Customer segmentation for successful and individual business processes

What is customer segmentation? Why should I carry out customer segmentation? What are the customer groups? What are customer groups? What is a B-customer? What does a sample data delivery / customer segmentation look like? These and other questions are answered here.

Customer segmentation: THE analytics tool for more customer centricity

Better budget allocation

Effective use of marketing and sales efforts

Customer First

Customer needs can be determined and the right measures derived from them.

Reduction of wastage

Not all customers are addressed - but only those who need it.

Customer loyalty and understanding

Higher customer loyalty and better customer understanding through individual approaches.

 

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What is customer segmentation?

Customer segmentation - what is it?

Customer segmentation is essential for successful marketing. Clustering using machine learning is a common method for customer segmentation. Clustering involves algorithms sorting data into similar groups. It is a way for the company to identify different target groups and thus be able to target them. Usually, the customer base is inhomogeneous. A company is interested in which of its customers are interested in which of its products, or which customers are particularly valuable and worth more effort because of them. 

FAQs Customer segmentation

What is the goal of customer segmentation?

The aim of customer segmentation is to break down the inhomogeneous customer base into homogeneous subsets, the segments. In the process, similar persons are identified on the basis of characteristic features and assigned to a segment.  
 
The selection of characteristics depends on the objective of the segmentation. In the case of determining customers who are willing to churn, other characteristics are relevant than when determining a potential group of buyers for a new product. In any case, the characteristics will be multidimensional, which makes the problem complex.
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How does customer segmentation work?

Customer segmentation is very complex and depends on the respective products and companies. A distinction is made between one-dimensional and multi-dimensional customer segmentation. A distinction is also made as to whether marketing customers are addressed in the B2B or B2C area.  
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What is one-dimensional customer segmentation?

In one-dimensional customer segmentation, customer groups are divided into heterogeneous segments. The individuals within a group can have similar characteristics but differ in many details. When companies need a rather rough overview quickly, this method is used. 
Multidimensionality of the data

What is multidimensional customer segmentation?

Multidimensional customer segmentation takes several factors into account. This type of analysis creates differentiated customer groups that can be clearly distinguished from other segments. This allows precise customer profiles to be created and valuable patterns to emerge.  
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Customer segmentation by market: B2C (Business to Customer) vs. B2B (Business to Business)

All types of data are suitable, as long as they fulfil the criteria mentioned.
In the B2C area, the characteristics are typically of the following nature:
  • Geographical (e.g. spatial distribution, culture)
  • Socio-economic (e.g. age, occupation, income)
  • Behavioural (e.g. brand choice, price behaviour)
  • Psychographic (e.g. lifestyle, attitude and values of the client)
  • Web and app usage behaviour
  • Purchase history
 
In the B2B area, the following data is segmented:
  • Environmental (e.g. business cycle, industry, government influence)
  • Organisational (e.g. legal form, position in the life cycle, company size)
  • Individual-related (e.g. information behaviour, decision-making behaviour)
Checklist s-peers AG

Checklist for customer segmentation

In principle, three central requirements apply to the data in data analysis:
  • Relevance - Does the dataset contain characteristics that are meaningful for customer segmentation?
  • Quality - Are the data error-free and validated, are there missing entries?
  • Quantity - Are there enough data series to cope with the complexity of the characteristics?
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Customised customer approach through the instrument of customer segmentation

"Responding more precisely to customers and thereby creating added value is what all companies strive for. Data science can help considerably in this. This discipline relies on an AI-driven process that takes all the necessary steps in seconds to address customers in a tailor-made way."

Dr Eric Trumm, Head of Data Science Workshop

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Dr. Eric Trumm
Head of data science and innovation

Video: Definition, benefits and the implementation of your successful customer segmentation

Customer segmentation definition, advantages and successful implementation. Youtube interview with Stefan Lieder and Theresa Riesterer. Both s-peers AG.
Play Video about Customer segmentation definition, benefits and successful implementation. Youtube interview with Stefan Lieder and Theresa Riesterer. Both s-peers AG.

Customer segmentation is the most important instrument for more customer centricity in your company. But what is customer segmentation anyway and what do I need to consider for a successful implementation?

Our video answers this and much more.

  1. Definition of customer segmentation
  2. What are the concrete advantages of using customer segmentation in my company?
  3. What is the approach/implementation for customer segmentation?

What is the approach to customer segmentation?

The implementation process of customer segmentation - if the above checklist is fulfilled - usually takes 4 - 6 weeks. 

The process consists of the following 5 steps:

Step 1

Define target group

Which customers should be addressed?

Step 2

Set characteristics

Which characteristics distinguish the individual target groups from each other (relevance)?

Step 3

Cluster identification

Identify clusters (usually by means of machine learning)

Step 4

Describe segments/clusters

  • Persona: Representative of a segment who unites all the characteristics of the segment
  • DiSG model: Dominant, Initiative, Steady, Conscientious (so there are exactly four segments)
  • Customer journey: Mapping of the complete path of the customer from the first touchpoint to the defined target action (temporal segments/milestones)
Step 5

Monitoring the customer segments

In practice, customers change and can therefore switch between segments.

In which system landscape can customer segmentation be integrated?

KNOWLEDGE

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