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Why you must segment your customers?

Updated: May 9, 2022


Inadequate customer segmentation models are one of the main factors limiting the quality of the commercial strategy of manufacturers and retailers. This obviously affects the ability to formulate and develop analyzes with the quality and depth necessary to accelerate sales and increase business profitability.

What is the difference between CLASSIFY and SEGMENT?


From the commercial point of view, to classify is to group clients and their points of sale with common characteristics. This that seems so obvious, is not always done in the most successful way. Normally we classify based on certain variables such as type of business, sales volume, profitability, geographical characteristics, etc. At present, the incorporation of new variables such as shopper profile, typical purchase profile, and target fit, among others, are becoming relevant.


An adequate classification allows us to later define store segments where we group several of the previously established classifications to carry out more focused commercial actions.


For example, implementing a promotion in urban supermarkets with a predominantly medium and medium-high socio/economic profile, where in addition the main purchase mission of our target is replenishment, should establish a more specific and differentiated tactic, mechanics, and incentive.

What is the utility of an adequate Customer Segmentation?

The way we show our clients in the Consulting Processes is that the Classifications and subsequent Segmentations have different uses depending on the function or business process from which it is required.

We can divide it into three major business functions:

  • Sales and Distribution (Route to Market Strategy)

  • Trade or Customer Marketing

  • Shopper Marketing (this also applies to the retailer itself)


Let's look at the opportunities for each of them:

To Sales and Distribution functions (Route to Market Strategy)

From the point of view of the Sales and Distribution function, an adequate Classification allows us to design or redesign our Route to Market model and formulate a more objective and quantifiable Service Strategy. In specific terms we can use the segmented classification for the following:

  • Optimize the definition of clients for direct attention or through third parties.

  • Optimize the definition of service models (self-sale, pre-sale, online, telephone)

  • Adapt the commercial conditions.

  • Optimize the frequency of visits by the sales force.

  • Assign mandatory assortment.

  • Track cost of serving and profitability.

Additionally, Classification is the fundamental tool for organizational design or redesign – structures, number of sales representatives routes, job profiles, account teams – and to maintain control in manageable and comparable blocks of information through the different indicators. of management

Recently, a new classification model allowed one of our clients to reorganize its entire sales force and reallocate its distributors, increasing both sales volumes and the organization's operating efficiencies and profitability.

To the Trade Marketing function


From the point of view of the Trade or Customer Marketing function, the classification of customers and their respective stores -establishing the strategic importance for the company, category and/or brand- is essential to carry out strategies aligned between our own commercial objectives with the requirements and needs of the trade. In specific terms we can use the classification, among other things, to:

  • Trade investment optimization (exhibitions, merchandising, publications, trade promotions, assignment of merchandisers, etc.)

  • Adequate implementation of the Pricing Strategy

  • Focus on the Standards of Execution and Planometry.

  • Definition of brand role and/or reference (SKU)

  • Assignment of execution budgets In Store.

Ideally, what we are looking for is to associate investment in the client with the strategic importance that the client has for one or more of our categories and brands. That is to say, the importance that it may have for a category or brand is different in relation to another…and this has to be reflected in our classification.

To the Shopper Marketing role


As I explained in my post on what Shopper Marketing is, the effectiveness and optimization of actions aimed at the Shopper begin with an adequate association of the store with the predominant profiles of the buyers. In other words, just as brands and even certain references of the same are directed to a specific group of consumers, in the same way, we must seek to associate the points of sale of our clients with the profiles and predominant purchase missions of said groups. This will help us in the following:

  • Improve our ability to obtain Insights by segments.

  • Optimize and focus actions: Activity targeting.

  • Optimize promotional investment.

  • Allocate resources more objectively.

  • Improve action planning with accounts (segmented sales points).


The work that we have developed in classification and segmentation of the point of sale has taught us that a correct classification helps to improve the evaluation processes of all commercial actions since it allows us to compare results between different segments and understand and learn what works best for each one of them.


From my experience, the classifications associated with Shopper Marketing are the least developed despite their enormous strategic value. However, I believe that as its benefits are better known, as we have just confirmed with a large chain of C-Stores in Brazil, we will see a radical change in this matter. Companies that have understood it, both suppliers and retailers segmenting their own stores, are achieving clear competitive advantages.

IN CONCLUSION

There are many uses, both operational and strategic, that we can give to a good classification of points of sale.


To develop a solid model, the participation of all the aforementioned functions and a broad commercial vision will be required to ensure the incorporation of the best classification practices, the appropriate research methodology, and, above all, a commercial team enabled with the skills and necessary tools to maximize results.


Need help? Just dedicate 30 minutes of your time to explain your need and thus be able to propose a job offer.




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