To improve profitability of business and to effectively manage large pool of customers as per their distinct behavioral traits and needs, it is imperative to segment the population in smaller homogeneous segments. These segments are characterised by similarity within the segments, but with distinctiveness from other segments.
IQ Segmentation Solutions:
Descriptive segmentation: These are useful when a set of variables is pre-identified based on their importance for making business decisions. Examples:
- Behavioral segmentation: We build behavioral segments based on variables that represent measurable behavior of customers. For a retail store, an index based on recency, frequency and volume of usage can be a good (first generation) indicator of loyalty.
- Motivational segmentation: We carry out segmentation through survey data that captures variables that relate to why customers make purchases. Understanding the motivations behind transactions in such cases can be used to create marketing promotions which have greater appeal to customers.
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Predictive segmentation:
Is useful for identifying variables that distinguish "target customer behavior”, example those who are more likely to buy or more likely to attrite
- We use tree techniques such as CHAID, CART and artificial intelligence techniques for identifying predictive variables (such as past purchase patterns, life- stage variables, etc.) that are drivers of the dependent target variable.
- Grouping on basis of such variables in the form of a rule translates into distinct segments.
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- Developing and Executing Segmental Business Strategy For Higher Effectiveness
- Predictive Segmentation Can be Used as First Generation Scores; Response Data from Such Segmented Promotion Can be Used to Develop Robust Scores Later.
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