Grouping customers for your products and services and targeting one or more customer groups can help to grow your business and keep you profitable. This allows you to find out which customers you already have, and which ones are your best.

Grouping Customers

A small business with just a few customers tends to treat every customer differently, providing a high level of personal and personalised service. However, as the business grows and acquires more customers, it becomes difficult to make a profit at the same time as providing such a highly personalised service.

Grouping customers is a way to continue to provide high levels of value and service to customers while making a profit for the business. If you like, it is a form of mass personalisation that helps a business to manage large numbers of customers. It is based on understanding both what they want and how they buy, as well as which customers you would regard as good for your business.

When a business knows which existing customers are profitable - the usual measure of whether customers are good for the business - it can then establish what characterises those customers (called profiling) and set out to find and attract more customers like them.

Customer Profile

All customers in the market are not the same and, as the old adage goes, if you try to please everyone you'll end up pleasing no one. So it makes sense to try to group customers with characteristics that are similar. This will enable you to refine and tailor your products and services to meet the particular requirements of these groups more closely, and so too any communication you have with them.

Grouping and targeting customers in this way can help your business to:

• Meet the needs of larger numbers of customers as the business grows. Such an understanding shows these prospective customers that you have a product or service which suits their needs and can be tailored to meet any aspects particularly important to them.
• Maintain or increase profits as the business takes on more customers.
• Retain customers by providing products and services specifically designed for them.
• Focus marketing communications by communicating messages relevant to your target customers through channels (magazines etc) that you know they are using.
• Avoid competition from larger companies by focusing on specialist needs that are too small for those companies to serve profitably.
• Five steps for grouping customers and deciding which group you are going to target:
  
  Step 1 : Establish which customers are profitable
  Step 2 : Profile your customers
  Step 3 : Define customer groups
  Step 4 : Decide which customer group you will target
  Step 5 : Compile a target list of prospective customers