Introduction

Customer segmentation is an enterprise-specific solution that uses data mining to group customers based on customer attributes and customer transactions. The retailer can use this information to describe and predict customer behavior. It provides the retailer with a vehicle to target customers with offers, pricing, assortment, and experience.

Retailers understand that shoppers are heterogeneous in nature, that they possess different wants and needs, and that it is impossible to satisfy them all. Retailers can differentiate themselves from their competitors by specializing and offering goods and services that are tailored to one or more market segments.

Customer Segmentation can be used to group customers and to discover hidden customer segments based on the contents of customer shopping baskets and the number of shopping trips they make. Loyalty card data is used to determine if these customer segments differ in terms of socio-demographic or lifestyle characteristics and whether these characteristics can be used to target different customer segments with more relevant product offers.

Retailers can create localized assortments and use customer insights to determine which products to offer by location or channel. This provides insights into the importance of a product to key customer segments and helps when making drop or keep decisions about products within an assortment.

This science-driven tool helps to automate segmentation in a repeatable process and bridges the gap between targeted marketing to targeted assortments.