Demand Segmentation

The future is demand segmentation

We’re living in the age of the consumer; and our businesses are in their hands. Empowered, demanding and always right, this new individual requires a shake-up in the way things are run. Of course, the value of good customer service has long been known, but in light of the recent global economic downturn, fast-evolving technology and changing habits of consumers, organizations need to become more focused than ever before on how to respond to their customers. Demand segmentation – classifying products, customers and channels into groups that share similar characteristics – is the surest way to manage this.

But segmentation is not just about responding to the varying needs of consumers today. It’s about anticipating long-term trends, thinking ahead of the game and predicting what customers want, even before they do, so there is time to respond and align the firm’s business model and supply chain, accordingly. In the past, it was enough to use a standard, single-model approach and structure the extended supply chain based on costs or operational considerations. Nowadays, to effectively meet demand service needs, across products, format, response and method, it is essential businesses understand that not one customer, channel to market, or product, are the same, and thus a ‘one-size-fits-all’ supply chain is no longer adequate.

Having segmented on needs and made the decision to respond differently, it is then time to structure the supply chain to deliver this response. And it is a segmented supply chain response that is needed to effectively manage product and service complexity and meet customer needs. It takes time for the extended supply chain to respond, but the fruit is sweet. Not only is the business better equipped to meet customers’ expectations now and in the future, but by capturing sets of capabilities and the costs associated with them, segmentation enables better decision making, instils simplicity in complex supply chains, increases operational efficiency and drives competitive advantage.

In order to achieve this, and truly understand customers’ needs in tomorrow’s rapidly changing market, demand segmentation must be intrinsically linked with the business strategy and become a core business process. Only when demand segmentation, driven by marketing, is fully integrated with the commercial cycle and runs through the bloodline of the business, can consumer needs be met effectively and profitably; not just now, but in five, 10 and 15 years’ time.