Methodologies for Customer Segmentation Analysis PPT

This PPT slide, part of the 47-slide Customer Segmentation PowerPoint presentation, presents 2 distinct methodologies for segmenting customer data based on behavioral or demographic characteristics. The first method, referred to as the 80/20 approach, emphasizes the division of customers according to their profitability. It involves hypothesizing the variables that contribute to profitability and combining these variables to create customer segments. However, this method is noted for its low statistical validity. The drawbacks include its iterative and manual nature, reliance on solid intuition, the risk of omitting important variables, and its failure to address causal relationships.

The second method utilizes CHAID (Chi-squared Automatic Interaction Detector), an analytical tool that identifies the drivers of a dependent variable, such as profit. This approach is more structured and involves selecting a dependent variable, hypothesizing segmentation variables, collecting relevant data, and running the CHAID analysis. The results are then reality-checked, leading to the creation of segments based on the findings. This method boasts high statistical validity and provides a more rigorous framework for segmentation.

However, it does come with its own challenges. The process requires engagement with the Bain Research and Data Analysis Group in Boston for software and statistical expertise, which may not be feasible for all organizations.

In summary, the slide outlines 2 methodologies, highlighting their processes, statistical validity, and drawbacks. Understanding these approaches can help organizations make informed decisions about how to segment their customer databases effectively.

This slide is part of the Customer Segmentation PowerPoint presentation.

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Customer Segmentation Data Analysis

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