How defining customer segments can help you maximize revenues

March 28, 2014

By Conor McAleavey,

Co-founder of ZinMobi

The traditional view on customer segmentation was always very simple — there were new customers, existing customers and lapsed customers. The thinking never really went any deeper than that and there was certainly not much thinking in terms of how a particular customer migrated from one customer type to another or how this migration could be manipulated in order to maximize the profits that could be reaped from each customer type.

Part of this was perhaps a lack of knowhow but for the most part it was probably due to a lack of resources. However, with the easily accessible technology that is available these days there is now of course no excuse, and every restaurant owner or marketer needs to be constantly thinking about customer segmentation and marketing automation in the most sophisticated way possible.

What follows is a basic outline of how you need to start thinking about customer segmentation, both in terms of how customers move from one segment to another as well as what you should be doing to achieve the maximum return from this new knowledge with the use of marketing automation software.

What defines a Customer Segment?

Before beginning any analysis we must first of all break down what it actually means to be an existing, lapsed or new customer.

The time which has elapsed since the last purchase is what defines lapsed versus existing and that coupled with total number of purchases is what defines new versus existing:



To get to the next level of sophistication you must think about 'lapsed customers' in a slightly more in-depth way as well as trying to understand how customers migrate between the different segments. There are in fact two types of lapsed customers — lapsed customers who never spent much money with you (low value) and lapsed customers who previously had spent a lot of money with you (high value).

How should you market to each of the customer segments?

High Value Existing Customers

Who are these customers?

  • Parents in large families who reward their kids every week with pizza (for example) night.
  • Sports fans who watch a lot of games together and love eating pizza while doing so.
  • Students who don't cook very often.
  • Anyone that just simply loves pizza.

What is my goal with these customers?

This segment can account for up to 70 percent of your entire yearly turnover and therefore should be treated as if they are the lifeblood and future of your business (which they are). It is widely accepted that it is between seven and eight times easier to keep an existing customer as it is to acquire a new one. What is also probably true is that it's up to 10 times more important to keep these high value existing customers than it is to obtain a new customer.

The goal here is to keep these customers as happy as you can for as long as you can. Reward them, appreciate them and above all identify as early as possible when they start to show signs of defection. You must also identify when they start to move east from Segment 1 to Segment 2 and intervene before it's too late.

How can marketing automation help me achieve my goals with this customer segment?

  • By rewarding them with coupons for free product based on trigger points around their total spend or purchase frequency. (e.g. every 5th purchase they get a half price coupon for their next visit)
  • By automatically sending them coupons for free product whenever they break their purchase patterns. (e.g. go 6 weeks without a purchase)
  • By setting up automatic feedback requests that are sent to the customers when they do not redeem their free coupons.

High Value Lapsed Customers

Who are these customers?

  • People who moved out of the area and now eat their pizza somewhere else.
  • People who changed their life style to just an extent that they stopped eating pizza (for example).
  • People who defected to another pizzeria or chain.

What is my goal with these customers?

This customer type which resides in Segment 4 above are customers who used to spend a lot of money with you but at some point stopped. There are several reasons why this could have happened, some of which you can't do anything about (e.g. they moved out of your business locality) and some of which you can, such as they had a bad experience or they were never shown any appreciation for their business. You want them moving west from Segment 2 back to Segment 1.

How can marketing automation help me achieve my goals with this customer segment?

  • By sending them infrequent but high value coupons in an effort to win them back.
  • By sending them feedback requests which can allow you to understand why they defected and help you reduce your future defection rate.

New Customers

Who are these customers?

  • People who have just moved into your business locality.
  • People who have started to try pizza.
  • People who have defected from another pizza chain due to a bad experience or just to sample a different brand of pizza.

What is my goal with these customers?

The goal in how you treat and react to new customers should always be in terms of how you can turn them into high value existing customers. You want them moving north from Segment 3 to Segment 1.

For the most part you only get one chance with new customers. Everything you do or don't do could be the difference between never seeing them again and them spending money with you every week for the next year or even longer.

Many business owners tend to spend a huge amount of money getting a new customer to cross their threshold but then are unwilling to spend a small bit more wowing them during and after their first visit in order to turn them into returning customers.

How can marketing automation help me achieve my goals with this customer segment?

  • By sending them an automated coupon for a free pizza on their next visit.
  • By triggering them a feedback request the day after their first visit so that you can act on that feedback if it was not satisfactory.
  • By simply sending them an automated 'Thank You' message in a genuine manner and saying you look forward to them returning.

Low Value Lapsed Customers

Who are these customers?

  • People who simply did not like your product or had a bad experience.
  • People who made a purchase from you when they were in your business locality for a small period of time. (e.g. staying in a friend's house or a business person passing through)

What is my goal with these customers?

This is the customer segment you should care about the least and spend the minimum of resources on. They were never high value customers to begin with and the vast majority of them never will be. The goal here should be to identify those that you have a chance with (those who do live or work within your business locality but had a bad experience) from those that you don't (those that purchased while passing through). From there you should market to this segment on a very infrequent basis with large value offers and coupons. You want them moving west from Segment 4 back to Segment 3 and hopefully eventually to Segment 1.

How can marketing automation help me achieve my goals with this customer segment?

  • By automating very infrequent high value offers to his segment which they will either take up or opt out of further marketing messages and coupons.


The usability of modern technology has improved to such an extent that almost anyone can now market to different customer segments in a sophisticated manner with only the very minimum level of understanding, set-up and training. This opens up a whole new level of revenue that can now be generated from existing customers which before now was well beyond the average restaurant owner.

Conor McAleavey is the co-founder of ZinMobi, which develops intelligent mobile messaging and coupon management systems for pizza and QSR chains. 

Topics: Customer Service / Experience, Marketing / Branding / Promotion, POS

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