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Survey and Research Data
A survey of 54 Canadian manufacturing Small to Medium Enterprises (SMEs) concerning marketing information systems produced the following results:
- Most respondents (87%) declared that they had undertaken market evaluation activities (e.g. analysis of tendencies), and 47% indicated that that they did so often;
- A large majority (83%) also carried out market segmentation activities, and 43% indicated that they did so often.
- The most used segmentation criteria were geographical criteria, and the advantages sought by customers.
- 65% of SMEs declared that their organisation had a positioning strategy. (Raymond et al, 2001)
A major U.S. bank conducted an empirical study into customer segmentation and examined average account balance, and average account profit along with average age, gender, and income data from a random sample of 796 customers. A service quality survey was also conducted for the same group. For data analysis the customers were divided into two tiers: the most profitable 20% (top 20%) and the least profitable (lowest 20%). Findings included:
- The top 20% produced more profit per volume of business - producing 82% of the bank's retail profits (a perfect example of the 80/20 rule in this profit setting);
- Customers in the top 20% viewed service quality in terms of three factors (1) attitude, (2) reliability, and (3) speed. The lower 20% viewed service as comprising only two factors, (1) attitude and (2) speed, with slightly different interpretations of the factors. Reliability was not a driver for the lowest 20%. An important insight gained from further study was that blending customer tiers resulted in an imprecise view of what service quality meant to the customer;
- The different tiers had different drivers of incidence and volume of new business. In the top 20%, speed was key to driving incidence of new business and attitude was the key driver for the lower tier;
- Improving service quality varied greatly in profitability impact across the different customer tiers e.g. an across-the-board service quality improvement of key drivers resulted in a projected 3.65% increase in the incidence of new accounts in the top 20%, but only a 2.00% increase in the lower 20%. Further analysis indicated the top 20% were almost 10 times as responsive to changes in service quality. (Zeithaml et al, 2001)
Extensive surveys were used to evaluate the customer segmentation strategies employed by five supermarket chains in the Chicago area of the USA. Strategies involving the following components were examined:
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Fixed Utilities
- Fixed Benefits
Habitual shopping experience (store loyalty, familiarity with store layout and product locations)
Service quality (parking space, cleanliness of the store, friendliness of staff, waiting times at checkout counter, etc.)
Assortment of products (breadth and depth of assortment, exclusive labels)
Purchase flexibility.
- Fixed Costs:
Store location (distance and time to reach the store)
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Variable Utilities
- Variable Benefits:
Store specific price discounts (coupons, loyalty , rewards)
Habitual category purchase experience (category-specific store loyalty due to assortment, prices, and familiarity)
- Variable Costs:
Expected price of items on shopping list
It was found that strategies involving fixed or variable components had significant and measurable effects on the customer segments examined. These factors were used effectively to increase:
- The number of shoppers visiting a store;
- The number of shopping trips made to the store;
- The amount spent during a given trip the store.
It was noted that competing retailers located in close proximity to one another used dramatically different price formats to attract the desired customer segments into their stores. (Tang et al, 2001)
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