Customer Segmentation - Data Mining Techniques in CRM: Inside Customer Segmentation - page 190

In general, the application of a clustermodel is required to reveal the segments,
particularly if we need to combine a large number of segmentation attributes. As
opposed to business rules, a cluster model is able to manage a large number of
attributes and reveal data-driven segments which are not known in advance.
Segments are created by analyzing the customer information residing in the
organization's data marts and data warehouse. For specific segmentation types, a
market survey is required to collect the necessary segmentation criteria since the
relevant attributes are unavailable (needs/attitudes, loyalty information) or partially
available or outdated (demographics) in the organization's data systems.
Amarket survey is also needed in order to analyze the entire market, including
customers of competitor organizations. In the framework of this topic, though, we
are going to focus on segmenting the existing customer base.
Consumers and business customers have inherent differences, as summarized
in the next section. Due to these differences, the two markets require a different
segmentation approach and the use of different segmentation criteria. In this topic
we are going to focus mostly on segmentation for consumer markets.
SEGMENTATION IN MARKETING
Segmentation identifies the different customer typologies, facilitating the devel-
opment of differentiated marketing strategies to better serve and manage the
customers.
Segmentation in marketing can be used for the following:
• Greater understanding of customers to support the identification of new
marketing opportunities.
• Design and development of new products/services and product bundles
tailored to each segment's characteristics rather than the mass market.
• Design of customized product offering strategies to existing customers
according to each segment's identified wants and needs.
• Offering tailored rewards and incentives.
• Selecting the appropriate advertising and communication message and
channel.
• Selecting the appropriate sales and service channel.
• Determining the brand image and the key product benefits to be
communicated based on the specific characteristics of each segment.
• Differentiation in customer service according to each segment's importance.
• More effective resource allocation according to the potential return from
each segment.
• Prioritization of the marketing initiatives which aim at customer retention
and development according to each segment's importance and value.