This is an area of business operations I am personally beginning to learn a lot about. We have spent the last 4 years building a firm that works very closely with small businesses. There are distinctions in service needs and allowances for those businesses and they can be grouped.
Specifically for our web marketing business, we have found the following groups:
Brochures - some clients simply use the web as a brochure and very seldom make changes to their sites. They have decided to work with us for hosting because we are local and we are available if they do need an edit or an email address change.
Web Assistant - these clients do a combination of tasks involving the web from newsletters and events to regular updates to their sites. Typically we are acting to assist their efforts on their site.
Web Business - mostly eCommerce, but also large organizational sites, the web business client represents more of a partnership relationship. We work very closely with these clients with online business planning and strategy.
Each segment of our client base has different needs and requires different levels of attention. Where a brochure client might spend $500 a year with us, a web business client could easily spend $50,000 a year or more. We certainly can not institute a formula company wide that would address the varying needs of these two disparate clients.
Hence, customer segmentation. Traditional customer segmentation is a demographic decision based on gender, location, etc. So our split actually leans more towards customer-value segmentation because we are seeing trends not based on who a client is, but on what services they prefer. Understanding these preferences is helping us improve our business and increase the value for each type of customer.
We have done several things over the last few months to better understand and service our customer base:
Customer Census - we conducted a geographic census of both current and former clients to gain insight into where our customers live. This is a traditional customer segmentation move, but it yielded some unexpected results.
Revenue Analysis - we researched our revenues over a 12-month period and looked for trends and opportunities. It was amazing to see the Pareto Principle in play in our small firm. Nearly 80% of our business comes from 20% of our clients.
Service Offering Review - armed with this data, we did an intense review of our service offerings and discovered opportunity to improve. A lot of opportunity. Its given us some serious work to do over this next year. Our biggest lesson was that we did not have the diversity of services for the client to express their preferences.
Marketing Review - a better understanding of our clients and their impact on our business has helped us shape our marketing efforts. One discovery from the census was learning most of our clients are located very close to our business, hence our recent initiatives to more actively engage in our community. We learned several other lessons as well.
I don’t know if there is a specific time that customer segmentation starts to make sense other than the point where you know your firm is being stretched thin. We never experienced a segmentation effort with my previous firms. We had very large clients, but very few of them and they were all in the same industry. I believe each case, we were already very targeted to start with, so the segmentation question never came up.
Personally, I have found customer segmentation to be liberating. I have strong sense of responsibility to my clients and I feel guilt and stress when I suspect we are falling short. Using segmentation has allowed us to more clearly define the customer experience based on what they have let us know they prefer it to be. We still have a lot of work to do, but we have plan and it is underway. That is a relief in and of itself.
We have found the segmentation has been extremely beneficial to us and our clients and we expect to continue to refine it over the coming year. I also expect it will be a regularly reviewed item in the future.
Sorry for the late reply.
I believe segmentation helps in all businesses, but this particular example is directly related to my service business. Understanding the top 20% of your revenue is key in this type of analysis.