A segment of one…or one segment?

When Tesco launched their Clubcard in the mid-90s they were effectively automating what any corner shopkeeper did decades earlier (think Arkwright from Open All Hours), i.e. understand the buying habits of individual shoppers. With this information, they could segment their customer-base, tailor offers and know how often people shopped at their supermarket.

The difference, of course, is that Tesco had hundreds of thousands of customers spread across the UK as opposed to Arkwright who just catered for the few streets surrounding his shop. Nonetheless, the principle is the same – understand your customers, what they buy, where they live and ideally, how old they are and their family situation. Tailoring products, services and communications to meet those needs then becomes easier.

Of course, in a perfect world, you’d tailor and target messages and services to meet the needs of each individual client, i.e. all your clients would sit in their own segment of one. However, this is easier said than done, especially if you’ve got more clients than Arkwright had shoppers.

But don’t get put off. Even the most simplistic form of segmentation is better than no segmentation. Here are some guidelines to bear in mind:

• Don’t be over ambitious – start with some simple segments and build up from there
• Be relevant – make sure you collect and store relevant data
• Be accurate – make sure the data is accurate

And finally, think of segmentation from the perspective of the clients. For example, the once popular way of classifying clients into gold, silver and bronze segments was based on a client’s value to the business not on the client’s situation, interests and needs. Adopting a value-based view may be good in the short-term, but in the long-term a client-based approach should be more successful.

If you need any help with segmentation, please contact us.

By Mike Johnstone