A Practical Guide to Market Segmentation

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A Practical Guide To Market Segmentation

There are ten basic steps in finding unique segments in your customer base. Segmentation can be created by looking at factors such as purchase history, industry, need, and behaviour. B2B International shares their segmentation methodology in this white paper.

STEP 1: ALWAYS MAKE KEY ACCOUNTS A SEGMENT ON THEIR OWN
Every company needs to segment its customers. Customers aren’t all the same and they shouldn’t be treated as such. Virtually every business to business company has key accounts and these are recognised as different and given special treatment.

The 80/20 rule which determines that 20% of customers account for 80% of turnover focuses special activity on those large accounts which determine the future of a business. For many business to business companies these key accounts amount to just a couple of handful of customers. It is quite reasonable therefore that such large and crucial customers should be treated as individuals, scoping products and services to exactly meet their needs. This is segmentation at its best – segments of one.

STEP 2: APPLY MARKET SEGMENTATION ANALYSIS TO THE SMALLER CUSTOMERS However, the corollary of the 80/20 rule is that 80% of customers account for only 20% of revenue. Eighty per cent of customers are, by definition, relatively small accounts and they dominate the customer population. Clearly they should not be treated in the same way as the key accounts. Since this tail end of customers can run in to many hundreds of accounts, some sort of segmentation is needed. Without a segmentation these companies will either be treated as all the same (in which case many will be disappointed by an offer that does not suit them) or, equally unsatisfactory, an attempt will be made to treat each and every one as a special accounts, swallowing up a huge resource and yielding very little in the way of profit.

Segmentation enables us to group together customers with similar needs so that...
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