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Customer Segmentation

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Customer Segmentation

Customer segmentation market research is an effective tool for organisations which deal with a wide-range of individuals and wish to offer a more targeted service or to target specific groups within their wider customer or user base with bespoke advertising or marketing strategies.

In short, customer segmentation refers to the process of splitting consumers in to several groupings, or segments, which all exhibit some similarity in relevant ways. For instance, some of the similarities we might look for would include age, gender, income and lifestyle – although it is likely that we would also seek to find further similarities such as any shared interests or hobbies, any stores which were visited regularly, spending habits etc. The specific behavioural elements we would choose to focus on would be driven by the organisation for whom a customer segmentation was being carried out.

Customer segmentation can be used to target marketing collateral effectively, among other uses. For instance, female teenagers who enjoy going to the cinema on a weekly basis might be offered a different prize in a competition (an annual cinema pass for instance) than middle-aged men with a tendency to spend more than 12 hours per week watching football (a subscription to a relevant sports package might be a more applicable prize). Not only does this encourage a higher response rate to the competition, it also subconsciously associates the company or organisation in question with something they enjoy in the recipients mind.

Marketing can also be targeted at individuals based on, say, their annual spend in store utilising a customer segmentation. Marketers may want to target customers from a segment who were more likely to purchase high-ticket items for instance. In order to accomplish this, a research agency might add other forms of data to the surveys which had been carried out. In a retail environment, CRM data such as that attached to loyalty card (such as the Tesco Club Card or Nectar cards) can be used to create customer segmentations based on purchasing habits – frequency, type of items bought, weekly spend etc.

DJS Research Ltd recently carried out two large scale customer segmentation projects. The first, for a major high-street retailer, aided fashion buyers in understanding their different customer sectors and utilised video reporting to give a real-life feel of what a 'Girly Girl', 'Man's Man' or 'Single Mother'. The videos gave buyers a picture of the individuals they were buying for within that segment when looking for next season's collection.

The second, for a City Council, utilised data from several different sources including on-street surveys, customer relationship management data and census data. This allowed DJS Research to create numerous customer segments within the city, and also to map these on to a geographical representation of the city in question. This allowed the Council to make informed decisions about service cuts, new construction projects and potential changes to zoning for instance.

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