Customer Segmentation: The Only Guide You’ll Ever Need

If you feel like there’s a misfit in your marketing campaigns and who you push them to, you are in the right place.

In this post, you will learn how to segment your customers properly so you can make the most out of your marketing budget.

Let’s get right to it.

What Is Customer Segmentation?

Customer segmentation is a method of dividing your customer base into distinct groups based on shared characteristics. This includes age, income, buying behavior, or preferences. The goal is to understand different customer needs and behaviors better so you can tailor your marketing, products, and services to each group more effectively.

Here’s a simple way to think about it:

Imagine you run a store that sells both fitness gear and organic skincare products. Your customers might have different interests and needs. By using customer segmentation, you could divide your customers into groups like “fitness enthusiasts” and “skincare lovers.” Each group has unique preferences: fitness enthusiasts might be interested in the latest gym equipment, while skincare lovers might look for new organic products.

By segmenting your customers, you can:

• Create personalized marketing campaigns that speak directly to each group’s interests and needs.
• Develop products or services that cater to the specific needs of each group.
• Provide a more tailored shopping experience by understanding what each group values and making sure your offers meet their expectations.

In short, customer segmentation helps you serve your customers better as you deliver what they want in a way that feels personal and relevant.

Is Customer Segmentation The Same As Market Segmentation?

Customer segmentation and market segmentation are often used interchangeably, but they are not the same.

Customer segmentation only considers a part of the market and focuses on existing customers, while market segmentation is more general and looks at the entire market, including existing and potential customers.

Customer segmentation groups existing customers together based on shared characteristics, whereas the latter group’s customers based on the products and services they purchase.

Why Is Customer Segmentation Important?

Customers like it when brands treat them as distinct individuals. Without a personalized customer experience, around 45% of customers tend to switch brand loyalties.

To keep your customers, you need to understand your audience, create different customer segments, and target them based on their unique needs. Otherwise, you risk wasting resources on generic campaigns that don’t resonate with them.

5 Customer Segmentation Models You Should Learn

Consider each segment carefully and as you go through them think about whether this is the best way to segment your audience. But do not restrict yourself to one model, create at least 2 customer segments to start with.

1. Demographic Segmentation

This is segmenting based on age, gender, marital status, income, and occupation.

• Age: Categorize customers based into teens, adults, and seniors. This is best used when products or services cater to specific life stages or generational preferences like side hustle ideas for teens or retirement plans for seniors.
• Gender: Segment based into male, female, and non-binary. Use this for products or marketing messages that resonate more with one gender or address gender-specific needs like grooming products for men or maternity wear for women.
• Marital Status: Divide customers into single, married, and divorced. Use this to target products or services about family planning, lifestyle changes, or relationship status.
• Income: Group customers into low ($30k/year), middle ($30k-75k/year), and high ($75k above/year) income. Use this for products or services at appropriate price points and tailoring offers to different financial capabilities.
• Occupation: Segment into healthcare professionals and tech workers. Use this to target products or services that align with professional needs or job-related requirements.

2. Geographic Segmentation

Geographic segmentation means organizing a company’s clients into different customer segments or distinct groups based on their physical location. It can be done based on:

• Segment customers based on climate or weather conditions (ex. cold vs. warm regions). Use this for products like winter clothing for cold climates or air conditioners for hot regions.
• Divide customers by regional cultural norms or preferences (ex. food, traditions). Use this to tailor products to align with local customs and tastes. For example, offering sushi in Japan versus barbecue in Texas.
• Segment by region’s economic conditions or cost of living (ex. affluent suburbs vs. economically depressed areas). Use this to adjust pricing strategies and products to fit local purchasing power. For example, luxury cars in upscale urban areas versus budget-friendly options in lower-income neighborhoods.
• Group by regions with different regulations or legal requirements (ex. GDPR compliance in Europe vs. CCPA in California). This ensures products and services meet local legal standards.

3. Behavioral Segmentation

Behavioral segmentation creates defined segments based on what customers do and how they respond to different marketing schemes.

• Segment customers based on their buying patterns (ex. frequent vs. occasional buyers). Use this to tailor marketing strategies and offers, like loyalty programs for frequent buyers or special discounts for occasional ones.
• Divide customers by how often they use a product or service (ex. heavy vs. light users). Use this to create customized offers or support plans, like premium service packages for heavy users or introductory offers for light users. For example, provide advanced features or higher-tier support for heavy users of software versus basic support for occasional users.
• Group customers based on their brand loyalty level (ex. loyal customers vs. switchers). Use this to develop loyalty programs or retention strategies like exclusive perks for loyal customers or incentives to convert switchers.
• Segment by the specific benefits customers look for in a product or service (ex. quality vs. affordability). Use this to design targeted messaging and product features that address different needs. For example, marketing premium features to customers seeking high quality versus budget-friendly options to those focused on cost savings.
• Divide customers based on specific occasions or events (ex. holidays, birthdays). For example, running holiday-themed promotions or special birthday discounts and sending them personalized online greetings with it.

4. Needs-Based Segmentation

It focuses on identifying different customer needs and priorities that influence their purchasing behavior.

• Segment customers based on practical needs or problems they want to solve (ex. reliability vs. performance). Use this to offer durable, high-performance equipment for customers needing reliability in tough conditions versus versatile, multi-functional gadgets for those seeking high performance.
• Divide customers by the emotional value they look for (ex. status vs. comfort). Use this to create marketing messages and products that resonate emotionally like marketing luxury brands to customers seeking status and prestige versus comfort-focused products for those valuing relaxation and ease.
• Group customers by their desire for convenience and ease of use (ex. time-saving vs. ease of access). Use this to design easy-to-use, quick-service options for busy professionals or comprehensive, hands-on solutions for those with more time.
• Segment by how price-sensitive customers are (ex. budget-conscious vs. willing to pay a premium). Use this to adjust pricing strategies and product features to match different budget constraints. For example, offering discount options or value packs for budget-conscious customers versus premium, high-end products for those willing to spend more.
• Divide customers based on their service needs (ex. high-touch service vs. self-service). Use this to tailor customer support and service levels like personalized, high-touch customer service for clients needing extensive support versus automated self-service options for those preferring minimal interaction.

5. Technographic Segmentation

This method considers:

• Segmenting customers based on the device types they use (ex. smartphones vs. desktops). Use this to design mobile-friendly websites and apps for customers who primarily use smartphones versus desktop-optimized interfaces for those who use computers.
• Dividing customers by the software or applications they prefer (ex. Windows vs. macOS). Use this to tailor for software compatibility, integrations, and support services to meet specific user needs.
• Grouping customers by their level of technology adoption (ex. early adopters vs. laggards). Use this to introduce cutting-edge technology to early adopters with a tech-savvy mindset versus providing more traditional options for late adopters.
• Segmenting by customers by technical expertise (ex. tech-savvy vs. novices). Use this to offer advanced features and customization options for tech-savvy users versus simplified, user-friendly interfaces for novices.
• Dividing customers by their online behaviors and internet usage patterns (ex. heavy users vs. casual users). Use this to tailor digital marketing efforts providing frequent updates and engaging content for heavy internet users versus streamlined, essential information for casual users.
• Segment your customers based on where they purchase the most (ex. Selling on TikTok vs. selling on Instagram)

3 Steps To Segment Your Customers With Ease

As you go through each step, consider how you can implement it to fit your specific needs.

Step 1: Figure Out What You Want to Achieve

Start by asking yourself what you want to get out of segmenting your customers.

• Are you aiming to increase sales?
• Improve marketing efficiency?
• Enhance customer satisfaction?

Based on that, write down your primary objective and be specific. For example: “Increase email marketing conversion rates by 15% within 6 months by identifying high-value customer segments to target with personalized offers.”

Next, pick the most relevant customer traits or behaviors. For example, if your goal is to increase sales, focus on purchase history and buying behavior. If you want to improve customer satisfaction, look at feedback and service interactions.

Step 2: Gather & Check Out Your Customer Data

Use CRM systems like Salesforce or HubSpot for detailed customer data, Google Analytics for website behavior, and survey tools like SurveyMonkey or Typeform for direct feedback. Here’s a better overview of what these tools can do for you.

• CRM Systems: Track customer interactions, purchase history, and demographics. Use this to keep detailed customer profiles.
• Google Analytics: Monitor website traffic, user behavior, and conversion rates. Use this to understand how customers interact with your site.
• Survey Platforms: Collect feedback and insights directly from customers. Use this to understand preferences and pain points.

Look at the data you already have to get a sense of your current customer base. For example, if you notice that certain products are popular among a specific age group, this will be a clue about where to focus your segmentation efforts.

You also need to decide how you will measure your progress toward your goals. For example, if your goal is to increase conversion rates, your KPI might be the percentage increase in conversions from segmented email campaigns. Then adjust your approach based on what you learn.

You also have to check the data’s quality to make sure it is accurate and complete. Look for missing, outdated, or incorrect information that might affect your analysis. Structure the data so that it’s easy to analyze. Categorize information, create summaries, or integrate data from different sources especially if you sell on multiple platforms, you can get integrated data from the multichannel listing software you use.

Look for patterns and trends within your data–common behaviors, preferences, or demographic characteristics and create initial segments based on shared characteristics or behaviors.

For this, you can also behavior tracking tools like Hotjar which is especially helpful for eCommerce stores that sell products in the same general niche but not entirely related like this store that sells wellness supplement and safety wear selling on the same landing page.

This can be time-consuming and can take you away from more pressing matters. You can either assign this to a junior team member or hire an intern who can manage CRM systems, analyze website behavior, and handle survey data efficiently for you so only have to think of the crucial decision-making phases.

Step 3: Pick The Best Ways To Segment

Now, you need to match your segmentation models with your objectives. For example, use demographic segmentation to target different age groups or geographic segmentation to focus on specific regions.

Then define the criteria you’ll use to create segments. This can include age ranges, income brackets, or behavioral patterns. For example:

• Income Segmentation: Low, middle, and high income.
• Purchase Frequency: Frequent, occasional, rare.

Now it’s time to use segmentation tools. CRM systems come with built-in segmentation features you can use for detailed customer profiles and targeted marketing.

Run small-scale tests first. Implement your segments in pilot campaigns to see how effective they are. Then document the segmentation models, criteria, and the results that work for you. This ensures clarity and consistency in your approach.

When everything is set, communicate your segmentation strategy with your marketing and sales teams to align all your efforts and make sure it gets implemented correctly.

By following these steps, you’ll effectively choose and apply the best segmentation methods to meet your objectives, leading to more targeted and impactful customer strategies.

How ‘corePHP’ Can Help

If you’re looking for a way to make customer segmentation a breeze, ‘corePHP’ can easily spot trends and patterns to help you create more targeted customer segments. Whether you’re running an eCommerce store with a range of products or just want to get a better grip on your customer data, we have what it takes to get you high-converting customer segments.

Conclusion

It can look overwhelming at first glance but it doesn’t have to be. Focus on one step at a time and understand what action is needed on your part and what tool you need for it. Once you master one step, move on to the next and you’ll fully implement it in no time.

Of course, sometimes you only have so much time in a day to handle everything. If you need more hands to work for you ‘corePHP’ is ready to help. With our expert knowledge of digital marketing, we can deliver customer-first solutions that improve your outcomes. Contact us today and see how we can help you out.

FAQs

Digging deeper? Here are 4 things you need to know.

1. How often should I revisit my customer segments?

Revisit your customer segments every 6 to 12 months to account for changes in customer behavior, market trends, or business objectives. These frequent updates help make sure that your segmentation stays relevant and effective so you don’t waste resources on outdated strategies and segments.

2. Can customer segmentation improve customer retention?

Yes, when you tailor your marketing efforts and customer experiences to specific segments, you can better meet their needs and preferences, which in turn means higher satisfaction and loyalty, ultimately improving retention rates.

3. How do I handle customers who fit into multiple segments?

For customers who fit into multiple segments, create a primary segment based on their most defining characteristic and consider secondary segments for more nuanced targeting. This will help you address their diverse needs without overwhelming your segmentation strategy.

4. Can customer segmentation be applied to different marketing channels?

Yes, customer segmentation can be tailored to multiple marketing channels, such as email, social media, or paid ads.

Author Bio:

Burkhard Berger is the founder of Novum™. He helps innovative B2B companies implement modern SEO strategies to scale their organic traffic to 1,000,000+ visitors per month. Curious about what your true traffic potential is?

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• Gravatar: vip@novumhq.com