DHL, the international air express and logistics company, serves a wide range of customers, from global enterprises with sophisticated and high volume supply-chain solutions shipping anything from spare parts to documents to the occasional customer who ships the odd one or two documents a year.

Exhibits 1 and 2 show some of DHL’s logistics operations. To be able to effectively manage such a diverse customer base, DHL implemented a sophisticated customer-segmentationcum-

loyalty-management system. The focus of this system is to assess the profitability from its customers, reduce customer churn, and increase DHL’s share of shipments.

To achieve this, the first task was to divide its customers into actionable segments with distinct needs. DHL defined three main segments. First, “strategic customers” are extremely high-volume shippers with a full range of logistics solutions and express-shipment needs. This segment approximately includes DHL’s top 250 customers worldwide, most of which are large multi-nationals. Second, the “relationship customers” segment consists of customers who use DHL to ship their products and documents regularly, but with a lower volume than the strategic customer segment. Moreover, its supply-chain needs are not as sophisticated. Finally, the “direct customers” segment ships infrequently with DHL.
The customer segmentation can be represented in the form of the familiar customer pyramid in Exhibit 3...................................

Questions 1. What are the main challenges in implementing this segmentation in DHL’s customer database?
2. How would you recommend DHL to address those challenges?

3. What are the various possible practical applications of this segmentation methodology in other functional departments (e.g. sales, customer service, etc.)?

Data From Exhibits 1

Exhibits 2

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Exhibit 1: DHL logistics center warehouse facility in Hong Kong. NO CAMERA 2018 by Jochen Wirtz, Indranil Sen, and Sanjay Singh. Jochen Wirtz is Professor of Marketing at the NUS Business School, National University of Singapore. Indranil Sen was Research and Planning Manager, Asia Pacific, and was responsible for designing and implementing DHL's loyalty marketing across Asia when this case was written. Sanjay Singh was studying for his MBA at the NUS Business School when this case was written. CUSTOMER SEGMENTATION To achieve this, the first task was to divide its customers into actionable segments with distinct needs. DHL defined three main segments. First, "strategic customers" are extremely high-volume shippers with a full range of logistics solutions and express-shipment needs. This segment approximately includes DHL's top 250 customers worldwide, most of which are large multi-nationals. Second, the "relationship customers" segment consists of customers who use DHL to ship their products and documents regularly, but with a lower volume than the strategic customer segment. Moreover, its supply-chain needs are not as sophisticated. Finally, the "direct customers" segment ships infrequently with DHL. The customer segmentation can be represented in the form of the familiar customer pyramid in Exhibit 3. These segments are further divided into sub-segments based on the kind of service required (Exhibit 4). The needs of direct customers and many of the relationship customers are often fully met by DHL's basic products. For relationship customers