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Needs based segmentation groups customers by requirements they have actually expressed or confirmed. Build an evidence register, assign reproducible groups, then compare revenue, gross margin and service usage from your customer exports.
Needs based segmentation groups customers by requirements supported by evidence: what they need from the product, delivery or service relationship. Start with customer statements or documented obligations, then compare the economics of the groups you have assigned. Purchase history can test whether an offer fits those requirements, but it cannot prove a customer's motivation.
Segmentation concerns groups with common needs and an expected response to a commercial action, as OpenStax explains in its definition of market segmentation. In practice, the difficult part is showing why a particular account belongs in a needs group.
Start with account reviews, interview notes, agreed service requirements and contracts. The SBA's market research guidance lists surveys, questionnaires, focus groups and interviews as direct research methods. Ask customers about a concrete buying or operating requirement, including the consequence of not meeting it.
Record the answer in an evidence register:
| Field | What it records | Illustrative entry |
|---|---|---|
| Account ID | Stable customer key used in the sales export | A |
| Requirement | A specific need the customer confirmed | Replenishment before planned maintenance |
| Evidence reference | Where the statement or obligation can be checked | Approved account review |
| Confirmation date | When the requirement was confirmed | September 15, 2026 |
| Primary need | Approved group for financial reporting | Fast replenishment |
| Assignment owner | Person responsible for checking the tag | Account manager |
| Review date | When the evidence should be revisited | Next scheduled account review |
The register should reference the source rather than copy sensitive material into every report. A short dropdown label can summarize the requirement, but it must not replace its evidence. Use a CRM data quality scorecard to check missing IDs, stale assignments and incomplete confirmation dates.
Write an inclusion rule and an exclusion rule for each group. Fast replenishment requires a confirmed lead-time requirement. A rush order without that confirmation is insufficient. Documentation requires an explicit need for technical, regulatory or product records; being in a regulated industry is insufficient by itself.
Choose one primary need for the financial summary. If requirements overlap, use an agreed precedence rule or a manual account review. Store secondary needs separately. Otherwise the same invoice can appear in several groups and inflate the total.
Keep unconfirmed accounts visible. They are a follow-up list, not a segment whose customers have no needs. Likewise, avoid giving the most profitable group a favorable needs label after seeing the figures. Value based segmentation answers the different question of economic contribution.
Use the customer master, net sales and cost export, and service activity records for the quarter ending September 30, 2026. Aggregate invoices and service entries independently to account level before attaching them to the register. Joining every service entry directly to every invoice would repeat values.
The following illustrative US distributor has approved primary needs for its accounts. Revenue is net of recorded discounts and credits; COGS covers the matching sales. Service hours are recorded usage, and no labor cost is imputed in this gross-margin view.
| Account | Primary need | Revenue (USD) | COGS (USD) | Gross profit (USD) | Service hours |
|---|---|---|---|---|---|
| A | Fast replenishment | 120,000 | 78,000 | 42,000 | 30 |
| B | Fast replenishment | 80,000 | 56,000 | 24,000 | 20 |
| C | Documentation | 100,000 | 60,000 | 40,000 | 60 |
| D | Documentation | 60,000 | 39,000 | 21,000 | 40 |
| E | Consolidated delivery | 90,000 | 63,000 | 27,000 | 10 |
| F | Unconfirmed | 50,000 | 35,000 | 15,000 | 15 |
| Total | 500,000 | 331,000 | 169,000 | 175 |
Put these columns in A through F in Excel, with accounts in rows 2 through 7. Gross profit in E2 is:
=C2-D2
Fill it down to E7. Review whether your COGS definition includes any service costs before interpreting service usage alongside margin; the gross profit margin guide explains the cost boundary.
List the group names in H2:H5. Use I for revenue, J for gross profit, K for gross margin and L for service hours. The formulas in row 2 are:
=SUMIFS($C$2:$C$7,$B$2:$B$7,H2)
=SUMIFS($E$2:$E$7,$B$2:$B$7,H2)
=IF(I2=0,"",J2/I2)
=SUMIFS($F$2:$F$7,$B$2:$B$7,H2)
Fill down for each group. Microsoft documents SUMIFS as adding cells that meet specified criteria. The blank returned for zero revenue prevents an undefined margin from being presented as a measured zero. Covirage is not affiliated with Microsoft.
| Primary need | Revenue (USD) | Gross profit (USD) | Gross margin | Service hours |
|---|---|---|---|---|
| Fast replenishment | 200,000 | 66,000 | 33.0% | 50 |
| Documentation | 160,000 | 61,000 | 38.1% | 100 |
| Consolidated delivery | 90,000 | 27,000 | 30.0% | 10 |
| Unconfirmed | 50,000 | 15,000 | 30.0% | 15 |
| Total | 500,000 | 169,000 | 33.8% | 175 |
Documentation gross margin is (40,000 + 21,000) / (100,000 + 60,000) = 38.1%, rounded to one decimal place. The company margin is 169,000 / 500,000 = 33.8%. All displayed margins use the same rounding and divide group totals rather than averaging account percentages.
Group revenue must equal the account table's $500,000. Gross profit must equal 500,000 - 331,000 = $169,000, and service hours must add to 175. Reconcile those figures to their source exports before discussing which group performs best. Check each account appears once, including account F.
The documentation group generates substantial gross profit but consumes 100 recorded service hours. That observation supports a review of what the documentation work involves. It does not prove the group is less profitable: the table has no service labor cost and does not distinguish reusable documentation from work repeated for each account.
Sales and customer operations should review the requirement and service design together. Finance can then approve a separate service-cost analysis if needed. Keep the original needs assignment when testing an offer so later performance does not redefine the group being evaluated.
Upload a sample of your own account assignments, sales, costs and service records. Covirage maps the columns, and its tools compute and check revenue, margins and service usage for the supplied groups; the external AI model explains the results with every figure traced to its rows. Create a free Covirage account and bring the evidence-backed assignments alongside your export.
See sales intelligence for the account questions this comparison can support.
A distributor might group customers that require rapid replenishment, those that need detailed compliance documentation, and those that prioritize consolidated delivery. Each assignment should point to a customer statement, contract requirement or confirmed service review rather than a salesperson's assumption.
Needs groups describe documented requirements. Behavioral groups describe observed actions, such as purchase frequency or order mix. An account can belong to both, but frequent orders alone do not prove a requirement for urgent delivery or explain why the customer orders that way.
Yes, customer requirements can overlap. For a financial summary, use one primary need or an explicit allocation so revenue is counted once. Keep additional requirements as separate tags for service planning, and state whether a report uses exclusive groups or overlapping tags.
Set a review schedule that matches the buying cycle and revisit requirements after material changes in the account. Retain the previous assignment and its effective dates so a new interview does not silently rewrite the groups used in earlier performance reports.