Customer Segmentation - Data Mining Techniques in CRM: Inside Customer Segmentation - page 216

• Marketing services management: Optimize the effectiveness of marketing
campaigns.
• Product management: Manage existing product offerings and new product
development.
• Brand management: Understand customer perception of the brand, and
identify and communicate the appropriate brand image and key product
benefits.
A GUIDE FOR VALUE-BASED SEGMENTATION
In contrast to behavioral segmentation, which is multi-attribute since it typically
involves the examination of multiple segmentation dimensions, value-based seg-
mentation is one dimensional as customers are grouped on the basis of a single
measure, the customer value. The most difficult task in such a project is the
computation of a valid value measure for dividing customers, rather than the
segmentation itself.
VALUE-BASED SEGMENTATION METHODOLOGY
As with any other data mining project, the implementation of value segmentation
should be guided by a specific methodology, a core process model, in order to
achieve an effective outcome. Inevitably the core process model for value-based
segmentation has many similarities to the one described in the previous sections
for the needs of behavioral segmentation. In this section we will outline the main
methodological steps of the value segmentation, emphasizing the special tasks
related to such projects.
Business Understanding and Design of the Segmentation Process
This phase includes the setting of the business goal, an assessment of the situation,
and the design of the process. Those analysts and marketers engaged in the
project should co-operate with finance department officers to jointly determine
the appropriate value measure that will be used to divide the customer base. This
co-operation typically involves the identification and explanation/understanding
of the cost and revenue components and a preliminary assessment of their
availability. It should finally conclude with agreement on a formula that will be
used for calculating the value measure.
More sophisticated measures are more effective, but harder to construct and
deploy, and have a greater risk of failure. Potential value measures include: