Marketing Segmentation: Slide #5 (p. 127; 2nd para on 128)
Market segmentation is the process of dividing up a market into more-or-less homogenous subsets for which it is possible to create different value propositions. At the end of the process the company can decide which segment(s) it wants to serve. If it chooses, each segment can be served with a different value proposition and managed in a different way. Market segmentation processes can be used during CPM for two main purposes. They can be used to segment potential markets to identify which customers to acquire, and to cluster current customers with a view to offering differentiated value propositions supported by different relationship management strategies. In this discussion we’ll focus on the application of market segmentation processes to identify which customers to acquire. What distinguishes market segmentation for this CRM purpose is its very clear focus on customer value. The outcome of the process should be the identification of the value potential of each identified segment. Companies will want to identify and target customers that can generate profit in the future: these will be those customers that the company and its network are better placed to serve and satisfy than their competitors. Market segmentation in many companies is highly intuitive. The marketing team will develop profiles of customer groups based upon their insight and experience. This is then used to guide the development of marketing strategies across the segments. In a CRM context, market segmentation is highly data dependent. The data might be generated internally or sourced externally. Internal data from marketing, sales and finance records are often enhanced with additional data from external sources such as marketing research companies, partner organizations in the company’s network and data specialists (see Figure 5.2 ).
The market segmentation process can be broken down into a number of steps: 1. identify the business you are in
2. identify relevant segmentation variables
3. analyse the market using these variables
4. assess the value of the market segments
5. select target market(s) to serve.
Sales forecasting: Slide #6 (p. 136-8)
The second discipline that can be used for CPM is sales forecasting. One major issue commonly facing companies that conduct CPM is that the data available for clustering customers takes a historical or, at best, present day view. The data identifies those customers who have been, or presently are, important for sales, profit or other strategic reasons. If management believes the future will be the same as the past, this presents no problem. However, if the business environment is changeable, this does present a problem. Because CPMs goal is to identify those customers that will be strategically important in the future, sales forecasting can be a useful discipline. Sales forecasting, some pessimists argue, is a waste of time, because the business environment is rapidly changing and unpredictable. Major world events such as terrorist attacks, war, drought and market-based changes, such as new products from competitors or high visibility promotional campaigns, can make any sales forecasts invalid. There are a number of sales forecasting techniques that can be applied, providing useful information for CPM. These techniques, which fall into three major groups, are appropriate for different circumstances. ● qualitative methods:
sales team estimates
● time-series methods:
● causal methods:
Qualitative methods are probably the most widely used forecasting methods. Customer surveys ask consumers or purchasing officers to give an opinion on what they are likely to buy in the forecasting period. This makes sense when customers forward-plan their purchasing. Data can be obtained by inserting a question...
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