Customer Product Segmentation
Segmentation is about defining which products and customers should be targeted for growth and which should be treated more opportunistically. It is an effective tool for implementing your company strategy, it is usually advisable to involve the CEO.
Customer & Product segmentation also benefits the company by providing a more structured framework for rationalizing the product/service portfolio. A service that is spiraling out of control has a negative impact on the EBIT and working capital. In the first instance, Sales can be very resistant to changes in the customer service level or products delivered. Involving Sales early on in the process helps to get everyone on the same page. Change management is a major key to success in segmentation exercises.
How does it work? You categorize your customers or products as A, B or C, whereby A represents the most profitable customers or products and C the least profitable ones. Typically, 20% of your customers and products account for 80% of your profit. For the long tail of less profitable customers and products in the ABC segmentation, you can make a distinction in terms of customer service and lead times, for instance. Focusing your efforts accordingly will automatically lead to more profit.
Solventure can guide you at every step in the journey: from segmenting customers based on a calculation model that is accurate for 80 to 90% of the customers based on 10 to 20% of the parameters, to helping you define the operational fit of products based on production- and planning-related data. Of course, we can also assist in the service differentiation per customer and product category. We are experienced in change management techniques to guide your people in the desired direction. We also use scenario management & simulation techniques to provide you with the necessary insights.
Do you want to know more about the drivers for segmentation and our step-by-step best practice approach to make the exercise easier to manage as part of your S&OP process? Read our white paper!
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Want to be informed about the next webinar on Customer Product Segmentation?
In this webinar Prof. Dr. Bram Desmet, Managing Director of Solventure will talk about “Customer Product Segmentation as an essential part of your S&OP process’.