Luxury Institute CEO Issues Ten Recommendations for Successful Customer Segmentation and Clienteling at Luxury Client Experience Board Meeting

NEW YORK, NY--(Marketwired - July 05, 2016) - At the most recent quarterly meeting of the Luxury Client Experience Board (LCEB) in New York, a membership association founded between Luxury Institute and The Ritz-Carlton, executives from top retailers, agencies, and major luxury brands met to assess the benefits, challenges and opportunities presented by segmentation and clienteling to improve sales performance. Attendees agreed strongly that brands can benefit from segmentation, which they defined as the grouping together of current and potential customers who share similar attributes, with the aim of matching products and offers to that particular segment. The majority of executives in attendance confirmed that they struggle with the successful implementation of segmentation as they navigate through irrelevant and clustered data, 25% of which is dirty. Segmentation programs fail to realize their potential because companies struggle with successful adoption and implementation, often drowning in irrelevant and clustered data that fails to provide actionable information to drive sales.

"Segmentation has tremendous potential but it can only be effective if it is fully integrated into the brand's systems and key executives believe in the system wholeheartedly," says LCEB co-founder and Luxury Institute CEO Milton Pedraza. He noted that the top 5% of clients account for 40% of sales for many brands, the next 15% make up 30% of sales while the remaining 80% of clients generate 30% of sales; each segment presents its unique challenges. The top segment of 5% must be provided with an additional level of service to deepen and maintain relationships and continue to drive the disproportionate share of sales. Luxury executives in attendance agreed that this top segment should be treated with special care from a manager, president, or other brand representative to ensure that their relationship is maintained if sales associates leave the brand. The middle 15% of clients must be nurtured into the upward segment. The high potential client within that 80%, who will increase their purchases over time, must be identified and a long-term relationship must be created to harbor loyalty as they increase their spending.

In his keynote address to the group, Milton Pedraza focused on the fact that CRM executives, IT engineers and sales associates must all collaborate to create a fully integrated system that serves all departments' needs seamlessly. He recommended that companies utilize segmentation based on their unique business objectives, data availabilities, customer lifecycles, and the customer relationship value. Representatives from many of the brands in attendance (40%) confirmed that gaps in communication between CRM executives and their front-line teams cause preventable problems in segmentation, including the common problem of maintaining a relationship with the client that only engages with the brand every few years. Executives agreed that it is key to establish a very strong communication flow between all parties to not only establish what should be implemented, but how it should be leveraged.

Following lively discussion and executive insights, Milton Pedraza presented ten final recommendations for all brands to implement for successful segmentation and clienteling.

  1. There must be a very strong collaboration between the front-line, IT and CRM teams; they must all be working with segmentation collaboratively and be held equally accountable for customer metrics, including client data collection, retention and conversion.
  1. Data quality is critical, as 25% of data is dirty and creates major lost opportunities for the brand. Brands must require their associates to collect the data and collect it properly.
  1. Executives must contractually require sales associates to place the client data into the CRM system to avoid losing or damaging client losses for the store, should the associate leave. The best sales associates are currently putting client data into a personal black book, but that data belongs to the brand and must be available for present and future use.
  1. The oldest, and still the most effective, way to segment is by R-F-M: the recency, frequency, and monetary value of client purchases. This method is proven to capture customer value and create useful, actionable information for long-term relationship building.
  1. Brands must understand the client's channel preference for researching, purchasing and/or engaging with the brand. The sales associate must respect those preferences and ensure the client has a seamless experience and feels no friction when they want to manifest their preferences.
  1. Beyond demographic and behavioral segmentation, lifestyle segmentation is extremely important. This essential data is independent from basic data in CRM systems or from KPI metrics and must be collected over a long period of time to build and maintain long-term relationships.
  1. Start with simple queries and scale up to more sophisticated types of segmentation. Regardless of the brand's chosen method of segmentation, critical data must be simple and actionable for both marketing and front-line teams.
  1. Understand segmentation and what the brand wants to achieve before hiring an outside consultant; a consultant can only help if the brand knows which direction they want to be moving.
  1. Test, test, test; refresh the algorithm and go through trial phases to find the optimal strategy for the brand.
  1. Do not use segmentation to only typecast individuals into broad groups, but rather to aid in the one-on-one humanistic relationship building process between the brands and their clients, as "the best segments are segments of one."

For more information on best practices in segmentation and clienteling, and to become a Luxury Client Experience Board member, visit, or contact us directly with any questions. Upcoming LCEB events include meetings on Thursday, September 15, and Thursday, November 10. On Thursday, October 13, an exclusive LCEB event will be held for C-level executives only including guest speaker Doug Kirkpatrick, author of Beyond Empowerment: The Age of the Self-Management Organization.

About the LCEB: Luxury Institute announces the Luxury Client Experience Board (LCEB), a membership association of luxury industry practitioners co-founded with The Ritz-Carlton to enhance the education and development of leading luxury brands. The LCEB provides members with ongoing education and training opportunities on industry best practices through primary research, educational events, and education across industries to deliver exceptional, seamless, and measurable Omni-channel client experiences on a daily basis. The LCEB unites luxury executives from all fields and internal departments dedicated to creating these exceptional experiences and building long-term, high-performance relationships with clients.

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