Wolseley’s Customer Segmentation Strategy

Understanding customer needs can help serve them more profitably.

Customer service is a key element to keeping customers happy for the long haul. And providing excellent customer service requires knowing your customers and how they want and need to be served, according to Ian Meakins, chief executive of Wolseley plc.

"The next stage of improving our service is segmenting our customers so that we have different propositions to more accurately meet their specific needs," Meakins said in a call to discuss the company's fiscal 2015 results. "… Across the group, we have basically found that there are fundamentally four to five different segments requiring different approaches to how to serve them."

In the U.S., for example, there are three key segments with unique characteristics: the deal segment, the price segment and the inventory segment.

The deal segment customer "values knowledge and service but insists on value for money and will actively split business between distributors," Meakins said. These customers will pay for value-added services but still want to be able to check prices online. As a result, they will use e-commerce channels to do research, but still want the services provided by a knowledgeable outside sales team.

In contrast, price-focused customers don’t necessarily need or want salespeople calling on them. They want to compare prices online and research promotions that can save them additional money.

"The price-focused customer is often a new build contractor who has the ability to plan ahead and has had to bid very competitively for all of his work," Meakins said. Wolseley keeps its cost to serve for these customers low by increasingly serving them through its e-commerce channel.

The inventory customer "is often a plumber focused on breakdowns and repairs," he said. This customer is heavily reliant on product availability and delivery speed. Price is far less a factor to these customers. For these customers, Wolseley offers a "one-hour promise." If they call ahead, warehouse employees will pick and pack those products and have it ready for pickup at the warehouse within an hour.

"This is also better for us," Meakins said. "It allows us to spread the workload throughout the day and to make sure the product is available or that a substitute is found."

The customer mix varies across the company's geographic regions, but the principle is the same: If you understand what your customers need, you can serve them more effectively and efficiently. Don't expend valuable outside sales team time on customers that can be served better through the online channel.

Learn more about how to effectively serve different customer segments in the MDM Special Report: Making Money with Small Customers.

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