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Stop Guessing: The Value of Customer Segmentation

Better understanding of your customers can uncover easy growth opportunities

March 10, 2012

Distribution executives’ beliefs about the best segments to go after in their markets may not be accurate. Blending internal transaction data with data that provides a more complete, demographic view of your customers is the best way to better understand your markets. This article examines how customer segmentation can highlight markets where you may be missing growth opportunities. And it provides examples of where previous assumptions about growth segments were called into question by actual data.

When we ask successful distribution company executives about the sweet spots in their markets, they readily provide a confident answer. The problem with the answer is that it is usually incorrect or at best partially correct. A detailed, analytical look at their customer base shows that some market segments are overrated, some underrated, and others are ignored or undetected altogether.

While these executives sincerely believe their answers, there are several reasons why they don’t match data about the customer base. The first is ...

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