Segmentation and customer insight in contemporary services marketing practice: why grouping customers is no longer enough

Abstract

The bulk of market segmentation literature has concerned the generation of
\nsegments, with far less attention on what segmentation is used for -
\nparticularly surprising given the common speculations that the role of
\nsegmentation is changing due to CRM practices and the wider range of forms of
\ncustomer insight which they enable. We explore market segmentation in the
\nservices and product-service systems context through twenty-five interviews in
\nfive UK-based companies, highlighting practical considerations in implementing
\nmarket segmentation programs (see Young, Ott and Feigin 1978, for a similar
\nearly approach). Within this case set, market segmentation, using a variety of
\nsegmentation bases, is still regarded as essential for customer selection,
\nproposition development and mass communication. Addressable and interactive
\ncommunications with individual customers, though, are increasingly based on
\nindividualised customer analytics and propensity modelling, which aid the
\ndetermination of the likelihood of uptake of specific propositions. Events and
\ntriggers informing companies of how to deal with customers individually are also
\nconsidered to be particularly effective rather than simple allocation of the
\ncustomer to a particular characteristic segment. Implications for theory and
\npractice in market segmentation are outlined and further research is called for
\nto explore this important area further.