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Segmentation/Targeting Model (Classification)

What you put in... What you get out...
  • Customers' importance ratings for each measure of value for offerings in a product class
  • Customer descriptors (demographic or firmographic variables)
  • Number, size, and profile of needs-based market segments
  • Identification of factors that differentiate segments, both in terms of needs and descriptors
  • Classification tool to allocate any potential customer to a segment based on customer descriptors

segmentationSegmentation/Targeting is an analytic technique that helps firms to segment customers in a market.

Segmentation is the process of classifying customers into homogenous groups (segments) such that each group of customers shares enough characteristics in common to make it viable for the firm to design specific offerings or products for selected segments. The application finds customer segments using needs-based variables called basis variables. Cluster analysis helps firms to:

  • Better understand their customers.
  • Identify different segments in a market.
  • Choose attractive customer segments for targeting its marketing programs.

Technical Note

The Segmentation model technical note is a supplement to the Segmentation Model overview provided in the Principles of Marketing Engineering. This note provides additional analytic background on the model.


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Archived Webinar

Segment, Targeting, and Profit Prioritization for Greater Profit

In this ISBM sponsored webinar, Professor Lilien will introduce the basic principles of ranking and prioritization using the GE/McKinsey approach.

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