Customer Experience Tools
Explore more insights from Bain's 2020 Customer Experience Tools and Trends survey: Let No Tool Stand Alone.
Customer segmentation separates a market into discrete customer groups that share similar characteristics. This can be a powerful way to identify unmet customer needs. Companies that identify underserved segments can then outperform competitors by developing uniquely appealing products and services. Segmentation works best when a company tailors offerings to segments that are the most profitable and serves them with a differentiated proposition. Prioritizing segments helps companies develop marketing campaigns and pricing strategies to extract maximum value from both high- and low-profit customers. Segmentation thus may serve as the principal basis for allocating resources to product development, marketing, service and delivery programs.
Our insights share how the right CX tools make customers’ lives richer and more fulfilling and strengthen a company’s economics by holding down costs and securing new revenue streams.
How companies use customer segmentation
- Prioritize new product development efforts and product features. Segmentation analysis allows companies to understand the preferences of each segment so that they can adapt product development.
- Develop customized marketing programs. Each segment should be reached in a personalized way.
- Determine appropriate product pricing and distribution strategy. Pricing and distribution choices should be flexible enough to fit to all segments.
- Identify cross-sell and upsell opportunities.
- Customize customer experiences.
- Target advertising or optimize media mix and media buying.
- Increase customer retention.
- Measure share of wallet and customer lifetime value.
- Define the size of segments that best fit the business objectives and inform specific business decisions.
- Do not treat segments or customers within segments as carved in stone. Segments evolve depending on customer needs and behaviors, and individual customers may move from one segment to another.
- Focus investments on the most promising segments, or create a strategy to make customers move from one segment to another, such as low spenders becoming high spenders.
- Meet a concrete business objective. Leading companies apply different segmentation schemes for different purposes.