Use customer segmentation

Learn about the key elements of the Insights: Customer segmentation user interface (UI).

User permission: Insights

Your data access might impact the segmentation results you see. For example, if you're restricted from accessing some customers, they won't be included in the 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: Search for a customer, resegment or filter customers, or download the data. 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 correspond 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, including the dimension that was used in the segmentation calculation.

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.

Learn more about RFM

The Customer Segmentation feature uses the Recency, Frequency, and Monetary (RFM) model to group your customers into meaningful segments and provide instant insights into customer behavior across their purchasing journey.

Additional resources on our website:

• Read this blog to learn more about the RFM model and how it can transform your sales approach: Customer segmentation for wholesalers that your customers will appreciate

• Read this guide to learn how you can maximize the potential of your data: Smarter selling starts with segmentation

The RFM model is an industry-standard analysis technique. It’s often used to manage customer accounts. As its name suggests, this model uses three key metrics to assess and rank customer behavior, as described in the table.

Metric	Definition	Why it's important
Recency	How recently did the customer make a purchase?​Higher threshold = more recent	Customers who purchased more recently are more likely to buy again, compared to those who haven’t purchased in a while. They're also more likely to reactive positively to marketing campaigns and promotions.
Frequency	How often does the customer make a purchase over the time period?​Higher threshold = more recent	Frequent buyers are generally more engaged and satisfied, therefore, more loyal and valuable to the business.
Monetary	How much did the customer spend over the time period (total spend)?​Higher threshold = more recent	Customers who spend more are typically more profitable and worth nurturing. Combining monetary value with how recently and often a customer buys can help identify loyal, high-value customers.

How Phocas applies the RFM model

Phocas analyses the data in the selected database within the specified time period (the default is the last 12 months). It scores the customers on each of the three RFM metrics, on a scale from 1 to 5, where:

• 5 = highest recency, frequency, or monetary value.

• 1 = lowest recency, frequency, or monetary value.

It combines these scores into an overall RFM score from which it builds a model of your customers’ behavior, presented in a chart format.

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, then use these insights to take further action.

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.

If your administrator linked the database to a customer scorecard (dashboard) during setup, you can click a customer in the segmentation summary table to open their scorecard. This allows you to view detailed information for that customer, explore related insights, and drill down deeper into the data.

Find a customer

Use the search box in the configuration bar to quickly find and select a customer by name. The search supports partial matches within company names, so you don’t need to enter the full name.

As you type, a dropdown appears with up to ten matching suggestions, helping you identify and select the right customer in fewer steps. Click a customer in the list to open its detailed view in the relevant segment.

Filter customers

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.

When you apply a filter, Phocas doesn't recalculate the segmentation. Instead, it removes the filtered customers from the segmentation chart, while the remaining customers stay in their original segments. As a result, the counts in each segment reduce to reflect only the visible customers.

1. Click the Filter button in the configuration bar.

2. Select the required dimension from the list, for example, Customer Type.

3. Select the required dimension entities, for example, only the Retail customers.

4. Click Apply. The segmentation chart updates to reflect your applied filter. A filter chip appears in the configuration bar to show the dimension and number of entities used for the filter.

5. Repeat the above steps to apply multiple filters to further refine the data.

For example, suppose you're analyzing your customer segmentation chart and are interested in a particular customer type, Retail. You can filter on the Customer Type dimension, selecting the Retail entity. The chart updates to give you a filtered view of the segmentation data; it's only your retail customers. You can then take your analysis another step further by applying another dimension filter, such as Country > UK. As a result, you can see in the example below that there are:

• 89 customers retail customers in the UK, responsible for over $3.6 million in sales across the year.

• 9 at-risk customers.

Resegment customers

The customer segmentation is automatically calculated for you using the dimension specified in the database configuration. You can resegment customers using a different dimension to focus on a specific part of your business, such as a product, region, or branch. This helps you understand how customer behavior and classifications vary across different areas.

When you resegment, Phocas first applies the selected filter to narrow the customer set, then recalculates the segmentation using only the filtered data. This means the segment classifications are updated based on the smaller data set, so the number and composition of customers in each segment might change.

1. Click the Resegment button in the configuration bar.

2. Select the required dimension from the list, for example, Country.

3. Select the required dimension entities, for example, only the US.

4. Click Apply. The segmentation is recalculated and the chart updates to reflect your selections. A filter chip appears in the configuration bar to show the dimension and number of entities used for the resegmentation.

In the example below, you start off with 370 champions in the overall segmentation. When you resegment by Country > US, Phocas recalculates the segmentation using only US sales transactions. This changes the totals and customer classifications. As a result:

• The number of Champions becomes 99.

• A customer with 100% sales in the US will remain in their original segment, such as Champion.

• A customer who was originally a Champion but has only 20% of their sales in the US and 80% in the UK might now move to a different segment, for example, from Champion to Loyalist.

Export the data

You can export data as a CSV (Comma Separated Value) file for use elsewhere.

Click the Export button in the Configuration bar (next to the filter button), then download and open the file.

Exporting customer segmentation data as a CSV file

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.

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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!