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The rules of customer segmentation; why it could make a difference to your bottom line.

You probably already segment your customers in one way or another, even if you don’t do it consciously. Customer segmentation is all about understanding the markets you sell to and who you would like to be your customers. Once you have an understanding of this then you can ensure that you build your products and services to meet the demands of these markets and become a market orientated company, which in turn will probably lead to greater profitability.

Understanding your customers, and more importantly your most profitable customers, means that you can target your marketing effectively We all know it's easier to sell to an existing customer than a new one so customer segmentation will also allow you to identify additional products and services you can sell to your existing customers where there is a worthwhile critical mass..

The 20th century was a time of mass markets, in the 21st century there are global markets but perversely these global markets can be smaller and self selecting quite often. Segmenting your customers will make your messaging razor sharp and your product development more effective making sure you become the solution of choice.

You can break customers into different types of groups or markets; typically the simplest market definitions are geographic, vertical, horizontal and size of company but you may want to consider other factors such as infrastructure or applications used depending upon the type of solution you are offering.  It is also worth considering some more esoteric factors such as membership of certain clubs or institutions (e.g, do 70% of all you customers come through referral from one customer or from a business networking club you are a member of?) or a shared interest.

Once you have your different market definitions then you can categorise all your customers against these factors to get an idea of your typical (and your ideal, which may be different) customer. You can then use this information in your prospecting and in your marketing activities to target your messages effectively and win more ideal customers.

Winning highly profitable business rather than just winning any business will have a massive impact on numbers so understanding who these customers and prospects are i.e. customer segmentation, really can make all the difference to your bottom line.

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