Customer segmentation

The concept of segmentation has its roots in companies like Proctor & Gamble where consumer-marketing companies recognized the value of dividing customers into groups or segments. These packaged goods companies could effectively focus resources promoting specific products into specific customer groups where they would produce the highest possible revenue, at the lowest possible costs.

Initially, simple demographic segmentation was used as packaged goods companies promoted products such as perfumed soaps to women, while to men, they would promote a more sharp and spicy fragranced soap, smelling much like an aftershave. It was eventually discovered that not all men and women wanted the fragranced soaps. Some because they did not care for the smells the soaps imparted, and others for the simple fact that some needed to avoid the scented soaps so as to avoid an allergic reaction. These types of discoveries illustrate the value of segmentation to help provide a means...