Editing Market segmentation (section)

== Use in customer retention ==
{{see also|Relationship marketing}}

The basic approach to retention-based segmentation is that a company tags each of its active customers on four axes:

; Risk of customer cancellation of company service
: One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry, this could be signaled through a customer's decline in spending on his or her card.
; Risk of customer switching to a competitor
: Many times customers move purchase preferences to a competitor brand. This may happen for many reasons those of which can be more difficult to measure. It is many times beneficial for the former company to gain meaningful insights, through data analysis, as to why this change of preference has occurred. Such insights can lead to effective strategies for winning back the customer or on how not to lose the target customer in the first place.
; Customer retention worthiness
: This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer and includes evaluation of [[Customer lifecycle management|customer lifecycles]].<ref>Gupta, Sunil. Lehmann, Donald R. Managing Customers as Investments: The Strategic Value of Customers in the Long Run, pp. 70–77 (“Customer Retention” section). Upper Saddle River, NJ: Pearson Education/Wharton School Publishing, 2005. {{ISBN|0-13-142895-0}}</ref><ref>Goldstein, Doug. [http://mindofmarketing.net/2012/05/what-is-customer-segmentation/ “What is Customer Segmentation?”] MindofMarketing.net, May 2007. New York, NY.</ref>

This analysis of customer lifecycles is usually included in the [[Growth planning|growth plan]] of a business to determine which tactics to implement to retain or let go of customers.<ref>{{cite journal |last1=Hunt |first1=Shelby |last2=Arnett |first2=Dennis |date=16 June 2004 |title=Market Segmentation Strategy, Competitive Advantage, and Public Policy |journal=Australasian Marketing Journal |volume=12 |issue=1 |pages=1–25 |citeseerx=10.1.1.199.3118 }}</ref> Tactics commonly used range from providing special customer discounts to sending customers communications that reinforce the value proposition of the given service.