segment customer value

Customers are not all gods. Sorting according to customer value and formulating corresponding business development and service plans, this value segmentation model is being widely used by enterprises. Value segmentation includes three steps: exploration, evaluation and layout. Businesses, big and small, can do the same.

Computer users are familiar with Dell computers for its affordable products and outstanding customer service. But to business observers, the company got its name mainly because of the business model it implements, not the products, prices or services it offers. Build-to-order is the cornerstone of Dell's business model -- and the source of its competitive advantage.

Build-to-order is more than a tool for managing inventory, supplier relationships and customer behavior. As Dell gathered better and more in-depth information on its existing and potential customers, the company began implementing special marketing strategies to generate new business from existing customers and to launch new products designed to attract high-value prospects. Brand new marketing plan. Because Dell is able to pull relevant information from multiple data points, the company is able to rate customers based on how much they value the company.

The practice of combining objective analytical data, subjective opinions, and decisions to assess the overall value of a company to customers is known as value segmentation. Conceptually, value segmentation is very similar to other marketing tools businesses are familiar with. For example, lifetime value (LTV) is one way to assess the importance of customers to an organization. The basic calculation of lifetime value is as follows: a customer's average annual spend multiplied by the expected number of years that customer will be a loyal customer.

Value segments are built on data. As it helps guide the implementation of corporate marketing plans and manage the business, its significance goes beyond lifetime value. Whereas a typical lifetime value analysis simply looks at the amount a customer has made with your business, value segmentation looks at all of the customer's spending on products and services from other businesses like yours. It not only fully considers the relationship that the customer has established, but also considers product plans and market changes in the industry.

One of the biggest advantages of value segmentation is that it helps you and your company focus more on current and potential customers than on products. If your company goes with the flow, the natural response is to launch a marketing attack from a product perspective. But an even better approach is to first understand who are the most valuable customers and what their needs are, and then develop products and services that meet their needs. Value segmentation can drive this attitude change and help your company strengthen relationships with existing customers, thereby digging out new business from them.

Basically, value segmentation involves three steps: exploration, evaluation, and placement.

Explore: Market Segments

During the Explore phase, you should use your knowledge of the market database to segment your markets and describe those segments accordingly. This philosophy goes beyond customer segmentation based on purchased products. Since the purpose of your marketing campaigns is customer purchases, it can be beneficial to your business to categorize your company's customers through analysis of customer profiles, geographic or industry-specific information.

Carefully segment your customers, rather than generalize them. What does it mean? For example, a market can be defined as "small business owners," but that definition is too broad to be meaningful: there are people in this market who will never be your customers, and too broad a division will keep you from Develop a reasonable offer or communication plan.

A market segment describes a group of existing or potential customers who have a similar attitude towards you and your company. Therefore, different customer groups are composed of customers with different attitudes from the above groups. Attitude matters because the attitude your customers have towards you will determine how you market to them. For example, an important feature of attitude is the willingness to buy from your company, which can be obtained from three sources: understanding customers' past purchases with your company; observing customers' purchases from similar companies; and whether potential customers are willing to buy from your company Purchase survey data made. To identify and track customers who exhibit similar attitudes, you should use characteristics such as age and business size.

Different people will have different attitudes toward your company, so drill down to the level of individual consumers. Some markets are inherently small, making it easier to segment at the individual consumer level. If your company is a B2B company that sells to some highly specialized companies, then you can not only track key people in each target company or each specific region, but you can also track individual potential customers you think .

Evaluation: Customer Ranking

Evaluation is the use of customer profiles to judge your company's current and potential customers to find out who are the most valuable customers. You can examine a customer's historical purchase data, then compare that data with your existing profile to predict likely or growing customers.

When faced with dealing with large numbers of people and companies, marketers at large companies often use statistical tools to select and analyze samples so that they do not Transactions are checked one by one. Statistics is a technical discipline based on prediction, samples and probability. We usually use it to analyze data and assign different confidence levels to draw corresponding conclusions. Here's how it works: You're selling construction project management software, and you want to know who your most valuable customers are, because with this information you can make targeted sales. You can call up sales transaction information in a company database, sort each customer's orders, and find the top 10 percent of customers who bought the most in the past year. Ranking customers by different attributes, you find that highway construction companies are your most valuable customers. Based on this realization, you will see transportation engineers as a similar group, and they are likely to be a group of the most potential customers.

You should rate your current and potential customers as "better," "good," and "worse," using different tags, and then find similarities between these groups of customers. The ultimate goal of the assessment is to prioritize the target groups you want to implement your marketing campaign.

When dealing with a small group of clients and prospects, you may be able to grasp the market at a glance. Browsing a subset of a company's database -- say, hundreds or thousands of customers -- will quickly give you a sense of what's going on with those customers. And you'll find that when you know the market information, the information you intuitively understand will be confirmed.

Positioning: Increasing Orders

Positioning requires the continuous collection and understanding of the following customer information: the status of existing and potential customers, your company's relationship with them, and whether they are related to corporate goals match. Positioning depicts the development process of the relationship between the company and customers in the form of a chart: from the initial acquaintance, familiarity and recognition, to the inevitable choice of your customers.

Location helps your company track and compare some data. For example, compare your perceived relationship with your customers (that is, how your company feels about your customers) with your actual relationship (how many actual orders you get from your customers).

A key concept here is how much of your customer's purchase share (also called wallet share) you have. Specifically, it refers to what a customer actually spends on your company's products and services as a percentage of their total budget for similar products and services. Suppose a customer spends $1,000 a year and your company only has a 10% share of the wallet. Wallet share is a great tool in measuring a company's relationship with its existing customers.

Focusing your company's marketing efforts on capturing the most value from existing customers is the most natural and appropriate path. Existing clients are the candidates most likely to trade in the way your company desires, because both parties know the best. Compared with the role of strengthening customer relationships, the management of potential customers rarely has such immediate and satisfactory results.

Remember, you don't have to wait until you have a good database to start using the value segmentation tool. Know that value segmentation doesn't have to be perfect before it can start helping your company grow. The more your company uses this tool and the better you understand your customers, the faster growth is possible.

Originally adapted from the book "Planting Flowers, Pulling Weeds: Identifying Your Most Profitable Customers to Ensure a Lifetime of Growth" by Janet Rubio and Patrick Laughlin with permission. The author registered copyright in 2002. The book is published by John Wiley & Sons. Translated by Li Jian.

Janet Rubio and Patrick Laughlin both worked at Dell and are now partners at Direct Impact, a company that specializes in direct sales.