Customer segmentation analysis is a critical technique that can be used to determine how a company allocates resources, structures its organization and prioritizes investments. The customer segmentation scheme and language a company uses may even reflect a business' history and culture. At its core, the purpose of strategic customer segmentation is to achieve four goals:

• Increase customer satisfaction by giving customers more of what they really need
• Increase cost efficiency by giving customers less of what they do not want or value
• Build competitive advantage through superior understanding and delivery of properly tailored bundles of goods and services
• Build efficiency into provision of goods and services

Our experience has shown that companies segment their customers based on the data that is most readily available. Common segmentation schemes are based on demographic or behavioral data. While these forms of segmentation are useful, they rarely provide the type of breakthrough insight that lead to innovative new consumer solutions or business models.

We believe that the most insightful forms of segmentation are driven by a deep understanding of customer needs and desired outcomes. Needs-based segmentation is often the foundation for companies to identify new growth opportunities, uncover areas to streamline a product offering and improve profitability through tailored pricing and promotion programs.

Our Capabilities

We rely on a variety of frameworks and tools ranging from focus groups to conjoint and cluster analysis to perform our strategic customer segmentation work. Our approach is geared to achieve the following:

• Understanding the needs of customers, how they differ, what drives these differences, and how they are likely to change in the future
• Examining how the company and key competitors currently serve the needs of different customers, quantifying the costs of each element of the value chain, and building a profit model for key customer groups
• Understanding the strengths and weaknesses of the company relative to competition and how the company can leverage existing and potential future strengths in delivering more satisfying and more cost-efficient bundles of goods and services

Case Study

• A new vacation cruise line finds smooth sailing by targeting underserved vacationer segments
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