Customer Segmentation and Customer Relationships

Customer relationships are supply chain relationships because customer requirements drive order, fulfillment, service and planning decisions. A single service model may not create the same value for every customer.

Why it matters

Segmentation allows the organization to focus resources and tailor service where differences in customer needs or economic value justify a different approach.

Core concepts

• Customer segmentation groups customers using relevant characteristics so differentiated relationship and service strategies can be applied.

• Segments can reflect customer needs, buying behavior, service requirements, strategic importance or economic value.

• Relationship strategies should support both customer value and the organization’s value proposition.

• Strategic customers may justify more collaborative planning, tailored service or dedicated relationship management.

• Customer profitability should be considered together with revenue because different customers can require different cost-to-serve.

• The supply chain should understand the service attributes that customers value rather than assuming all customers define service the same way.

• Segmentation should be reviewed as customers, markets and strategic priorities change.

Remember for the exam

• Customer segmentation supports differentiated service.

• Revenue alone does not show customer profitability.

• Relationship intensity should fit customer and business value.

• Customer value and cost-to-serve should be considered together.

Apply it

• Use this concept in a practical decision by asking: Customer Segmentation and Customer Relationships

• Then check the decision against this principle: Customer relationships are supply chain relationships because customer requirements drive order, fulfillment, service and planning decisions. A single service model may not create the same value for every customer.

Exam trap

Watch for questions that test this distinction or principle: Customer relationships are supply chain relationships because customer requirements drive order, fulfillment, service and planning decisions. A single service model may not create the same value for every customer.

Key takeaway

Customer relationship strategy begins with understanding that customers differ in needs, value and service expectations. Segmentation helps the supply chain apply the appropriate relationship and service model to different customer groups.