Introduction to Customer Segmentation for CRM

Arthur Middleton Hughes in an article Have you defined your customer segments? explains the core Customer Relationship Management concept of Customer Segmentation and how you use it to define the different groups of customers (segments) you are targeting and how best to reach them.

Example of a customer segment

As an example of a customer segment using the airline industry Arthur suggests:

Segment: Retired couples who visit their children and grandchildren.
Strategy: Get them to register their children's and grandchildren's cities and birthdays. Suggest air packages to the proper destinations a month in advance of each date.
Communication: "We can fly you both from Atlanta to Portland, Maine next month to visit David and Tracy for Tracy's birthday. The price is only $189 each roundtrip. If you are interested in learning more, click here."

6 characteristics of a customer segment

Arthur proposes that an ideal segment is one which has 6 characteristics

1. Has definable characteristics in terms of behavior and demographics: for example, Retired Couples, Business Travelers 30-60, College Students, Families with young children, etc. Business customers should be segmented by SIC code, annual sales and number of employees
2. Is large enough in terms of potential sales to justify a custom marketing strategy with appropriate rewards and budget
3. Has members who can be motivated by cost-effective rewards to modify their behavior in ways that are profitable for your company
4. Makes efficient use of available data to support segment definition and marketing efforts
5. Can be measured in performance, with control groups
6. Justifies an organization devoted to it. The managing organization can be a single person, or part of a person's time, but there should be someone definite in your company who "owns" each segment.

For more on CRM using the latest free software tools read The Walkie-Talkie (Basic)

Other Articles in the YOUBIDFAST series

01. Online Marketing, Lead Generation and Customer Relationship Management (CRM)	2. So What is YouBidFast and how can it help with Online Marketing, Lead Generation and CRM?	03. YouBidFast: Your Own Unique Online Marketing, Lead Generation and CRM System
04. The Web Transmitter (Basic) for Online Marketing	05. The Walkie-Talkie (Basic) for CRM	06. The Web Alerts Radar (Basic) for Lead Generation
07. The Web Transmitter (Advanced) for Online Marketing	08. The Walkie-Talkie (Advanced) for CRM	09. The Web Alerts Radar (Advanced) for Lead Generation
10. Getting your Blog Transmitter Search Friendly for Online Marketing	11. A Social Media Optimization Simulator for testing your online marketing and lead generation plan	12. YouBidFast Technology Inventory (Alpha Order)