Customer Segmentation Parameters  

Customer Segmentation and Profiling

Customer Segmentation and profiling is the first step before we decide on how to retain, satisfy and maximize their profitability.


Customer Segmentation Parameters


Customer segmentation can be done on multitude of parameters, This is just an indicative list. The key is to make sure that you are focusing on the parameters which are important for your business. One should avoid the trap of making customer segmentation too complex an exercise.

One can segment customers on variety of parameters. As mentioned before, one should optimize on the level of segmentation and the number of parameters you want to do the segmentation.

Segmentation Parameter Hierarchy:

A class of parameters for customer segmentation is called ‘top level’ parameters, which generate primary set of actions to address those segments. These can also be called ‘segmentation defining’ parameters. Few examples are: Income-group & Social strata, Customer Age Group, customer value.

Another class of segmentation parameters belongs to ‘fine-tuning’ parameters, which help you further improve OR fine-tune your actions. For example Customer location, Customer occupation

There is no standard rule to tag parameters as ‘defining’ OR ‘fine-tuning’, as it depends on the organization context. Though it is an iterative process, it is important to define these distinctions before you invest heavily into segmentation and start building your segment-based actions.

List of Customer Segmentation Parameters

Customer

  • Demographic Parameters: Age, Sex, Location, Language spoken, Education
  • Life Cycle Stage: Studying, working, marital status, children, retired.
  • Occupation: Self employed, unemployed, service, practicing professional..

Income

  • Total income
  • Disposable Income
  • Assets owned- Owning a house, Car, Investments

 Customer Life-Style

  • Memberships to clubs
  • Vacations
  • Entertainment patterns

 Customer Behavior in Usage

  • Usage patterns of aligned products: A company launching a new electronic gadget will be interested in people who have bough high configuration laptops.
  • Usage volumes- A customer having a higher usage of mobile phone, will be a good target for video and song download service. Another example is- A customer utilizing the limits of the credit card, could be a good customer for introducing limit enhancements.

Risk profile:

  • Payment patterns in terms of timeliness.
  • Income-group alignment with the payment terms.

Customer Value & Profitability

  • Level of revenue generated from the customer (current as well as lifetime projection)
  • Level of profitability from the customer (current as well as lifetime projection)

Customer Relationship

  • Customer tenure with the company
  • Customer tenure with a given product

Customer stability

  • Average tenure at the job
  • Average tenure on a location.

Customer Satisfaction

  • Level of customer satisfaction
  • Number of customer issues
  • Number of customer queries