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Here comes the final episode of the customer segmentation series and we are going to discuss the future and potential problems inherent in customer segmentation.
Customer segmentation has currently been widely used in different business settings and we would say this area promises a lot. Customer segmentation helps attract revenues and enhance user satisfaction with the user-centrics service and contents, which is a win-win situation for both businesses and consumers. However, in reality, there are still several obstacles that an organization faces which has to be resolved.
The major types of customer segmentation are value-based, behavioral, loyalty-based, need -based and so on. One of the major challenge for most of the businesses is to choose proper type of implementation for their segmentation and develop effective business strategies catered to their business objectives . If the business chooses an inadequate method, they might run under the risk of loosing out opportunities to generate more revenues. On the other hand, customer segmentation only provides specific and centered information or services to the segmented users, which results in loosing out opportunities of exploring new market.
Another major hurdle involve in this exciting field is cost incurred by businesses in segmenting their users. Customer segmentation cost might be huge. If there are too many clusters, which could be a result of overfitting data, a business needs to design various services or workflows for each type of customers. This in turn would considerably increase the administrative cost. Moreover, the maintenance cost of customer segmentation is also high. Organizations have to continuously collect data over time and modify their segmentation strategies in order to respond to the upcoming trends in purchases of products.
Despite of some difficulties faced by organizations in real implementation, Data Science in Customer Segmentation is going to be the driving force for most of the businesses and is going to become more popular and more prosperous from our perspective. In the early stages of a business cycle, organizations may have to invest in the customer segmentation research and development, but later on they will be able to provide better user experiences to their customers based on the results of their research which will help them to get their upfront investment back and earn more revenues. It will be a win-win situation for both of them.
So are you ready to play with customer segmentation?