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Customer Value-Based Segmentation Guide

Value based segmentation divides customers based on the value they derive from a company's products and services rather than traditional demographics. It focuses on customer attributes like needs and lifetime value to understand when and how customers are likely to value offerings. A successful value based segmentation provides insight into how to effectively implement marketing programs to deliver customer value and achieve business goals. It involves 6 steps including determining segmentation criteria, identifying key value drivers, creating segments based on customer needs and operational constraints, and developing metrics to separate segments in practice. Good value based segmentation is profitable, supports distinct offerings at different price points, and facilitates marketing and pricing decisions.

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170 views1 page

Customer Value-Based Segmentation Guide

Value based segmentation divides customers based on the value they derive from a company's products and services rather than traditional demographics. It focuses on customer attributes like needs and lifetime value to understand when and how customers are likely to value offerings. A successful value based segmentation provides insight into how to effectively implement marketing programs to deliver customer value and achieve business goals. It involves 6 steps including determining segmentation criteria, identifying key value drivers, creating segments based on customer needs and operational constraints, and developing metrics to separate segments in practice. Good value based segmentation is profitable, supports distinct offerings at different price points, and facilitates marketing and pricing decisions.

Uploaded by

arunesh_bahadur
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Value Based Segmentation

Segmentation is not a new technique, as it is time and again used as a product-centric way of


dividing a company’s population by focusing on demographics related to the business at hand
("firmographics") that align products to market segments. What is new is the process of dividing a
firm's population that shifts to a customer-centric segmentation, where the polestar is on customer
attributes of needs and value. The attributes appertain to the relationship between a customer and
the firm, and the customer’s lifetime value. A successful customer-value based segmentation (CVS) is
one that provides an understanding of when and how a customer is likely to derive value, and how
the firm can effectively implement marketing programs to provide that customer value and achieve
its marketing goals.

Segmentation is one of the key functions of marketing. Company’s profitability depends on customer
segmentation. Value based segmentation techniques talks about defining segmentation based on value placed
by customers on the product. Following are 6 steps in defining Value based segementation

1. Determine basic segmentation criteria that create “natural fences” between customer groups
2. Identify discriminating value drivers
3. Determine your operational constraints and advantages with regard to those value drivers
4. Create primary segments based on overlap of customer needs and your internal constraints, and
secondary segments based on most important needs
5. Create detailed segment descriptions for easier identification in the field
6. Develop metrics and fences to operationally separate conceptual segments

Good value based segmentation has following characteristics:

 Based on the segment’s profit potential — i.e., the value the segment receives relative to your
operational ability to service the segment

 Needs between segments are different enough that you can design different offerings at different price
points

 Able to facilitate the creation of product/service offerings

 Based on identifiable criteria that easily separate one segment from another

 Helps managers to make better marketing and pricing decisions (statistical significance is a nice-to-
have, not a necessity)
Actionable in the field, i.e. easily enabling customers to make trade-offs between offerings and willingness to pay

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