How to Use the Customer Segmentation Pyramid

In this clip from our eLearning series, Allison Hartsoe, CEO of Ambition Data, takes us through the Customer Segmentation Pyramid as described in Valarie Zeithaml, Katherine Newell Lemon, and Roland Rust's book.

Learn about the 4 tiers - Gold, Silver, Iron, and Lead - in the customer segmentation pyramid and how companies can use CLV and customer health to identify, categorize, and segment their customers.

The customer segmentation pyramid

Near the turn of the millenium, researchers Valarie A. Zeithaml, Katherine N. Lemon, and Roland T. Rust published a book called Driving Customer Equity: How CLV is Reshaping Corporate Strategy. In the book they define a customer pyramid model with 4 types of customers that are segmented by profitability.

customer segmentation pyramid

Platinum Tier

At the top of the pyramid you have the platinum tier. These are your most profitable customers which are also the most committed to the company. They cost the least to maintain and are likely to be advocates for the company to their friends and family. These customers are already committed to the company and they love the brand. You shouldn't excessively market to these customers as they require a special kind of treatment.

Gold Tier

The tier below Platinum is the Gold tier. These customer's profitability levels aren't as high as the Platinum tiers. They might want price discounts, but are not as loyal as the Platinum tier. These customers often need a little bit extra to move up to the Platinum tier. This could come in the form of service guarantees or personalized offers to make them feel special.

Iron Tier

The third tier is the Iron tier. These are customers who provide essential revenue and volume to the brand. Their loyalty and profitability aren't substantial enough to the company to warrant the special treatment like the Gold tier. However, customers in this level require lots of research to determine how to move them up in the pyramid since they provide lots of volume.

Lead Tier

The lowest level in the pyramid is the Lead tier. These are customers who are actually costing the company money. Customers in the lead tier are the most difficult to do business with. But even though these customers are costing the company money they are still an important part of the customer mix. They might be costing you money today, but with research and testing they have the potential to move to higher tiers in the customer segmentation pyramid.