The document discusses a customer value segmentation project for NA commercial customers. It aims to define value-based customer segments, understand marketing opportunities, and create a repeatable segmentation process. Seven customer segments were identified based on dimensions like margin, tenure, purchase behavior, and channel usage. The segments are highly differentiated and have clear strategic directions. Descriptions of each segment's characteristics are provided, including number of customers, average margin, spend potential, product purchases, channel usage, and purchase frequency. Charts show segmentation by employee size, industry, and annual migration rates between segments.

1. Customer Value Segmentation
NA Commercial Customers
WW Integrated Marketing Communication
Scott Berg – Director, WW Direct and Database Marketing
Victor Howard – Sr. Manager, WW Database Marketing

2. Project Objectives
 Develop clearly defined, value-based segments for NA
commercial customers
 Understand best opportunities for strategic marketing
investments
 Identify tactical marketing opportunities
 Create a repeatable and transferable process for other
Geos (dependent on data availability)

3. Project Foundation
 Segment Drivers
– Margin
 2 year rolling revenue
 2000 Group level gross margin
– Tenure
 Purchase behavior
 Quarterly retention/repurchase
 Segment Descriptors
– Margin
– Compaq Spend Potential
– Product Division Sell Through
– Channel Usage
– Key Products
– Employee Size
 Methodology
– Clustering
 K-Means clustering
 Nearest Neighbor scoring
– Data Transforms
 Natural Log - Margin
 Natural Log - Tenure
– Customer Focus
 NA Commercial Customers
 Transactions through Q1 2001

4. Results
 The Compaq commercial customer value segmentation scheme has
been successfully deployed.
 Seven segments have been identified, which are highly differentiated
on the key dimensions of margin and tenure.
 The segments are coded and identifiable on the database.
 Strategic direction can be set for each cluster.
 Actionable and measurable marketing opportunities.
 Clear value propositions - significant revenue and profit.

5. 5
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65,558
81,486
133,20526,352
40,763
29,099
71,966
0
0.5
1
1.5
2
2.5
3
3.5
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Transformed Margin Score
TransformedTenureScore
Crown Preserve
6.5% of Customer Base
$113,298 2-year margin
Blue Ribbon Goal
14.6% of Customer Base
$7,512 2-year margin
Reactivate Direct - 9.1%
Motivate
Capitalize Growth
18.2% of Customer Base
$1,078 2-year margin
Maximize Growth
29.7% of Customer Base
$206 2-year margin
Motivate Margin
16.0% of Customer Base
$40 2-year margin
Motivate Minnows
5.9% of Customer Base
$6 2-year margin
Reactivate Direct
9.1% of Customer Base
$1,827 2-year margin
448,429 Total Customers for 2 years
$8,887 2-year average margin
Cluster Map

6. Cluster Characteristics
# of Customers  29,099 (6.5%)
Average 2-year Margin  $113,398
Compaq Spend Potential  Comprise 90% of “At Potential” customers
Product Division Sell Through  95% purchased in more than one unique division during
1999 and 2000
 40% purchased in 4 or 5 unique divisions during 1999 and
2000
Employee Size  57% of customers with a known employee range have
greater than 100 employees
Channel Usage  73% purchased from more than one reseller
Key Products  95% purchased an industry standard server
 Generated 85% of total industry standard server margin
Purchase Frequency  During each quarter of 1999 and 2000, at least 53% of
customers made a purchase.
Crown Preserve

7. Cluster Characteristics
# of Customers  65,558 (14.6%)
Average 2-year Margin  $7,512
Compaq Spend Potential  Comprise 40% of “Growth” customers
Product Division Sell Through  70% purchased in 2 to 4 unique divisions during 1999 and
2000
Employee Size  57% of customers with a known employee range have 16 to
199 employees
Channel Usage  45% purchased from more than one reseller
Key Products  83% purchased an industry standard server
Purchase Frequency  During each quarter of 1999 and 2000, at least 30% of
customers made a purchase
Blue Ribbon Goal

8. Cluster Characteristics
# of Customers  81,486 (18.2%)
Average 2-year Margin  $1,078
Compaq Spend Potential  Comprise 28% of “Growth” customers
Product Division Sell Through  60% purchased in more than one unique division during
1999 and 2000
Employee Size  75% purchased from one reseller
Channel Usage  54% of customers with a known employee range have 10 to
99 employees
Key Products  50% purchased an industry standard server
Purchase Frequency  Percent of customers purchasing per quarter increased
from 13% in Q1 1999 to a steady 25% in Q2 through Q4
2000
Capitalize Growth

9. Cluster Characteristics
# of Customers  133,205 (29.7%)
Average 2-year Margin  $206
Compaq Spend Potential  Comprise 30% of “Develop” customers
Product Division Sell Through  72% purchased in one unique division in 1999 and 2000
 22% purchased in two unique divisions in 1999 and 2000
Employee Size  63% of customers with a known employee range have less
than 31 employees
Channel Usage  91% purchased from one reseller
 Comprise 40% of agent direct channel customers and 26%
of all direct channel customers
Key Products  48% purchased a PC Desktop
–Generated 33% of total PC Desktop margin
Purchase Frequency  Percent of customers purchasing per quarter decreased
from approximately 15% in 1999 to 10% in 2000
Maximize Growth

10. Cluster Characteristics
# of Customers  71,966 (16%)
Average 2-year Margin  $40
Compaq Spend Potential  99% of customers are in the “Develop” level
–11% of “Develop” customers
Product Division Sell Through  93% purchased in one unique division in 1999 and 2000
Employee Size  63% have a known employee range have less than 31
employees
Channel Usage  92% purchased from one reseller
Key Products  25% of their total margin is from purchases of displays and
peripherals
Purchase Frequency  During each quarter of 1999 and 2000, 10-15% of
customers made a purchase
Motivate Margin

11. Cluster Characteristics
# of Customers  26,352 (5.9%)
Average 2-year Margin  $6
Compaq Spend Potential  100% are in the “Develop” level, comprising 8% of
“Develop” customers
Product Division Sell Through  99% purchased in one unique division during 1999 and
2000
Employee Size  61% of customers with a known employee range have less
than 31 employees
Channel Usage  96% purchased from one reseller
Key Products  39% of customers purchased Internet Products and
Services
–20% of all commercial Internet Products and Services
customers
Purchase Frequency  Percent of customers purchasing per quarter increased
from 7% in Q1 1999 to 23% in Q4 2000
Motivate Minnows

12. Cluster Characteristics
# of Customers  40,763 (9.1%)
Average 2-year Margin  $1,827 (1999 only)
Compaq Spend Potential  Not applicable
Product Division Sell
Through
 Not applicable
Employee Size  66% of customers with a known employee range have 5 to
99 employees
Channel Usage  84% purchased from one reseller
 10% purchased through a direct channel
–16% of total direct channel customers
Key Products  65% purchased an industry standard server
Purchase Frequency  No customers purchased in 2000
Reactivate Direct

13. Segment by Employee Size
Segment by Employee Size
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 - Crown
Preserve
2 - Blue
Ribbon Goal
3 - Capitalize
Growth
4 - Maximize
Growth
5 - Motivate
Margin
6 - Motivate
Minnows
7 - Reactivate
Direct
Segment
%ofCustomersinSegment
1000+
500 - 999
250 - 499
100 - 249
50 - 99
20 - 49
01 - 19
b
 Higher value customers tend to have larger employee sizes.

14. Segment by Industry
0% 20% 40% 60% 80% 100%
1 - Crown Preserve
2 - Blue Ribbon Goal
3 - Capitalize Growth
4 - Maximize Growth
5 - Motivate Margin
6 - Motivate Minnows
7 - Reactivate Direct
Manufacturing Business Services Engineering, Acct, Research, Consulting
Wholesale Trade Financial Services Retail Trade
Public Sector Health Services Education/K-12
Social Services, Memberships, Galleries Insurance Communications
Other
 No significant differentiation in industry.

15. Annual Cluster Migration Rates
Segment
Retention in
Cluster Migration Up
Migration
Down Attrition
Crown Preserve 65% NA 29% 6%
Blue Ribbon Goal 47% 7% 30% 16%
Capitalize Growth 29% 9% 50% 12%
Maximize Growth 44% 8% 2% 46%
Motivate Margin 59% 5% 1% 35%
Motivate Minnows 61% 7% 0% 32%
Reactivate Direct 0% 9% 0% 91%
 High annual downward migration
 Very high attrition in mid/lower value segments.