Today's proliferating environment is dramatically increasing the importance of effective customer segment management. Market polarization is widening the gaps between the lifetime values of various segments. Frag-menting customer needs are creating opportunities for specialist competitors to go after just one segment. And proliferating distribution channels and media vehicles are helping all companies target the most valuable customers with focused service and advertising. The result is a powerful need for companies to get better at identifying and delivering distinctive value to their most attractive customer segments.

But few organizations can get their segment strategies to work. Many companies articulate detailed segmentation plans, but they rarely define and manage their segments in a way that helps the organization differentiate the value it offers specific groups of customers. What's more, the planning systems of most companies lack the roles, processes, and integrated customer metrics needed to create unique customer experiences for select segments or to respond quickly to shifts in a segment's value. Indeed, many organizations have difficulty measuring the extent of customer migration (more spending by satisfied customers or less spending by dissatisfied ones)—much less quantifying its financial impact or actively managing it through differentiated customer propositions and experiences.¹ For evidence...