Customer Segmentation

Customer segmentation or tiered customer management is the practice of classifying customers based on criteria such as purchase volume, frequency, or relationship history. Common tiers include VIP, regular, or potential customers. This helps businesses tailor services, allocate resources more effectively, and apply differentiated policies such as payment terms, discounts, or dedicated account support.

Customer segmentation in CRM and ERP systems

In CRM and ERP systems, customer segmentation is used to enforce business rules consistently. Segments can determine which customers receive priority handling, special pricing, extended credit terms, or dedicated account managers.

Because segmentation is often tied to reporting and automation, it helps ensure customer-specific policies are applied systematically rather than manually.

Customer segmentation vs individual customer treatment

Segmentation defines rules at a group level, making it scalable. Instead of managing customers one by one, businesses define policies per segment and apply them automatically. Individual exceptions can still exist, but segmentation establishes a clear baseline for decision-making.

Common criteria used for customer segmentation

Customer segments are typically based on measurable and operational data, such as:

- Purchase volume: Total spending or order size.

- Purchase frequency: How often a customer places orders.

- Relationship history: Length of time as a customer or past interactions.

- Behavioral patterns: Returns, late payments, or support usage.

These criteria are often combined to reflect both value and risk.