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Customer Segmentation
- 1. Successful Segmentation for Creating Profitable Customers Carlos Soares Head of Customer Insight October 2008
- 2. 1. Introduction 2. Renewing our understanding 3. Profiting through segmentation 4. Investing to action segmentation 5. Making it happen Contents
- 4. Segmentation is needed to drive higher profitability through understanding customer needs and delivering on those needs Meet Exceed Relationship Development Retain and develop Manage Customer Expectations Cherish and tailor Number of individuals Few Many Low High Value per individual Unprofitable Marginally profitable More profitable Very profitable Segmentation is an important tool in becoming customer-centric. It is a key enabler of CRM. “ Recognise me, remember me, value me.” Typically customers are not created equal ..and different “segments” need different customer strategies to exploit their value Renewing our understanding 20-30% 40-50% 20-30%
- 7. There are many types of segmentation: Having one type will not meet all our needs How can we segment Transactional / value (RFV), LTV Attitudinal/ needs Loyalty / length of relationship Geography / demographics Behavioural Propensities Targeting / Selections Value Management Propositions Development Comments *** Nearly always useful ** Sometimes useful * Not that useful alone Renewing our understanding *** * *** *** * ** ** ** ** ** * ** * *** * Key for planning e.g prioritising marketing spend, setting segment strategies & objectives and prioritising spend & resource Predictive behavioural models are key for targeting customers for a behavioural change e.g. buying a product Overlays and geography can give insight of different regional profiles. Geography allows us to address specific competitor behaviour. Likelihood to take up of new products. Level of customer-led contact. Identifying customer needs and drivers can lead to new developments or product tailoring opportunities
- 9. Yesterday: Today & Tomorrow: Targeting Mass customisation Focus Acquisition Approach How big is my list? Differentiation Retention Test and learn Company KPIs Volume targets Marketing KPIs Sales volumes Value targets Segment objectives (KPIs) Propositions Sell to all Customer-needs driven Using segmentation for a ‘Customer Driven Organisation’ Renewing our understanding
- 13. Using Segments to understand our Customers Profiting through Segmentation
- 14. Developing Customer Strategies: Driving Value 1. Retain high value customers 2. Cross sell valuable customers 3. Broaden the relationship 5. Improve the margin of value destroying customers 4. Acquire the right customer THE BUSINESS CHALLENGE Understand me and provide me with reasons to stay (e.g. Next Best Action, Loyalty recognition – discount) THE CUSTOMER ISSUE Provide me compelling reasons to purchase again (e.g. VFM - account review for best ‘package) Understand me & make relevant, competitive offers (e.g. Exclude high defectors, debt risk, relevance to customer type) Understand my needs & make more competitive offers (e.g. Use customer feedback – research & response to tailor props) Can I be satisfied more cost effectively (e.g. Intercept & Communicate) Profiting through Segmentation
- 16. Developing Customer Strategies: Applying segments to Sales and Marketing What movements in customer segment would we ideally like to influence? How can we achieve that? What objectives can we set ourselves in order to test our hypotheses? Profiting through Segmentation
- 18. Customer Value Churn Risk High High New kit £XX offer Sample premium Free Product Free Product Product deal Service DD migration On-line Extra kit Full price Service Service Service Service Tenure Based offer Service Service Tenure Based offer Tenure Based offer Service Service Sample premium Sample premium Product deal Extra kit Full price Extra kit Full price Extra kit Full price Sample premium New kit £XX offer New kit £XX offer New kit £XX offer On-line Product upgrade Extra kit offers Pay up front 3,6 months Free content Replace Old equipment Optimised upgrade offer 2 Optimised upgrade offer Optimised upgrade offer 3 Free content (14 days, free) Free content Weekend (free) BOGOF content Sample DVD Mid tier Sample CONTENT £5 for x months CONTENT £5 for x months Extra kit offers Extra kit offers Free Product Free content Product upgrade Existing proposition New – product based New – Sample based New – pre payment New – anniversary Low Sample DVD BOGOF content BOGOF content Free content Free Product Optimised upgrade offer 2 Optimised upgrade offer Optimised upgrade offer Optimised upgrade offer 2 LTC Bundle Fairly well covered, but only with introduction of new propositions (green) Illustrative only Developing Customer & Targeting Strategies: Identify proposition weaknesses & design propositions to make them effective Profiting through Segmentation
- 20. Developing Customer & Targeting Strategies: Key messages for bundles or offering strategies Put the customer and not the product first Pricing and proposition is critical and can take several months to get right Make sure there are no proposition gaps in your portfolio, otherwise your offers or bundles will be weak Remove the business silos and work together. The common goal is the customer Bundles can pose a significant risk to your P&L as well as offer many benefits Understand your different business objectives and use different varied offers or bundles strategies to suit 1 2 3 4 5 6 Profiting through Segmentation
- 22. An integrated approach to segmentation Total CRM would include an integrated approach to segmentation Business knowledge - what is the strategy? What is the current product portfolio? Data knowledge - availability and limitations Statistical / Analytical skills - inhouse or outsourced. Knowledge transfer Usage of segments Marketing database to provide data Analytical tools and platforms to create single customer view Decisioning tools, channel implementation capability Regular feeds of data from operational systems Ongoing process to update and refresh segments once built Processes to operationalise segments - providing customer data at the customer touchpoints Communication of insight Investing to action Segmentation
Notas do Editor
- Value - market share Voume - share of customer
- 1. Profitability: Customer profitability is the cornerstone of CRM, it identifies who is worth servicing and gives a performance measure. Who is adding value to our business? Where does the value get generated? How effective have our CRM efforts been? How much can we spend on CRM activity? 2. Segmentation: The Lifestyle segmentation tells you what your customers are like as people, we need this to develop marketing messages and to design appropriate products / propositions What do our customers look like as people, not data? What kind of products would they need based on their life-stage? What kind of messages would be appropriate for our customer / consumer set? 3. Behavioural Clustering: This shows what the customers are doing with us, often very similar customers from a lifestyle perspective have very different behaviours. What are our customers doing with us? What do our customers choose us for? What opportunities exist to migrate customers into more productive segments? Are there clear gaps in product take up by our customers? Data mining starts without an end in mind and helps get to hidden patterns. 4. Propensity Modelling: Shows how likely a customer /consumer is to purchase a product, defect, etc., this analysis can be done for each of the behavioural clusters Other questions it answer are: How similar is this customer to other customers with this product or behaviour? NOT JUST about SALES but BUYING AND CUSTOMER DIALOGUE