The philosophy of customer segmentation

Customers are not all the same. Ideally, each customer should receive a customized service. However, this is impractical where the customer base runs into hundreds or thousands names. Segmenting the customer universe allows manageable personalization to be achieved. It also helps with the development of product, propositions, service levels, communication and aligning the right resources with the right opportunity.
The objective of any customer segmentation is to improve the customer experience so that:
Prospects become customers
Customers remain customers
Customers buy more
Customers become advocates
Segmentation is a dynamic process. It has a beginning but no final conclusion. The reason is that customers are not static. Therefore, any customer segmentation is considered as a snapshot of the customer groupings at a certain point of time.
It’s important to understand also that, a customer segment is a generalization. All customers are different and it is rare that any single customer will fit their assigned segment with 100% accuracy especially as customers have a habit of changing.
Over time, not only will the customer change, but so the characteristics that combine to form a segment.
Segment sizes will narrow or expand as customers move from one segment to another.
As a result, it is critical that the development and maintenance of customer segmentation is seen as a journey where the objective is to travel rather than to arrive!
Customer segmentations need to be both objective (quantifiable) and subjective (qualitative) in order to achieve optimum usability.
The objective elements provide benchmarks against which segments can be valued.
The subjective elements provide insight that gives users the means to build a personality for a segment.
Combined they deliver a balanced perspective on the customer and their needs.

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