Usually you will to this by asking them. You take a small random sample and interview them about who they are. This is classic market research and there is plenty of available literature on the subject. You know what you need to do, just realize that your organization is probably not very good at it unless it is a specialized agency and it has a large budget (which is rarely cost-justified). But it doesnвІ t have to be perfect, it has to be useful. You can (and should!) almost always trial your campaigns first to see if they really deliver what you expect.
Sometimes the database clusters may be sufficient. Maybe you only want to improve the targeting of some existing campaigns. But if you want to consider developing new campaigns or new propositions then you need at least some business understanding of these customers. Not just what they do (step 1) but also who they are (step 2).
2. Survey your customers to obtain behavioral segment descriptions
Find us some clustersвІ is not a project brief. The analysts will find you clusters without any problems, but they will not be commercially significant or deliver the bottom-line benefits that you need.
You want the segments to be different on the variables that are important for your business. Otherwise the segments are not useful. All too often we see marketing departments commissioning data mining without specifying clearly how they want to use the resulting segments. вІ
But from a business perspective it is essential that you know why you are segmenting so you know which variables you want the clusters to split. We discussed this in some detail in our previous article about .
The first step is to take your customer data and analyze it to determine clusters of similar behavior. Much has been written on the subject elsewhere so I will not go into technical details here.
1. Database analysis to determine behavioral clusters
LetвІ s look at the steps in turn.
This is not intended to suggest that you must always perform all the activities on the list. Sometimes you may only need some of them to achieve your objectives. But it is an ordered list so start at the top and work your way through until you have achieved (and measured!) your goals.
Behavioral segment descriptions
We have found the following list useful:
Assuming that you are and you therefore know how to measure if you are successful, then what are the steps you need to make it happen?
Customer segmentation is not a piece of database work. It is a strategic or tactical business activity with with hard monetary benefits. Yes, you do need to do some data mining, and how clever you are in doing that is important, but that is not (or should not be) the primary activity.
All too often marketing departments thinks that database analysis is the first, last, and only step in segmenting the base of existing customers. In fact, identifying clusters of common behaviors is only the first activity you should undertake in creating a customer base segmentation.
segmentationвІ really is, why we do it, and what we can expect to achieve from it.
Over the last years we have been doing a tremendous amount of customer segmentation work with the marketing departments in companies across a number of industries. We have experienced that there are many misconceptions about what вІ
5 step process for customer base segmentation
5 step process for customer base segmentation
5 step process for customer base segmentation
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