What Is Customer Segmentation?

Customer segmentation was proposed by American scholar Wendell Smith in the mid 1950s, and its theoretical basis lies in the heterogeneity of customer needs and the need for enterprises to compete effectively on the basis of limited resources. It means that in a clear strategic business model and a specific market, the company classifies customers according to their attributes, behaviors, needs, preferences, and values, and provides targeted products, services, and sales models. Hierarchy according to the customer's external attributes. Usually, this hierarchy is the simplest and most intuitive, and the data is also easy to obtain.

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In general, segmentation can be based on three considerations:

External attributes

Such as the geographical distribution of customers, customer's product ownership, customer organizational ownership-corporate users, individual users, government users, etc. In general, this layering is the simplest and most intuitive, and the data is easily available. However, this classification is relatively extensive, and we still do not know who is the "good" customer and the "bad" customer at each customer level. All we know is that certain types of customers (such as large corporate customers) may have stronger spending power than other types of customers (such as government customers).

2. Intrinsic attributes

Intrinsic attributes The attributes determined by the customer's intrinsic factors, such as gender, age, beliefs, hobbies, income, number of family members, credit, personality, value orientation, etc.

3. Consumer behavior classification

The analysis of consumer behavior in many industries is mainly considered from three aspects, namely the so-called RFM: recent consumption, consumption frequency and consumption amount. These indicators need to be obtained in the accounting system. But not every industry is applicable. In the communication industry, for example, the classification of customers is mainly based on such variables as the amount of telephone charges, characteristics of usage behavior, payment records, credit records, maintenance behaviors, registration behaviors, and so on.

Classification according to consumption behavior can usually only be applied to existing customers. For potential customers, since the consumption behavior has not yet begun, of course, there is no way to talk about layering. Even for existing customers, consumer behavior classification can only meet the specific purpose of corporate customer stratification. Such as rewarding customers who contribute more. As for identifying the characteristics of customers and finding definitive countermeasures for marketing activities, more data analysis work is required.