Segmentation and Profiling are advanced statistical methods of clustering, and producing decision trees which can be used to better understand customer segments and their purchasing behaviours.


Segmentation is the process of analysing the database and placing the customers in pigeon holes or clusters with other customers that exhibit similar purchasing patterns. It is a broad term used to describe the partitioning of customers or prospects into distinct, non-overlapping groups. The most important aspect of segmentation is that the segments or "clusters" can be defined to specifically meet the needs of the program of the particular marketer. The marketer no longer needs to rely on canned or predetermined, "off the shelf" clustering systems.

Customers can be separated into different groups based on attributes like age, income, gender, geographic locations, previous purchase history, predicted likelihood of purchasing a product, etc. People within the same segment are similar in certain aspects, while people from different segments are distinct. Once a number of clusters have been identified, each segment can be profiled to understand the customers within the segment and how that segment differs from other segments.

Examining prototypical members of a segment can provide a better understanding of people with the segment. The segments might be deciles into which a customer is ranked.

For example:
Customers tiered into segments like "highly profitable customer," "above-average customers," "average customer," and "below-average customers."
Products or services purchased by your customers are segmented (e.g., customers that purchase only product 'A' versus customers that purchase only product "B" versus customers that purchase both products "A" and "B")
Customers are clustered by tenure or length of time a person, has been a customer, sales volume, frequency and geography of clusters.

The possibilities are limitless. Segmentation allows the marketer to define exactly the groups to analyze and profile and that are unique to that marketer.


Profiling is the process of identifying the characteristics of the customers that makeup the segmented clusters, Profiling allows you to totally understand the uniqueness of each cluster. By studying the characteristics and statistics of a group of people within a cluster or segment, you can draw conclusions to help target your marketing campaigns more effectively.

For each cluster you can typically view:

Characteristics that best represent people within that cluster. By examining these prototypes using the variables specified for analysis, you can increase your understanding of your different customer segments.
A list of variables ranked by the importance levels, that most differentiate one cluster from another. By analyzing the key differentiating attributes or the "average," you can understand critical differences that can be leveraged in one-on-one marketing campaigns.
Customer tendencies for each cluster, - those variables that are typical and those variables that are not common within that cluster. This highlights variables and values that best characterize customers for easy understanding of the segments.
Variable interactions that characterize a cluster by identifying variables and values explaining customers within a cluster. This analysis allows you to see what values account for large portions of the segment.


The benefits of Segmentation and Profiling are recognized as the following:
Establishment of customer clusters meaningful to specific marketers.
Identify profiles for purchasing radio, TV, newspaper and unaddressed media.
Identify groups of people to maximize up sell opportunities.
Identify characteristics of your best customers to find similar prospects.
Identify opportunities for additional sales expansion.
Improved understanding of customers or prospects for strategic marketing.
Identify the prototype customer representative of each cluster.
Better understand the characteristics differentiating each cluster.
Develop targeted communications directed at focused audiences. . Develop more effective customer retention programs.
Improved customer relationships and retention through "one:-on-one" marketing messages.

In addition, by targeting your communications more effectively to prospects and existing clients, you improve and strengthen customer relationships. The customer may perceive more value in your communications (ie. They receive information speaking directly to their interests.