That’s why, in a customer segmentation process like the one described in this guide, it’s critical to develop customer segment hypotheses and variables, and then validate them with a well-developed, scientific research process. While most companies possess enough market knowledge to predict or anticipate which customer segments are their most profitable, the leaders of those businesses also know that scaling a business is not best left to guesswork or instinct. Establish segmentation hypotheses and variables This guide will focus on the value-based approach, which allows expansion-stage companies to clearly define and target their best prospects (based on its current knowledge of the market) and satisfy most of their needs for segmentation in the expansion stage-without consuming the time and resources of a traditional, descriptive segmentation research process.ĭon’t have time to read it now? Check out our quick 10-step approach to customer segmentation. Value-based segmentation differentiates customers by their economic value, grouping customers with the same value level into individual segments that can be distinctly targeted.The needs are discovered and verified through primary market research, and segments are demarcated based on those different needs rather than characteristics such as industry or company size. Needs-based segmentation is based on differentiated, validated drivers (needs) that customers express for a specific product or service being offered.However, a priori market segmentation may not always be valid since companies in the same industry and of the same size may have very different needs. A priori segmentation, the simplest approach, uses a classification scheme based on publicly available characteristics-such as industry and company size-to create distinct groups of customers within a market.There are three main approaches to market segmentation: Buying characteristics (i.e., responses to messaging, marketing channels, and sales channels, that a single go-to-market approach can be used to sell to them competitively and economically).Needs (i.e., so a single whole product can satisfy them). That division is based on customers having similar: What is customer segmentation and why does it matter?Īlso known as market segmentation, customer segmentation is the division of potential customers in a given market into discrete groups. Step 5: Presenting and incorporating feedback.Step 1: Setting up your customer segmentation project.Creating change your company can believe in.Explore B2B customer segmentation schemes.Establish segmentation hypotheses and variables.What is customer segmentation and why does it matter?.To scale efficiently and effectively, expansion-stage companies need to focus their efforts on a specific subset of customers who are most similar to their best current customers, not a broad universe of potential customers.
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