Tuesday, March 28, 2006

Stairway to Heaven

"There's a lady who's sure all that glitters is gold
And she's buying a stairway to heaven
And when she gets there she knows if the stores are closed
With a word she can get what she came for"

Led Zeppelin were on to something -- The Mar-27 BusinessWeek cover story includes a report on BestBuy who'se trying to escape commodity hell via customer segmentation: "The company has divided its customers into five distinct demographic groups and is doing extensive market research to figure out how to serve them better"

On their website, a press release gives further details:
"As part of its customer centricity initiative, Best Buy identified five initial customer segments that it believes represent significant new growth opportunities or include some of the company's most profitable customers today. The segments include:
  1. The affluent professional who wants the best technology and entertainment experience and who demands excellent service.
  2. The focused, active, younger male customer who wants the latest technology and entertainment.
  3. The family man who wants technology that improves his life - the practical
    adopter of technology and entertainment.
  4. The busy suburban mom who wants to enrich her children's lives with technology and entertainment.
  5. The small business customer who can use Best Buy's product solutions and services to enhance the profitability of his or her business. "

The million $ question is how did they arrive at these segments? What does "initial customer segments" mean? why "believe"? Why exactly 5? Is there a cluster analysis going on behind the scenes, or is it time for one?

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