Customers must be differentiated on the basis of their needs and their differing actual and potential Customer Value. These are dynamic characteristics; therefore the CRM must recalculate them periodically.
Customer segmentation is an essential element of successful customer relationship management. With the help of advanced information technology we can build a customer knowledge base, that can provide those pieces of information about a company’s customers and prospects that will become key factors in increasing competition. Such knowledge allows a shift toward customer orientation, where providers seek to satisfy more of the needs of a specific customer, creating costumer intimacy, increased switching cost for the costumer, and ultimately a competitive advantage.
Well applied segmentation methods can assist the provider in organizing successful up-selling and cross-selling campaigns, expand customer life-cycle and increase Customer Value.