What is customer segmentation and why is it necessary?

Customer segmentation is the distribution of your customer base into groups (segments) based on shared characteristics or behaviors. It allows for personalized approaches to each segment, increasing the effectiveness of communications. One of the most important aspects for building marketing in a company is segmentation by the customer lifecycle, which helps identify at which stage of interaction with your company the customer is, and how to best work with them to enhance loyalty and achieve repeat sales.

Customer lifecycle is the path that a customer takes in your company from the first inquiry/need to the end of cooperation (sooner or later). The longer this path (the number of repeat sales, interactions, communications), the greater the potential for business growth.

In this article, we will explore how to set up automatic customer segmentation in CRM Creatio, focusing on the customer lifecycle. We will describe the logic of the business process for each segment defined in the company: Leads, New, Active, Active-Churn, Churn, Dormant, Lost, and explain how these processes help automate customer interactions.

Key segments of the customer lifecycle and their characteristics

1. LEADS (Potential customer)

LEADS are new potential customers who have shown interest in a product or service but have not yet made a purchase. From this category, a customer can either move to NEW or to LOST.

2. NEW, ACTIVE, ONETIME

NEW are customers who have made their first purchase and the time that has passed is not equal to the average purchase cycle in your business (let’s define it as X).

ACTIVE – customers who regularly interact with the company, make purchases, or use services. For our area of activity, we have defined this as customers with 2+ deals at the Successful stage. For your business, you need to define this criterion yourself.

ONETIME – customers who have made one purchase, and the time of the average purchase cycle in your business X has already passed (i.e., the customer has not returned for repeat purchases according to average statistical indicators).

3. CHURN, ACTIVE-CHURN, DORMANT

CHURN – customers who are considered essentially lost, but with whom it is still possible to work, and some can be brought back. In our case, it was determined that for such a customer, more than 2X average sales cycles have passed since the last purchase, but less than 4X average sales cycles (for example, if the sales cycle = 30 days, then the condition would look like “more than 60 days, but less than 120 days”, and they were previously an active buyer, meaning they had 2+ purchases.

ACTIVE-CHURN – clients who show signs of losing interest or decreasing activity in their interactions with us, whom we may lose. If a client has 2+ successful deals, but more than X average sales cycles have passed since the last purchase, and less than 2X average sales cycles (for example, if the sales cycle = 30 days, then the condition would look like “more than 30 days, but less than 60 days”, they are at a stage where the client is almost lost.

DORMANT – clients who have not interacted with the company for a very long time. Typically, these are clients whose last purchase was more than 4X average sales cycles from the closing of the last successful deal, while such a client was previously active, with the number of successful deals equal to 2+.

4. LOST (Lost Client)

LOST – clients who have contacted our company but have not made any purchases and have completely lost interest in our company’s product or service, and have ceased all interactions with us. A client becomes LOST after the LEADS segment.

Automation of Segmentation in Creatio

To set up similar automatic client segmentation in CRM, you first need to determine your average client lifecycle (X).

In our case, we calculated it as follows:

• count the number of days from the creation of the deal (in your case, it may be the lead creation date or order date) to its transition to realization (production, delivery, choose the correct option for your business) for each sale in CRM;
• sum the values in days obtained from all sales (deals);
• we calculate the arithmetic mean (the obtained sum is divided by the number of sales/deals);
• we round to the nearest whole number for simplicity of calculations and interpretation. If you have a very short sales cycle (for example, in hours rather than days), then rounding is not necessary).

Fig. 1. Business process for calculating the average sales cycle X in Creatio

If your business has different sales directions (or products and services) operating simultaneously, we recommend calculating your own indicator X for each direction, and making all subsequent calculations separately. 

Segmentation Conditions

In the table below, we specify the segments and the conditions under which a client will belong to the corresponding segment, where X is the calculated average customer lifecycle.

According to this table, we will configure the business process, the logic of which is as follows:

• we calculate the lifecycle of a specific client (we can denote it as Y);
• we compare Y with our overall X and the conditions from the table – we assign the corresponding client segment.

Attention! The order of determining segments may matter.

First, we define LEADS and LOST. Then sequentially from NEW to DORMANT in order of increasing complexity of conditions and logic of the customer lifecycle.

Calculating Segments (Examples)

1. Lost (Lost Customer)

Fig. 2. Part of the business process in CRM Creatio for determining the LOST segment

Logic of the LOST segmentation business process:

• We configure the business process so that the system reads the counterparty’s data and analyzes the time since the last interaction of the client with us (for example, no purchases or support requests for a certain period). If the time exceeds the value we defined as X, then the system moves the client to the LOST segment.

Step-by-step flowchart (fig. 2):

• We read the previously calculated X (average client cycle).
• Then we read the Sales data for the counterparty (fully completed)
• We read the number of Sales for the counterparty (at the Implementation/Secondary payment stages, which essentially occurred as sales)
• We read the number of sales that are at a stage less than Implementation (potential)
• We search for the counterparty’s sales history records 
• If all sales options (successful, implementations, potential) equal 0, then the client falls into the LOST segment.

2. Leads (Potential Customer)

Fig. 3. Part of the business process in CRM Creatio for determining the LEADS segment

Logic of the LEADS segmentation business process:

The logic of the Leads segment is the same as LOST. We read Sales data by the Id of each counterparty; if they meet the conditions of Deals at a stage less than Realization/Secondary payment (potential deals), which we specified in the table by segments, then the client falls into the LEADS segment.

3. NEW, ACTIVE, CHURN

Fig. 4. Part of the business process in CRM Creatio for determining the segments NEW, ACTIVE, CHURN

Logic of the NEW, ACTIVE, CHURN segmentation business process:

• Read the data of the last successful deal
• Calculate the interval from the last successful deal to today
• If the read data falls under the conditions of the segment NEW, the system segments it into NEW
• If the read data falls under the conditions of the segment ACTIVE, the system segments it into ACTIVE
• If the read data falls under the conditions of the segment CHURN, the system segments it into CHURN

4. DORMANT, ACTIVE-CHURN, ONETIME

Fig. 5. Part of the business process in CRM Creatio for determining segments ONETIME, ACTIVE-CHURN, DORMANT

Logic of the business process for segmenting ONETIME, ACTIVE->CHURN, DORMANT:

• Read the data of the last successful deal 
• Calculate the interval from the last successful deal to today 
• If the read conditions match the conditions of our table for ONETIME, the client falls into the ONETIME segment
• If the read conditions match the conditions of our table for ACTIVE-CHURN, the client falls into the ACTIVE-CHURN segment
• If the read conditions match the conditions of our table for DORMANT, the client falls into the DORMANT segment

How to collect segmentation data and use it for customer loyalty retention

After setting up business processes to determine segments, you need to define the optimal frequency of process launches that will allow you to flexibly use marketing tools. This frequency depends on both the specifics of your business and the obtained X, the frequency of marketing activities, and many other criteria depending on the specifics of the business. In our case, the system launches the process of calculating the current X every Monday and redistributes clients across segments. At the same time, we keep the segmentation histories for each Monday when the calculation was made to build graphs over time. 

Fig. 6. Example of data visualization in CRM Creatio for customer segmentation

It is important to regularly analyze them and use them to build personalized campaigns. 

This can include automating trigger messages or loyalty programs that help increase customer retention and maintain their interest in your company.

Solutions for working with clients in segments LOST, DORMANT, CHURN, ONETIME, ACTIVE, NEW, LEADS

Reactivation for inactive clients (LOST, DORMANT, CHURN, ONETIME).
These tactics are best employed during periods when clients have missed purchases.

What this can include:

• Sending special offers.
• Reminders about brand benefits (“Why us?”).
• Informing about new products.

Engaging active customers (ACTIVE)
It is worth reminding them of your presence throughout the year.

What this could be:

• A gesture of gratitude (for example, through cards or messages).
• Encouragement with gifts, special offers, or bonuses.

Greetings for all customers on their birthdays and anniversaries of cooperation.

What this could be:

• Providing discounts or gifts.
• Personalized greetings.

Welcome letter for new customers (NEW).
Send after the first purchase.

What this could be:

• Thanking them for choosing the brand.
• Reinforcing the company’s image.
• Offering a discount on the second purchase.

Offers for potential customers who have not yet made purchases (LEADS)
Engage immediately after registration or periodically.

What this could be:

• Offer for the first purchase.
• Information about the brand’s value and advantages.
• Demonstration of value through examples or testimonials.

Conclusion

Automating customer segmentation by lifecycle in CRM Creatio allows for the most efficient organization of work with the customer base, providing a personalized approach to each segment at different stages of their interaction with the company. Through precise segmentation (for example, NEW, ACTIVE, CHURN, DORMANT), the company can adapt communication and marketing activities to the specific needs of each segment.

This approach allows for the implementation of personalized strategies aimed at increasing loyalty, repeat sales, customer retention, and encouraging their return to active cooperation with the company. Thanks to automation, you not only save time but also reduce the likelihood of human errors, enabling you to execute complex advertising campaigns faster and with greater accuracy. This, in turn, increases sales conversion, positively impacting long-term relationships with customers and the company’s financial performance.