How Product-Customer Demand Segmentation Works
In product-driven Segmentation, you focus on the demand of any product.
Here’s how you can implement a product-driven demand segmentation process:
For any business, it’s crucial to identify and prioritize based on profitable Customers and outperforming products. For this purpose, you should perform Demand analysis and evaluate the costs involved with meeting those needs. You can start with a basic model that categorizes products based on current market shares and allocate the costs of ordering those products. You can further use this data to enhance the decision-making process.
Now that you’re better aware of customer demand, it’s time you develop a Segmentation strategy based on Demand signals such as Customer orders and Forecasts.
Inventory is a major component of the Supply Chain that benefits from Segmentation. Through Segmentation, you can determine which products satisfy demand for a group of Customers. Inventory policies can be optimized if you clearly understand how certain products add value to your target audience.
Manage Customer Relationships
Managing Customer relationships is essential in Supply Chain Demand Segmentation. An organization can divide its Customers into different groups based on their profitability, services required, and distribution channels serving them. This type of segmentation can help businesses prioritize service levels in cases where there are production constraints. It can help determine when a make-to-order or make-to-stock strategy works best. For instance, for high volume products, a make-to-stock strategy might be ideal while low-volume product demand could be fulfilled with a make-to-order inventory strategy.
Manage Supplier Relationships
Just like it’s important to manage Customer relationships, you can’t overlook the importance of managing Supplier relationships when it comes to Demand Segmentation.
In Supplier replenishment programs, you must segment Suppliers based on component dynamics that align with business objectives. For example, you can segment Suppliers by combining multiple characteristics such as nearshore capacity with short lead times.
Phases of Demand Segmentation Analysis
As you approach your demand segmentation analysis process it’s important to understand some of the most prominent phases of the demand segmentation process.
Here are the most prominent phases of Demand Segmentation:
- Intelligence Phase – It includes a detailed analysis based on performance indicators and the identification of order qualifiers and winners and relevant Segmentation variables
- Design Phase – In this phase, strategic priorities are allocated to each Supply Chain Demand segment
- Choice Phase – It includes the evaluation of feasibility, consistency, and agreement of Supply Chain Segmentation
- Implementation Phase – In this phase, the Supply Chain department prepares for implementation, reconfigures Supply Chain processes, and monitors and controls standard practices.
In today’s world, Customers are more empowered than ever before. Increasing customer delight involves letting go of a one-size-fits-all approach. The methodologies listed above are great starting point for as you embark on your demand segmentation process or re-evaluate your existing strategy. Once you have these foundational segmentation processes in place, you can move on to a more complex analysis of combining segments to help you answer more detailed questions about your demand. We’ll cover that in a later blog.
Ready to get started? Ask for a demo of the Arkieva Demand Analyzer.