Segmentation

Abstract

To understand customers, the first step should be to segment customers. Although consultants agree on this first step, they do differ on the approach to segmentation. There are practical approaches and also scientific ones to segmentation. Rather than simply choosing to adopt one approach over the other, the correct approach will depend on the complexity of the given customer base and on the requirements of the current business challenge. For instance, a bank’s customer database containing 1 million customer records may require a much more sophisticated approach than a retail customer database containing 50000 records. Identifying students as a customer segment for a student program in a bank is going to be far less complex than trying to identify unique customer segments where the objective is to create distinct corporate strategies for these segments.