What is Customer Segmentation?

customer segmentation explained

One common misconception about marketing is that “one plan fits all.” While this would be true in an ideal world, not every marketing strategy pays off with every individual around the world.

Let’s Start with an Example

To find an example of this, look no further than the television commercials that appear on various channels, all day long. While advertising experts do their best to ensure commercials appear in a way that appeals to the largest scope of audience members, you’ll still see the occasional backlash discussed on social media and news sites.

Not every customer is going to be informed and entertained by every marketing attempt, be it large-budget commercials or a short mention on social media.

The concept of “Customer Segmentation” allows business owners and marketing staff to avoid the backlash by marketing to a specific audience within the global population. But before diving further into this topic, you might want to learn more on how to find your perfect audience: this is the right article.

The practice of customer segmentation can be highly beneficial for getting the right information about your business to the right people at the right time, which is the most direct path to profit and success.

What Is Customer Segmentation? 

As the name implies, customer segmentation is the process of addressing a certain segment of your audience at a time.

customer segmentation

Customer segmentation can be achieved by grouping your audience members by similar characteristics, and creating a marketing plan for each segment that will encourage brand loyalty.

There are several different ways in which you can accomplish this, but achieving an ideal balance in your customer segmentation can require a lot of thought and research.

Ultimately, this investment of time should have a fantastic ROI, as customers gain insight into your products or services in a way that’s meaningful to them. Still, you’ll need to create a sense of balance and consistency when creating and communicating with each segment.

What Are Some Types of Customer Segmentation?

So how do you decide which customer to put in what group? Ultimately, this depends on your overall strategy, though the details can be tweaked for each major campaign.

Needs Based and Value Based

Some marketers like to start with “needs based” and “value based” segmentation. To accomplish this division, you’ll start with what your customers need and value.

For example, some customers may appreciate your business because of convenience. Your site is easy to navigate, the ordering process is straightforward, and they never question any step of the process, from discovery to customer service.

Other customers may simply prefer your business because they believe your product provides the best product for the money. Others still will choose your company for its core values.

In each example, you would target marketing campaigns that highlight these preferences, with emails that stress a specific need or value, newsletters that focus on these topics, and social media posts that will head straight to these customers’ ideals.

Demographics Based

Another common approach to customer segmentation is via demographics. This includes age, gender identity, ethnicity, income level, and so forth. While customers aren’t going to volunteer this information, posting a survey, contest, or other type of interactive content may request this information for marketing purposes.

Many customers will divulge semi-anonymous details in the scope of potentially winning a prize, or receiving a special discount. If you want to grab some interesting ideas on how to interact with your audience, check this interesting article about gamification.

Psychographics Based Segmentation

Psychographics are another type of customer segmentation. Psychographics can include the personality traits, values, life goals, beliefs, and lifestyles of your audience.

While this information isn’t as easy to procure, an experienced analyst with a good set of tools can provide the research needed to gain a more psychological view of your customers’ buying habits.

Geographical Based

Geographic segmentation is perhaps the most easily obtained information, especially for existing customers. Knowing their city, region, and country can help you refine marketing strategies based on time zone, season, holidays, or common activities.

For example, few people are shopping for a swimsuit in Minnesota in December, but customers in coastal Australia might be searching for summer supplies.

Behavioral Based

Behavioral segmentation can be extremely helpful. After all, you wouldn’t address a customer who spends several thousands of dollars a month regularly with the same information you would provide a prospect who has many questions about your business.

Creating separate marketing plans for your audience based on their spending habits, purchases, and interactions with your brand can help you address your customers in a way that is on par with where they are in the sales funnel.

Understanding the Benefits of Customer Segmentation

So why do you want to go through all this effort of learning more about your customers? Does it matter if your customers live in Ohio or Oaxaca?

If you’re looking to create a valuable marketing campaign that encourages brand loyalty and demonstrates the value of your business to people in a way that is meaningful to them, then yes, customer segmentation can be worth the effort.

Customers appreciate communications that make them feel understood. In addition to feeling that your business offers the best product for best price, they’ll feel a connection to your brand. That connection ultimately leads to brand loyalty, which is the goal of every business owner.

Value of Segmenting your Customer Base

Marketing to various groups of customers in a segment-specific makes your marketing spend more valuable as well. An ad, blog, email, or social media post that resonates with a person based on who they are and why they’re buying will be far more memorable than a generic ad.

As in the previous example, a half-frozen, middle-aged man isn’t going to stop in the middle of shoveling out his car to pay attention to a bikini sale in December, while a college-aged young woman in a warmer, more coastal location, who may be planning for a big school vacation in the coming weeks may click your link immediately. Why spend the money to send your ad or email to both of them, when you can get a far better response by targeting a customer segment that has a greater likelihood of making a purchase?

Customer segmentation is not always obvious, and some thought and careful time spent gauging your analytic tools will be necessary. However, if you can create a well-considered plan for the major segments of your customer base, you’ll be spending advertising money and marketing energy far more wisely, which in turn, will lead to a much richer ROI.



Teachingbiz provides internet marketing services and education to digital entrepreneurs and marketers who want to learn how to build and scale their businesses.

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