The Critical Role of Account Segmentation in Consumer Goods

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.

Customers vs. Consumers: Understanding the Difference

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.

What is Customer (or Account) Segmentation?

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

Key Dimensions of Effective Account Segmentation

Successful account segmentation requires a comprehensive approach, incorporating multiple data points. Some common categories of data to collect on your customer base include:

1. Sales and Profit Data

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

2. Account Characteristics

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

3. Category and Competitive Landscape

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?

4. Behavioral and Relationship Metrics

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

5. Qualitative

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?

Advanced Strategic Segmentation: A Multidimensional Approach

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.

Consumer-Account Alignment: The Critical Intersection

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.

Integrated Segmentation Framework

Successful account segmentation combines multiple strategic lenses:

1. Value-Based Considerations

   • Revenue potential

   • Strategic importance

   • Growth trajectory

   • Margin contribution

   • Long-term partnership potential

2. Operational Compatibility

   • Supply chain efficiency

   • Merchandising compliance

   • Technology integration capabilities

   • Order and service complexity

   • Historical performance metrics

3. Competitive Landscape

   • Market share dynamics

   • Category development indices

   • Competitive positioning

   • Innovation adoption rates

   • Promotional effectiveness

4. 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

A Theoretical Example

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 Spend Management: A Segment-Specific Approach

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

1. Strategic Growth Partners (Tier 1)

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.

2. Important, smaller (Tier 2)

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.

3. High volume customers with average consumer fit (Tier 3)

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.

4. Non-strategic, smaller customers (Tier 4)

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 

Continuous Refinement and Future Outlook

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

The Future of Account Segmentation

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

Who does the work?

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!

Conclusion: A Strategic Imperative

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.