it comes to predicting customer behavior, historical sales data may contain critical clues. Who are repeat customers for a product or service? Have all segments of the target customers been identified? Segmentation is used to divide customers into groups based on their demographics, attitudes, or buying behaviors and target the specific groups with a message that will best resonate with them. The more you know about a customer, the easier it is to predict their behavior.
During this season of prediction making, you may want to consider playing the popular German game of Bleigießen “lead pouring,” in which your future is foretold through lead shapes. A spoon with a small amount of lead is held over a flame until the lead melts. The melted lead is then quickly poured into a bowl of water. Upon contact with water, the lead solidifies and forms a unique shape. The shape of the cooled lead is then compared to a list of meanings.
You might not have any control over shape formation (i.e. fish “Fisch” = luck “Glück” vs. cross “Kreuz” = death “Tod”), or what personal changes will manifest in 2015, but one area in which you may have some control is in increasing your company’s profitability. By implementing Customer Segmentation, a Voice of the Customer tool within Six Sigma methodology, you’re able to zero in on target customers who create the highest value and ultimately increase your profitability and bottom line.
What Does it Do?
Customer Segmentation identifies and focuses on subgroups of customers who create the highest value and prioritizes efforts to allocate appropriate marketing resources. Companies oftentimes neglect or miss opportunities because they treat all customers as bringing equal value or fail to understand the economic, descriptive, and attitudinal criteria of their core business.
Segmentation criteria can include:
- Economic (revenue, frequency of purchase, loyalty, company size, etc.)
- Descriptive (geographic location, demographics, industry)
- Attitudinal (price, service, value)
The following Bleigießen examples exhibit segmentation criteria:
Customers can be segmented demographically by marriage status (single, married, divorced). Married couples often have distinctly different purchasing behaviors compared to single consumers. This can relate to purchases such as cars, financial products, or holiday entertainment. For example, travel agencies would not offer similar holiday packages for bachelors and married couples.
Customers can be segmented by purchasing power or behavior. These customers could be segmented demographically through social class (lower, middle, upper). Social class is a term linked to education, tradition, income (low, medium, high) and parenting. Alternatively, customers could be segmented attitudinally through values or lifestyle (conservative, economical, trendy). If your target customer is upper class, marketing via coupons will be a waste of time for a group indifferent to saving a few dollars.
Customers can be segmented demographically through family size (couple only, small family, large family) and family lifecycle (young married no kids, married young kids). Customers can also be segmented attitudinally through needs or motivations (convenience, value, safety). If you’re considering entering new markets/regions and your target customers are children, you may want to avoid certain European countries, such as Spain, where there are 1.4 children per female.
How to Do It:
- Identify the product or service being analyzed
- Brainstorm to identify customers
- Identify segmentation characteristics
- Develop profiles of the segments
- When gathering information, include members from each segment
- Document results
|Product/Services (Output)||Customers||Potential Segments|
|BleigließenGame||US Customers||West Coast|
|European Customers||Western Europe|
Benefits of Tool:
- Understanding customer segments and segment behavior can help tailor marketing and sales strategies
- Reach profitability goals by demoting customers who don’t generate value
- Formalizing segment profiles provides a common language
For related blogs that cover additional VOC tools: