On Tuesday, I took a look at the Apostle Model, which segments customers by their ratings to two survey questions: overall satisfaction and likelihood to repurchase. Today I look at another approach to segmenting customers in a meaningful way that was presented in “The Mismanagement of Customer Loyalty” (Werner Reinartz, V. Kumar, Harvard Business Review July 2002).
In this article, Reinartz and Kumar outline their research and their approach to looking at customers segmented by profitability and loyalty; this is an important exercise to help you understand which customers to wine-and-dine and which to “ignore.” I won’t regurgitate the article here, but if you get a moment, read it to get the background on how they came to these segments.
Similar to the Apostle Model, this Loyalty-Profitability Model is depicted in a quadrant chart that segments customers four ways. The chart below shows the segments and the appropriate actions to be taken for each one, according to Reinartz and Kumar.