Customer Segmentation: How better targeting based on efficient segmentation can improve ROI

Customer segmentation analysis identifies & separates your client base into distinct groups with common characteristics to help you gain a deeper understanding of the profile of each segment. It uncovers significant similarities & differences between the behaviour and demographics of each segment.

Posted in Customer Segmentation, on June 18, 2019, 10:21 a.m. by:

John Doe
Anmol Mohan

Founder & CEO, Tuple Technologies

Customer Segmentation Analysis leverage advanced analytics to help provide a holistic understanding of the traits and attributes that define the different types of customers within your client base. It identifies and separates your client base into distinct groups with common characteristics to help you gain a deeper understanding of the profile of each segment, as well as to uncover the significant similarities and differences between the behaviour and demographics of each segment. The result is to help inform business planning and marketing decisions to improve overall business performance.

Benefits of Customer Segmentation for Business

Most marketing efforts often fail not so much because the promotion was wrong or not well presented. They only didn’t hit the target with features, benefits or promotion that appealed to the right target audience.

Customer segmentation is an essential tool in customer relationship management, enabling businesses to market effectively to their clients. Companies are expected to understand their customers and demonstrate their customer insights by sending only relevant, targeted communications to their customers. Customers want to feel valued and be treated as individuals, yet for anything other than perhaps the smallest of businesses this level of customer knowledge is impossible to achieve.


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Segmentation also allows businesses to channel their resources appropriately. High-value customers who frequently purchase and generate more revenue usually belong in a segment which is allocated a higher level of marketing spend.

Successful segmentation saves time and resources and makes many internal discussions unnecessary. More importantly, though, successful segmentation enables both top management and employees to steer marketing and sales activities in an active and differentiated manner, without having to consider each case, thereby promoting quicker and better decisions.

Methodology for Customer Segmentation

Various tools and processes are available to segment customers according to your business needs. The typical approach includes segmentation of clients through multiple dimensions and then overlapping them with each other to create a rich user profile. Finally, different marketing and product strategies can be defined for different cross-sections to the ROI.

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Value Segmentation

Satisfied customer value-based segmentation is one that provides an understanding of when and how a customer is likely to derive value, and how the firm can implement marketing programs to provide that customer value and achieve its marketing goals.

Value segmentation usually contains only two key variables: Avg. The frequency of Visits and Avg. Revenue generated by customers

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Since it relies on a few general variables, it easier to calculate and has an impact on all kinds of businesses. Good value based segmentation has the following characteristics:

  1. Based on the segment’s profit potential, i.e., the value the division receives about your operational ability to service the segment

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

  3. Based on identifiable criteria that easily separate one segment from another 

Actionable in the field, i.e. quickly enabling customers to make trade-offs between offerings and willingness to pay.

Lifecycle Segmentation

Customer’s lifecycle relies specifically on the frequency and recency of purchases. The idea of using these metrics comes from the RFM analysis. Recency and Frequency are critical behaviour parameters. Companies are interested in frequent and recent purchases because frequency affects the client’s lifetime value and recency effects retention. Therefore, these metrics can help us to understand the current phase of the customer’s lifecycle. When we know each customer's stage, we can split the customer base into groups (segments) to:

1. Understand the state of affairs,

2. Effectively using marketing budget through accurate targeting,

3. Use different offers for every group,

4. Using email marketing,

5. Increase customer's’ lifetime and value, finally.

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Customer Persona

Analyzing demographics and psychographics gives layers of insights which help anticipate customers’ needs and plan new products and services. This, in turn, enables marketers to target more accurately those customers or prospects who would be most interested in them.

Some frequently used dimensions to create customer personas are:

  1. Acquisition Path - Helpful in optimizing your acquisition strategy to get the customers who will be most profitable in the long run

  2. Purchase History - an Obvious indicator of the upstream or downstream relationship. Also customer’s product preferences

  3. Geography - People at same geographic locations usually have similar preferences

  4. Income - Indicator of value that customer can generate

  5. Age - Indicator of kind of purchases customer might be interested in

  6. Gender - Enough said

  7. Preferred Day and Hour - Helpful in   the communications and create a targeted strategy

  8. The volume of purchases - Purchase preferences of customers is different according to their purpose


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Intent Segmentation

Different customers go to stores for various reasons.

Case I – You are coming back from office, and you remember you are out of milk. You make a quick stop at the store near your house and pick up milk and maybe eggs too now that you are here.

Case II– It’s a Saturday afternoon. You are lazing around in the house when your wife hands you a list of grocery shopping. It’s the weekly replenishment trip. You have pre-planned to pick up fruits, vegetables, juices, the aftershave you ran out of, etc., etc.


Similarly for an airline booking website:

Case I – You just got a call from your boss that you have travelled to a different city for an urgent meeting tomorrow morning. You quickly go to your favourite ticket booking website and book a ticket without caring about prices (after all the company is paying for the trip).

Case II– You are planning to go to Amsterdam with your wife. You are not sure when. You just want to inquire about the prices and see how they are going to change over time.

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Different factors determine why a customer is coming back to your business. You may lose out on additional avenues of personalization by putting the customer in one segment. The Same customer can show different kinds of attributes from a trip to trip. It is important to understand what is their intent and then personalize their content.

Our Technology

At Tuple, we have created several Segmentation SaaS modules which can easily understand your customer profile data, historical sales data, and social media data. Our latest machine learning technology can help you create actionable insights about your marketing and lets you optimize according to your business objectives.

Our system is equipped with state-of-art methodologies for business analytics which can be used to create customer segments quickly. We can customize the marketing applications based on your target audience to maximize the mileage on your efforts.

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