Use customer segmentation

Customer segmentation, a core feature Insights, automatically analyzes purchasing behavior to group your customers into meaningful segments and uncover key insights. The insights update as your data changes, so there's no need for manual recalculations.

Whereas you might already have a clear picture of your top customers and have strong relationship with them, it’s likely you don’t know much about those customers that don’t buy often or much from you. You might not be aware of potential risks of losing customers.

These insights give you a better understanding of all your customers, helping you to quickly answer key business questions and take informed, targeted actions to drive retention, loyalty, and growth.

Get started

In your Phocas navigation menu, click Insights, then click the required configured database to open its Customer segmentation page.

The best way to get started is to take the tour in-product tour and watch the accompanying video, available in the bottom right corner.

Take a tour of Customer segmentation

The Customer segmentation page is organized into several sections, as identified by the numbers in the image and explained below.

1. Configuration bar: On the right side of this bar, you can access the dimension filter. If you're the Administration user, you can also edit or delete the configuration settings from here.

2. Customer segmentation summary: This is a quick overview of your most up-to-date customer data. It shows the total number of customers who were active within the current period (by default, the last 12 months). The summary cards on the right highlight the total sales value and the total number of active customers, so you can quickly understand the overall scale of your customer base and sales without digging into detailed data.

3. Customer segmentation chart: This is a visualization of how your customers are grouped based on their buying behavior, with supporting details.

   • The chart visually groups your customers into segments (Champion, Loyalist, At risk, and so on) based on how recently and frequently they buy, and how much they spend.

   • Each block in the chart contains the segment name and number of customers in that segment. The size and position of each block corresponds to how that segment is structured (thresholds). It bears no relation to how many customers are in the segment. For example, segments higher on the chart show higher sales value; segments further right are more recent buyers.

   • You can take the following actions:

     • Click the Information button next to the chart title to view the customer segmentation setup. See Understand the segmentation to learn more about this.

     • Hover over a segment to view a summary of its details, including how much revenue it represents.

     • Click a segment to view its details on the right side of the chart, in summary cards and a table. See Analyze the insights to learn more about using the chart.

4. Customer segmentation summary table: This is a table that gives you a high-level view of all the segments and what they mean, and how the distribution of customers and revenue is split across them. It’s a quick way to compare the following metrics across all segments: Number of customers, average sales value, and total sales value.

Understand the segmentation

To understand how your customers were segmented, and the chart was created, click the purple Information button next to the chart section header. This opens the Segmentation setup where you can see:

• A table of the Recency, Frequency, and Monetary (RFM) thresholds configured for the underlying database. They're grouped into five buckets (range 1 to 5) that determine the size and position of the segments in the chart.

• Brief description of the terms Recency, Frequency, and Monetary.

• Information about where the data comes from.

If you're the Administration user, this information will be familiar. For all other users, this is a handy snapshot of what's going in behind the scenes.

Analyze the insights

The segmentation is done for you, and the chart allows you to instantly view key groups based on behaviour like champions and at-risk customers. You can drill deeper into this data to get more insights and answer questions.

View segment details

Hover over a segment in the chart to view a summary of its details.

Click a segment in the chart to view its details on the right side of the chart.

Filter the data

Filter by a dimension, such as Territory, Sales Rep or Product, to narrow your focus to a specific area. For example, if you're a sales rep, you can filter to focus on your individual customers and see where you need to spend your time, who to call, and where to grow.

Click the Filter button in the Configuration bar, then select the required dimension from the list. You can apply multiple filters to further refine the data. The segmentation chart updates to reflect your applied filter(s).

For example, suppose you're analyzing your customer segmentation chart and are interested in a particular customer type, Electrical. You can filter on the Customer Type dimension, selecting the Electrical entity. The chart updates to give you a filtered view of the segmentation data; it's only your electoral customers. In the image below, you can see:

• There are 40 customers, responsible for nearly $1.5 million in revenue across the year.

• There are 7 at-risk customers.

The next step in your analysis is to use these filtered insights to take further action.

Take action

While the segmentation helps you understand different customer behaviours, it’s the follow-up actions that drive results.

The insights allow you to tailor business strategies to each segment, allowing you to:

• Make the most of your loyal and high-value customers; prioritize high-impact opportunities by focusing on the accounts that need the least effort but promise the biggest returns.

• Track purchase trends to see how often customers buy, when they last purchased, and how much they typically spend, then adjust your outreach to better match where each customer is in their journey. For example:

  • Support newer customers who show potential.

  • Reconnect with those who might be drifting away.

• Stay not just competitive but truly customer-centric; put your customers at the center of your sales strategy and build a business around what they really want and need.

Examples of actions you can take include:

• Personalized marketing: Tailor campaigns based on each customer segment. Send the right message, to the right customers at the right time.

• Customer retention: Identify at-risk customers and re-engage them to drive growth. Predict and prevent customer churn.

• Resource allocation: Focus efforts on high-value customer segments at scale.

• Product recommendations: Suggest products based on buying behavior patterns. Note: Phocas is actively working on enhancing this area - watch out for new functionality coming soon.

FAQs

Here are answers to some frequently asked questions about the Insights: Customer segmentation feature.

1. Is the segmentation always done on a 12-month basis? Can I update it for seasonal customer behavior? Currently, the segmentation is calculated across a-12 month period. In the future, we'll be introducing for flexibility in the segmentation setup, allowing you to choose a specific time period.

2. Can I add additional measures to the segmentation summary, such as margin percent? Not right now, but we're working on it!