Customer Segmentation

The Situation

The client was a printing firm based in Kerala, India. Their focus was on outdoor media, mainly in flexible hoardings, and signages. They catered to a wide variety of clients, ranging from walkins, to large corporate clients. Anyone who needs signage could approach them. For the last five years, their turnover has slightly increased however, their profit margins have dropped considerably.

The Business Need

The client mentioned that they were not able to increase price margins, however, they were able to get reductions in purchases because their volumes had increased. The client is worried about losing clients as the competition is increasing.

Analysis

The analysis of the client environment pointed to the large range of clients that they were catering to. Most of the interactions to each type of client had a different approach and requirements. For example, walkin customers did not have a price issue however, they usually had a strong delivery time requirement. This meant that the client had to reschedule any current manufacturing orders and even break running orders to free up the printing machine for the walk-in customer’s order. 

On the other hand, large corporate customers had long deliberations on pricing and delivery dates were well into the future. Since corporate customers needed tight pricing, the discussions were more specific and technical in nature, such as print quality, use of eco-solvents, print media quality, packaging, delivery and many more.

The Solution

Looking at each type of customer, we found that the requirements were spread quite broad and therefore, we could afford to price the services differently. We used a couple of customer profiling methods to cluster the different types of customers into approximate homogeneous segments. There were six customer segments that were identified and for each segment, we suggested a baseline pricing and an additional pricing for the range of additional services that were included for the final delivery. We created a customer feedback service and aftersales support service to ensure that pricing adjustments did not create a backlash to the client in the long run.

Results

Our engagement, from initial discussion to signoff took 6 months. There was a 1.5x increase in turnover and the profit margins were significantly increased. The customer feedback was initially mixed, as the new pricing and delivery took a few months to streamline. A majority of customers enjoyed the pricing as the additional services were clearly specified. There was significant client handholding that was required to ensure the pricing changes were accepted to the end customer. The client’s staff was quite eager to help customers as the process became simplified based on the customer segment. Once the staff identified the segment the customer was in, the rest of the process was to follow a standard script. 

Towards the end of the engagement we found that one customer segment could be divided into two more segments! The client was confident to build the pricing and related services for these new segments based on our training.

Leave a Reply

Your email address will not be published.