Customer Segmentation — Strategic or Tactical?
We were asked this question the other day by one of the early readers of a new white paper we’re doing. The white paper is a comprehensive examination of how to segment a customer population. It will be published soon so keep a lookout.
The question made us stop and think. Customer segmentation is hot right now, drawing more search traffic than keywords like predictive analytics, CRM, loyalty marketing, and marketing analytics. But ultimately, we decided, it is a tactic, not a strategy.
The strategic question for a company is to decide whether they want to be a customer-centric company or a product-centric company. We did a guest spot on the 1to1 Media blog on this topic recently, describing how companies like IBM, Google, and Apple (and add BMW to the list) are product-centric. Product-centric companies emphasize and talk about their products. We think there is a great window of opportunity for companies to capture their customers’ loyalty by becoming customer-centric. Customer-centric companies focus on what their customers need. See the 1to1 blog post for more details.
If you make that customer-centric decision, the two principle tactics you need to deploy are segmentation and calculating purchase propensities. Segmentation divides the customers into more homogeneous group for clearer messaging and targeting. Product purchase propensities tell you what to offer each customer.
This kind of personalization and customer-centricity works. Our customers who use it see significantly higher response rates and revenues for their campaigns. On which side of the customer/product line does your company fall?