Needs-based Segmentation revisited, part 2

In the previous posting I spoke about "the toolkit" we use for needs-based segmentation: targeting, segmentation and grading. Targeting, Segmentation and Grading (or, Valuation) are three of the most powerful weapons in any business' arsenal. This “toolkit” is comparable to open-source code. Constructed theoretically over the last 15 + years by integrated databased sales and marketing masters, this approach recognizes that: a. No firm can be all things to all people b. The value of the firm is equal to the sum of all the customers with whom it does business (and yes, your CFO will accept this!). c. All firms are constrained by resource limitations: people, time, money, etc d. It makes compelling sense to invest your sales, marketing, channel management, and customer service dollars and effort in direct proportion to the expected return on that investment e. Especially in tough economic times, investing in customer relationship management and customer experience management positions a firm for competitive uniqueness as business improves Accordingly, actionable segmentation to promote selectivity and wiser investment decisions is one of the most valuable applications for your marketing database and your CRM/CEM initiatives. Until quite recently, more business communications than not aimed at customers and prospects(present and potential) tended to address them as a great, undifferentiated mass…because there was really no practical way to do otherwise. It was the “We can be all things to all people” approach. Obviously, no business can survive and flourish if it attempts that approach. Limited resources: people, time, money need to be invested in direct proportion to the limited resources that can be applied – and accordingly, this is where targeting, segmentation and grading come into play. Today, computer and business intelligence advances have made it easy and practical to break down the companies in your market universe just about as finely as you like, according to whatever factors you choose. Recognizing the fact that not all customers are created equal, it also allows you to target your limited resources toward those that are most potentially valuable to you. It gives you a practical alternative, and the next best thing, to one-on-one communication. The technique is called needs-based segmentation – the segmentation strategy of choice, since it is needs that drive market behavior. This is the clustering of customers (and later, prospects) according to common sets of needs and purchasing behavior…as these relate to your organization’s external service values…then dividing your customer list into one or more segments, each consisting of a group of customers who share a common set of needs, and a way of doing business.