Activity 1: Segment Customers

Activity One: Segment Customers (Steps 1-12):
Segment customers, both by size and by need, to identify targets for the Company.

Your business must grow to prosper. You grow your business by selling more of your Company’s product. You increase your sales by selling more products to your current customers and by finding new customers to buy your products. But, not all customers are equally valuable to you. Your best customers are the core of your business. The purchases these Core customers make from you provide a good profit for your Company, a profit large enough to make a good return on your investment in the business. Other customers are less valuable to you than the Core customers. Some will purchase products from you, but at low prices. Or, they will be costly for you to serve because they require a lot of service but buy little from you. Others will not buy from you at all. The time and resources you spend on them are wasted.

This first activity of the Basic Strategy Guide identifies your Core customers, or those who could become Core customers, and creates new segments of these Core customers according to the needs these customers have that you and the other competitors in the market have not met yet.

Step 1:		Define the products, competitors and customers of the business.
Step 2:		Segment all the industry’s customers by size.
Step 3:		Understand the purpose of multiple roles in customer relationships
Step 4:		Place the total industry purchase volume on a Customer Size/Supplier Role matrix.
Step 5:		Estimate the average volume by position on the Size/Role matrix.
Step 6:		Find the annual amount and location of the industry’s Positive Volatility.
Step 7:		Determine whether “Wins” or “Failures” account for the majority of the industry’s Positive Volatility.
Step 8:		Find the Company’s strengths and weaknesses on the Size/Role matrix.
Step 9:		Separate the sources of the Company’s change in share.
Step 10:		Compare the Company to the industry on the components of volatility.
Step 11:		Classify and assign company objectives to each current and potential customer.
Step 12:		Develop new need-based segmentation.

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