Biology Forums - Study Force

Why do organizations engage in customer segmentation? What are the different approaches that can be used for customer segmentation?

Customers generally have different requirements and expectations. A company usually cannot satisfy all customers with the same products or services. This issue is particularly important for those that do business globally. Therefore, organizations that segment customers into natural groups and customize the products or services are better able to respond to customers' needs. Segmentation allows a company to prioritize customer groups, for instance, by considering for each group the benefits of satisfying their requirements and the consequences of failing to satisfy their requirements. Segmentation also helps an organization to align its internal processes according to the most important customer expectations or their impact on shareholder value.
There are many different ways to approach customer segmentation. Customer segmentation might be based on geography, demographic factors, ways in which products are used, volumes, or expected levels of service. Customers can also be classified into two groups, the vital few and the useful many, based on the degree of individual attention required by the customers. Customers can also be segmented based on profitability.