Question

How, when and why would you use a tiered approach to segment your customers and suppliers?

Answer 1

The tiered approach to segment the customers will take place when customers will have the different potential to create demand, revenue and subsequent value for the organization. Here, the customers are classified into the different groups or tiers so that each tier represents customers with specific characteristics. To answer the how, it can be done using the customer lifetime value calculation for each customer. On the basis of customer lifetime value, the customers can be put into the different tiers. To answer the when, it is done when the organization plans to design a product or plans to launch a promotional campaign. Here, each type of customers will be targeted with customize message that will be most suitable to the customers of particular tier.

The tiered approach is used to segment the suppliers also. Suppliers provide different types of inputs and it creates varied importance, degree of strength in relationship and networking relationship with the organization. It creates a basis of tiered segmentation of the suppliers. To answer the how, it can be done using the value of inputs provided by the suppliers or the frequency of materials provided by the suppliers. on this basis, tiered segmentation can be done. It is done by the organization when it identifies the need to offer the contract to the suppliers, or want to maintain the relationship with the suppliers. It is also done when the organization tries to attract new suppliers and develop new schemes for them. in this scenario, the tiered approach helps the organization.