Approaches and Analytical Techniques

for Customer Segmentation in B2B

Market Scenario
Team Members:
Arjit Saran (GSEP14GLM27)
Rahul Charkha (GSEP14GLM30)
Shasanka Sahu (GSEP14GLM31)

Table of contents
1. Introduction B2B Market Segmentation
2. Segmentation Approach and Basis for Segmentation
3. Source of Consumer Data
4. Customer Intelligence Analytical Methodology
5. IT Analytics and Survey Techniques
6. Final Thoughts

Introduction
B2B Market Segmentation
Need for Segmentation:
Rising complexity in Business environment
One size fits all no longer holds true
Customers have unique needs and expectations
Needs to be grouped based on similar buying preferences
Supply chain needs to be aligned with customers segments
it caters to.

Segmentation Approaches

Factors of market segmentation

5 Broad categories on approaching segmentation

Buying behavior factors Product risk and resiliency based, customer
service needs , and market driven

Basis for segmentation

Basis for segmentation

Segmentation dimension

Approach to segmentation has evolved from convenience , firmographics t

based on behavior and needs
Segmentation dimensions for market segment based on buying behavior,
attitudes, features, needs and preferences

Source of consumer Data

Internal Data

Public Data

Self Provided
Data

Source internal to Business

Data available with various
tools used within company
Like CRM (customer
relationship management),
MRM (marketing resource
management)

Data from Research and

consulting firms such as Dun &
Bradstreet, Jigsaw Research.
Data from social media such
as LinkedIn, Facebook

Data shared by customer

themselves through feedback,
complaints

Customer Intelligence Analytical

Methodology
Analytical Techniques
1.Customer Life Time (CLV /LTV)
2.Predictive Modeling
3.Voice of Customer Analysis (VOC)
4.MultiDimensional Segmentation
5.Customer Balance Scorecard

1. Customer Life time value

Building block of lifetime value over time frame

CLV represents the net present value of past and future cash flow that custo
generate
Customers generating same revenue can generate different profits for the co
Core areas for increasing customer value- cross selling, Up selling and retent
Identifying customers with highest value helps in maximizing ROI

Evaluating customer Lifetime value

Steps for evaluating customer lifetime value
1.Assembling the necessary historical data
in analysis ready format
2. Understand cost at customer level
3. Apply predictive Analysis

Conceptual framework of CLV for segmen

2. Predictive modeling
Identifying historical reasons for customer
engagement in the past
Identifying customer target
Understanding and forecasting consumer behavior.
Return on Investment (ROI) Optimization
Measuring impact of marketing activities on consumer
behavior

3.Voice of customer (VOC) analysis

Voice of customer is part of six sigma process improvement program

Information exchange of business and customers is known as VOC
Ways through which customer communicates complaints , compliments,
product return, customer referrals, closure rate of sales call

Translating VOC to CCRs

VOC gets translated to understand critical customer requirements

CCRs clearly defines the value proposition it has to offer to customers
Useful for determining current defect level and helps to establish new targ

4.Multi dimension segmentation

Limitation having segmentation with one set
of variables
Consumers consider multiple parameters
for buying decision
Users of market segmentation have different
needs
Each segmentation is independent
Powerful tool for analyzing complex datasets
Often leads to innovative marketing solutions.

5.Customer Balance Scorecard

Developed by Robert Kaplan and David
Norton in the 1990s.
Helps to understand risk and opportunities
within the customer base
Helps to understand parameters that can
create or destroy companys future value
Important indicators for strategic
improvement
Evaluate companys strategy at all levels.

IT Analytics and survey techniques

Various IT Analytics techniques used to segment customers
1. The CHAID Algorithm
2. TURF Analysis
3. RFM Segmentation
4. Partial Least Square Structural Equation Modeling
5. Cluster Analysis

The CHAID Algorithm

CHAID (chi-squared Automatic Interaction
Detection) developed by Gordon in 1980.
Primarily used in exploratory analysis
CHAID detects non-linearity in the data unlike
linear regression
Can be depicted visually and easily interpreted

TURF Analysis

TURF Analysis output table

TURF (Total Unduplicated Reach and Frequency) is used when choice com
high and combinations that can be pursued is restricted.
The above result shows preference for a particular combination
A sweet spot or optimal trade off can be found

RFM segmentation
RFM segmentation measures
the Recency, Frequency, and
Monetary data to segment customers
RFM segmentation is used by business
to design promotion and sales strategies
Any low score among these factors
have to be improved upon
Limitation of this technique is its inability
to measure or segment customers other
than these factors

Partial least squared equation modeling

It composed of two models
- structural model
- measurement model
Measurement model measures the
relationship between observed data and
latent variables
Structural model measures the relationship
between latent variables

Smart PLS software screenshot

Cluster Analysis
Cluster analysis helps to partition data into mutually exclusive
and homogeneous groups.
Different types of cluster analysis
- Hierarchical cluster
- K means clustering
- Density based clustering

Hierarchical cluster

Hierarchical clustering good for causal analysis

K means cluster representational of Voronoi Diagram
Density based clustering group variables based on density
K means clustering
and their location close or away from density

Final Thoughts

Best segmentation analysis is the one that that is most useful to particula
No one method works best

Segmentation should be aligned to strategic goals and based on that par

techniques need to selected
Need for multi faceted understanding of consumers and target market

THANK YOU