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What is Customer Value Segmentation?

Customer Value Segmentation is a value segmentation that is activated by default when a MIP is started up. The underlying derivatives can be recognized by the prefix CV that is added to these indicators.

Concept

Customer Value is a two-dimensional segmentation that uses the parameters Recency and Monetary to build the segmentation. 

  • Recency: the number of seasons since the customer's last purchase.
  • Monetary:the sum of all purchases during the last 2 seasons since the last purchase.

Derivatives

Customer Value Segmentation results in two interdependent segments that together provide a clear picture of the customer value and behavior of each customer.  

  • CVgroup: First level within the segmentation. The CVgroup is primarily based on the recency value of the customer.

  • CVsegment:Second level under CVgroup. This is primarily based on the monetary value of the customer. 

Advantages

This version of segmentation is known as ‘fixed segmentation’ or stable segmentation. The calculation is performed once at the start of a new period and maintained throughout that period. The period can be annual or semi-annual, depending on the sector. 

This means that: 

  • Short-term factors are not reflected in the customer's Customer Value Segmentation.

  • Comparisons of segments over time and the analysis of the performance of these segments are clearly defined. 

  • The segments form an ideal basis for drawing up a medium-term strategic plan.

Customer Value in practice

Customer Value Segmentation is structured with a clear strategic focus that should make it easier to analyze performance and draw up strategic plans. 

CVgroup

The first level of Customer Value Segmentation is a segmentation based on recency, the Customer Value group (CVgroup). This reflects the intention to purchase in the medium term.

0 SOL ( optional):

  • Customers who, in recent periods, have only made purchases during the sales period, July, and January in the last four periods. This is the only segment that is not based on recency.
  • These customers are often difficult to activate during the other months and often focus purely on discounts.

1 NEW:

  • Customers who made their first purchase during the current season. This is the only segment that can grow during a period.

2 ACT:

  • Customers who made a purchase during the previous period.
  • These are the most loyal customers who have an active relationship with your brand.

3 COLD:

  • Customers who were last active two periods ago.
  • These customers have not been seen for a while, but there is still an active relationship to maintain here.

4 LOST:

  • Customers who were active 3 or 4 periods ago. This corresponds to a last purchase that was more than a year ago.
  • These customers are clearly slipping away. If they are not reactivated in time, they will be lost.

5 LOST:

  • Not purchased for more than 2 years, or not purchased for 4 periods.
  • There is almost no relationship left with these customers; it is difficult to reactivate them through general communication.

CV segment

Below is the Customer Value segment (CV segment), which is primarily based on the monetary value of the customer.

JUNIOR:

  • Customer with only one purchase. Only constitutes a separate segment for 2 ACT and 3 COLD.

PLATINUM:

  • Belongs to the very best customers, top 5% in terms of monetary value. Have spent the most in the last 2 seasons.
  • Similar to the Large (L) segments under 3 COLD and 4 LOST

GOLD:

  • Very good customer, 5–25% on monetary.
  • Similar to the Medium (M) segments under 3 COLD and 4 LOST.

SILVER:

  • Dear customer, 25–50% off monetary.
  • Similar to the Small (S) segments under 3 COLD and 4 LOST.

BRONZE:

  • Belongs to the small customer segment, bottom 50% in terms of monetary value. Have spent the least in the last 2 seasons.
  • Similar to the Extra Small (XS) segments under 3 COLD and 4 LOST.

CV segments below 0 SOL are not based on monetary value, but follow the recency logic of CV groups.