Anyone selling goods to retailers knows not all retail customers are created equal. The discipline of segmenting the customers of a business is critical in understanding where to prioritize business-building resources.
Consumer goods companies, especially in the FMCG sector, navigate a complex landscape of sales channels. From traditional grocery stores to online platforms, drug stores to mass merchandisers, each retail account represents a unique opportunity. While there is much written about consumer segmentation, customer (or account) segmentation is equally important.
But first, let’s clarify. The CUSTOMERS (AKA ACCOUNTS) of a consumer goods brand/company are the retail (including e-commerce), wholesale and distributor accounts who purchase goods to sell to their shoppers.
CONSUMERS of a brand are the shoppers who purchase these goods for their use.
Account segmentation is the strategic process of categorizing retail customers into distinct groups based on specific, meaningful criteria. There are layers of characteristics that make each account unique and enable us to categorize them based on their importance to our brand.
Why Account Segmentation Matters
Strategic account segmentation is not just a theoretical exercise—it's a powerful tool for managing profitable revenue growth. By identifying distinct customer groups with specific needs and preferences, companies can:
Develop targeted marketing strategies
Optimize product development
Create tailored promotions
Maximize sales potential
Enhance customer loyalty
Allocate resources, including trade spend, more efficiently
Successful account segmentation requires a comprehensive approach, incorporating multiple data points. Some common categories of data to collect on your customer base include:
Leverage comprehensive data sources like Circana, Spins, and Nielsen IQ, to gain granular insights into purchasing patterns. The syndicated point of sale data provided by these companies allow brands to evaluate:
Sales volume and growth
Competitors
Distribution
Pricing
Promotions
And when incorporated with household panel data (from these same companies), CPGs can also:
Identify high-value customer segments
Understand actual buying behaviors including switching
Uncover market basket companions
Discover market trends
Develop nuanced marketing strategies based on proven purchasing data
There are characteristics of accounts that help us understand if an account aligns with our brand goals. These include:
Shopper demographics
Store type and channel
Geographic location
Company size
Store count
Strategic positioning
Historical store growth and future plans
It is important to have a clear view of how committed the account is to the categorie(s) in which we compete, as well as how successful they are in competing with other accounts in their area. To that end we want to understand the account’s:
Market share
Number of SKUs and how that compares to other customers
Category share of competitive market
Competitive positioning
Category development indices
Promotional strategies, how well is the category supported and are we getting our fair share?
A full review of the relationship we have with each customer is important, as well as an understanding of their value to our business. We will want to know:
Fill rates
Service level performance
Cost-to-serve analysis
Margin requirements
Historical compliance data
Relationship tenure
An account segmentation should also take into account the qualitative information you can gather from your front line sales team. How does the account feel about our company? Are they excited when we bring them new innovation? Do they prefer our competitors? What is their view of our long-term strategy? Is our relationship mulit-threaded?
We often look at accounts by channel, or by geographical location. However, effective account segmentation transcends simple categorization. It requires a sophisticated, layered approach that combines multiple dimensions and critically evaluates the alignment between a brand's consumer profile and the account's shopper base.
The most sophisticated segmentation strategies recognize that not all accounts are equally valuable to a specific brand. The key is understanding the match between:
Your brand's core consumer demographics
The shopper demographics of each retail account
Purchasing behaviors
Lifestyle preferences
Price sensitivity
Product interaction patterns
A simplistic example of this would be a premium organic snack brand finding more strategic value in accounts with:
Health-conscious shoppers
Higher-income demographics
Stores emphasizing fresh and natural product offerings
Willingness to pay premium prices
Conversely, the same brand might deprioritize accounts dominated by price-sensitive shoppers or those with limited interest in premium, health-focused products.
Successful account segmentation combines multiple strategic lenses:
Value-Based Considerations
Revenue potential
Strategic importance
Growth trajectory
Margin contribution
Long-term partnership potential
Operational Compatibility
Supply chain efficiency
Merchandising compliance
Technology integration capabilities
Order and service complexity
Historical performance metrics
Competitive Landscape
Market share dynamics
Category development indices
Competitive positioning
Innovation adoption rates
Promotional effectiveness
Shopper Mission and Demographics
Primary shopper profiles
Purchase occasion types
Basket composition
Lifestyle segments
Geographic nuances
Once you have classified accounts, it is important to regularly evaluate your classifications for:
Changing market conditions
Evolving brand strategy
Emerging consumer trends
Competitive movements
Here is a hypothetical account segmentation and how the approach to account management might differ:
Tier 1 - Strategic Growth Partners - High Growth, National (or nearly national) Footprint, High Volume, medium to strong consumer segment match. Walmart typically falls into this category for a lot of brands that are purchased frequently in middle income households and/or are regularly purchased staples. These strategically important accounts will have a high level of effort placed against them. They will collaborate in joint business planning, share data, develop co-marketing strategies and partner in category management and shelf space planning.
Important, Smaller Customers (Tier 2) - Medium to smaller size accounts that have a very strong consumer/shopper alignment and have designated our category as strategically important to their stores. These accounts may not get the level of resources as a Tier 1, but they may be accounts where collaboration is more productive, co-marketing is more affordable and growth likely outpaces the Tier 1s.
Tier 3 - High volume accounts with average consumer fit, no to negative growth. Servicing these accounts will involve managing assortment and providing a minimal trade program to keep velocity up to enable our strongest SKUs to remain in distribution.
Tier 4 - All other, smaller accounts without outstanding characteristics in any of the above categories. Minimizing volume losses and maximizing profit as much as possible may be the goal in these accounts.
Trade strategy will vary significantly across account tiers (within the confines of Robinson-Patman Act - you can find an overview of laws to be aware of here). Each account segment demands a tailored approach that aligns with its unique characteristics, shopper base, and strategic importance.
Segment-Specific Trade Spend Strategies
For top-tier strategic partners like Walmart, trade spend management becomes a comprehensive, collaborative investment strategy. These accounts receive the highest percentage of overall trade budget, characterized by complex, multi-dimensional promotional programs that go far beyond traditional marketing approaches. The focus is on creating long-term strategic initiatives with joint business planning at the core. Trade spend in these accounts involves intricate, performance-based incentive structures that align the manufacturer's goals with the retailer's objectives.
Manufacturers will develop integrated omnichannel promotion support that spans digital and physical retail spaces, including advanced data-sharing initiatives and customized merchandising programs. These partnerships often include collaborative innovation funding, where trade spend is not just about immediate sales but about co-creating future market opportunities. Performance-linked promotional allowances ensure that every dollar spent is measured, analyzed, and optimized for maximum impact.
Tier 2 customers may require a different approach to trade spend management. These accounts demand strategies that are deeply rooted in local market dynamics. Trade spend becomes a nuanced tool for creating regionally optimized promotional calendars that reflect unique local preferences and shopping behaviors. The approach is far more flexible and adaptable compared to national strategies, with a strong emphasis on category development specific to the regional market.
For instance, a trade spend strategy for H-E-B might include promotions aligned with local cultural events, targeted seasonal campaigns that resonate with Texas consumers, and localized product innovation support. The trade spend becomes a strategic lever for understanding and penetrating specific regional markets, with promotions that reflect local taste preferences, shopping patterns, and cultural nuances.
Trade promotions may be the only, or one of just a few, levers used in this tier. This would not be a group jumping in to try every innovation we offer, distribution may be limited to our core, most popular items. Account management will focus on getting the promotional calendar correct and ensuring the right quantities of product are delivered to feed those events. Trade strategy could be efficiency-driven trade spend that minimizes complexity while maximizing potential sales volume. Manufacturers develop standardized merchandising solutions that can be quickly implemented across multiple stores, focusing on creating compelling price points and bundle offers that drive consumer choice.
These accounts will be milked, with just enough trade support to keep the product on the shelf. These accounts, typically served through distributors, receive minimal direct investment. Trade spend becomes a standardized, low-touch engagement with basic promotional materials, standard pricing support, and highly scalable, cost-effective solutions.
How can my trade promotion management software help me segment accounts?
A good trade promotion management solution will help you get a jump start on account segmentation, IF that solution is built on a solid foundation of harmonized, granular data. This will provide much of the quantitative information you need in terms of size of customer, growth, profitability, range of distribution, trade spend strategy, etc., thus saving weeks of compilation time. Solutions like CPGvision are consistently expanding into capabilities
Account segmentation is not a destination but a continuous journey. Regular reassessment—typically quarterly or semi-annually—ensures your strategy remains aligned with:
Market dynamics
Consumer behavior shifts
Competitive landscape changes
Your brand's evolving strategic priorities
Emerging technologies like AI and machine learning are revolutionizing account segmentation, enabling:
More precise customer insights
Dynamic, real-time segmentation
Predictive performance modeling
Hyper-personalized engagement strategies
In our above process currently, we may pull all the datapoints, index each account relative to the average on each metric and start bucketing them based on these indices. This process would likely take many weeks of manhours, depending on the size of the business, number of brands and how fragmented the customer base is. This data exercise, once compiled, becomes complicated when some of the indices contradict each other and in these cases judgement calls are made. In the future, the data will be culled by AI, indexed and bucketed very quickly for human review and approval. Our involvement will be focused on interpreting the data, the compiling and indexing will be done for us, halleluja!
Account segmentation is more than a marketing exercise—it's a strategic imperative for consumer goods companies. By developing a sophisticated, data-driven approach that recognizes the unique characteristics of each retail account, brands can:
Optimize resource allocation
Drive more effective trade spend
Build stronger retail partnerships
Provide a stronger, more individualized experience for their consumers
Accelerate revenue growth
Luckily, the CPGvision revenue growth management platform provides granular, harmonized data that provides a foundation for account segmentation analytics. A single platform that manages trade spend strategy, plans and budgets, analytics, forecasting, deductions, and revenue growth management, CPGvision is a great starting point for account segmentation analytics.