491621 Segmentation – the key to great customer experience

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  • Nick Hague and Paul Hague

Segmentation – the key to great customer experience

At a very simple level, delivering great customer experience is easy. Give someone a good product at a great price, in a place where they can easily buy it and all should be well. It is the philosophy of many Chinese companies. Pile it high, sell it cheap, make a product of reasonable quality – what more is there to it?


What companies find out eventually is that the subject of delivering great customer experience is more nuanced. Not all customers want the same thing. Some want a no-frills offer while others seek and are prepared to pay for additional services. Some want to buy online while others want to deal with real people. Some want knowledgeable representatives others want to know the environmental credentials of the supplier. Customers are very different in their needs, which is why segmentation is so important.


The skill is in segmenting customers into manageable groups so that you can supply them with products and services that meet their needs and that crucially make economic sense to you. This can be easier said than done. In business to business markets there is usually a decision-making unit made up of people with different needs. A technical person within a customer organisation may demand a certain specification of product. The buyer at the customer may be focused on price and value for money. The production manager at the customer will no doubt say that delivery and availability is critical. Which of these influencers carry most weight in placing a customer in an appropriate segment?


It can be helpful to develop a segmentation strategy for established customers and another one for potential customers. The established customers will have gone through the hoops of having their products certified and approved. They are likely to have moved on and now be driven by high level attributes such as trust, ease of doing business, cherishing suppliers who offer effective solutions, who understand their business and so on. Of course product quality and price will still be important but these have been established and put to one side. Other factors take their place.


Potential customers are understandably more focused on products, prices and availability. Once they are on board as customers, softer attributes takeover. In the transition from potential customer to customer, the players in the decision-making unit may change in importance. The buyer and the technical manager who were critical in the early stages of doing business become less important and the warehousing manager, the production manager and even the shop floor users of the product become more significant decision-makers.


In addition to the complication of the decision-making unit there is also the worry that customers’ needs may change. We have already mentioned how needs can change from a potential customer to a customer who is on board. So too, needs can change if there is a shift in the market situation. If a new supplier knocks on the door of a customer with a cheaper and better product, the customer who has been positioned in the service segment may suddenly have their head turned and become interested in the alternative offer. If a customer’s financial position deteriorates, the customer that was prepared to pay a premium for service may suddenly find that price is the key driver.


All this indicates the importance of understanding customers’ businesses. Understanding a customer's business is easier if you are in dialogue with the customer and more difficult if you are simply transacting online. At least if you are talking to the customer you have a chance of recognising their changing needs. If you're dealing online, the first you may know about a change in a customer's needs could be that they have stopped buying from you.


So what are we saying? We are saying that the drivers of customer experience are varied and liable to change. Recognising these different groups of customers is critical to delivering great customer experience and the best way of doing so is to stay on top of their changing needs. In our experience the best way you can do this is by having constant conversations with the customer. Yes, this involves a cost but surely it is worth it if great customer experience yields a loyal lifelong relationship.

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