Voice of the Customer – Customer Segmentation

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:

Customer segmentationShape 1. Ring “Ringe” = Marriage “Hochzeit”

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.

customer segmentationShape 2. Mouse “Maus” = to be thrifty / economical “sparsam sein”

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.

customer segmentationShape 3. Bell “Glocke” / Egg “Ei” = Birth announcement “Ankündigung einer Geburt”

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
East Coast
European Customers Western Europe
Eastern 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:

Edgewater Consulting blog

Voice of the Customer – Kano Analysis

As a Consultant, I’ve acquired specific preferences when traveling, and learned to adapt behaviors that make these experiences as stress free as possible. For example, at airport security, I try to avoid standing in line behind anyone who is dressed too “casually” or has sun screen as one of the items in their plastic bag. Chances are that they will take twice as long going through security, thus delaying my time to reach my gate/flight. When selecting a hotel, I look for one with a good in-house dining menu. The benefit of coming back to the hotel and enjoying a good meal without having to leave my room is priceless. Also, let’s be honest, it all comes down to points.

The casual traveler might see little value in earning points or priority boarding; however, the business traveler sees great value in these service items.  Not all consumers value the same services and products on the market in the same way and many companies are keen to analyze these trends. To aid in analyzing customer needs, and provide insight into services or products of little importance or that miss Critical to Quality (CTQ) features, companies may want to perform a Six Sigma process based on the Voice of Customer (VOC), called Kano Analysis.

What Does It Do?

Kano Analysis identifies and prioritizes customer needs or requirements by classifying them under key categories, including: basic services a customer expects, services that a customer desires, and services that delight a customer. Below is a summary of categories and definitions (terminology may vary slightly).

Requirement/Need Definition
  • “Must Be”
  • Basic Requirements
  • Dissatisfiers
  • (Expected Quality)
  • Expected features – cannot increase satisfaction
  • Taken for granted, rarely voiced
  • If not fulfilled, customer is extremely dissatisfied
  • “More is Better”
  • Performance Requirements
  • Satisifers
  • (One Dimensional Desired Quality)
  • Linear effect – the more needs are met, the more satisfied
  • Customer is aware that feature is important to them
  • Remain in the market
  • “Delighter”
  • Excitement Requirements
  • Satisifers
  • (Excited Quality)
  • Unexpected feature – impresses customers
  • Delights when present – does not cause dissatisfaction when not present – rarely voiced
  • Leading edge in the marketplace

How To Do It?

Gather as much VOC information as possible (via interviews, focus groups, surveys, etc.) from your customers regarding service or product offerings. Have them classify the requirements / needs under the three categories. Eliminate any requirements that aren’t relevant. The example below shows classifications pertaining to hotel services.

Requirement/Need Definition
  • “Must Be”
  • Basic Requirements
  • Dissatisfiers
  • (Expected Quality)
  • Clean hotel room
  • Reinforced lock
  • Toiletries
  • Towels
  • “More is Better”
  • Performance Requirements
  • Satisifers
  • (One Dimensional Desired Quality)
  • Large work desk
  • Wi-Fi
  • Car service
  • Hair dryer
  • Bed-side outlet
  • On-Demand movies
  • “Delighter”
  • Excitement Requirements
  • Satisifers
  • (Excited Quality)
  • Dimmable lights
  • Heated floors
  • Bottle of wine on birthday
  • Cappuccino machine in room
  • Room access activated via smart phone

It’s important to point out that a customer’s needs / requirements change over time. What was once a “Delighter” could be a “Dissatisfier” nowadays. For example, receiving an invoice (slipped under the hotel room door) used to mean that it wasn’t necessary to wait in line to check out of the hotel. Nowadays, it’s just one more piece of paper to file. Many travelers prefer to automatically receive an electronic copy of the invoice.