What is customer segmentation? Types, tips + strategy

There’s no one way to collect customer data, however, and the process depends on the type of data you’re collecting. Here are the main steps to get you on the road to a successful segmentation plan. Psychographics are related to demographics, though they dig into the values, interests and lifestyle of the customer — things the customer thinks rather than who they are. For retail stores that rely on foot traffic, geographic segmentation is often crucial, as marketing efforts have the greatest impact on customers who live within a certain radius of the physical location. This persona, which may even get its own name, like Sheila or Joe, might include a job title, age, years of experience, work responsibilities, motivations, business challenges and key skills. In many organizations (especially business-to-business operations, or “B2B”), these customer segments are known as personas.

Their Audience Targeting feature is a marketing-focused customer segmentation tool. Sprout Social makes it easier to reach specific segments when creating and sharing messages on both Facebook and LinkedIn. Experian’s customer segmentation software has multiple functions so you can build, view, and manage your segments to meet your business needs. Now, what about a tool to support you while you work through the strategy and analysis steps we just covered? This can help your business figure out what resources you need to make these changes. Once you’ve updated your customer segmentation, it’s important to put those updates into action.

Customer segmentation allows you to tailor your support experiences to the needs of certain groups. Customer segmentation also helps connect customers with the right agent the first time, minimizing frustrating transfers. For example, say you identify a sizable group of customers who left a competitor because they wanted a particular product feature that only you offer. When you customize messaging to reflect a group’s specific priorities and behaviors, it’s far more likely to resonate and drive engagement. Segmenting your customers brings structure to the chaos, helping you serve the right people in the best way.

Step #3: Segment definition

If an agency has a lot of these types of properties available, understanding the psychographics of various segmented groups will help that agency zero in on the right people to market those properties too. Not only does this build brand trust – by creating the feeling that you understand your customers, their interests, and concerns – it also improves your overall ROI by reducing waste in advertising. Tracking these analytics gives organizations the means to achieve continuous improvement in their segmentation efforts, as well as in their marketing messaging and relationship-building goals. By better understanding their customer base, and how it changes on a month-to-month basis, businesses can organize their service delivery in a way that best meets the preferences and needs of all customers — and especially the high-value ones. Customer segmentation also provides information on what channels any given customer is most likely to engage with, whether it’s an app, a social media push, or a traditional brick-and-mortar sale. Like market segmentation, customer segmentation groups people based on certain shared characteristics.

• Meanwhile, LinkedIn allows you to segment and target customers by business size, industry, location, and seniority.
• This is an ideal option if you offer multiple products or services.
• For startups and established businesses, understanding the importance of segmentation is essential for the granular analysis of consumer demographics, behaviors, needs, and preferences.
• If your goal is to sell more hiking boots, “hikers” is the perfect place to start.

FAQs on customer segmentation

Instead, the characteristics of your happiest existing customers are used to find an overlapping subset within the new customer segments that your research generated. By grounding their strategies in “hard data” and “flesh-and-blood” customer behavior, these companies used insights from both A-list customers and dispassionate self-assessments to attract new customer segments and develop new products aligned to organizational capacity. The HBR article on the Bain study gave two case studies of companies that got market segmentation right.

These two customers have different needs and, depending on the correlation you find, might then become two different customer segments for you to focus on. Whereas market segmentation relates to the whole market, customer segmentation is your part of the market. In comparison to customer segmentation, market segmentation is more general and looks at the entire marketplace.

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Depending on company philosophy, resources, product type, or market characteristics, a business may develop an undifferentiated approach or differentiated approach. One American study, for example, suggested that almost 60 percent of senior executives had used market segmentation in the past two years. Despite its limitations, market segmentation remains one of the enduring concepts in marketing and continues to be widely used in practice. Some scholars have argued that the fragmentation of markets has rendered traditional approaches to market segmentation less useful. Extensive data is now available to support segmentation in very narrow groups or even for a single customer, allowing marketers to devise a customized offer with an individual price that can be disseminated via real-time communications. Such activities suggest that basic forms of market segmentation have been practiced since the 17th century and possibly earlier.

Your first step might be to compare analytics between the two platforms. You’ll want to make sure that the data used to build each segment is still accurate, especially if they’re used across multiple channels. Once you’ve got those segments set up, it’s important to go back and revisit them from time to time. You won’t get the best outcomes by sending slight variations of the same content to each segment. You want your customers to feel you understand them and that you’re connecting to help, not just sell.

Each stand is brimming with vivid fruits, each appealing to different people. Understanding a company's size helps in customizing product offerings, communication, and support services to match the operational capacity and needs of potential clients. Company size divides businesses based on the scale of their operations, typically measured by the number of employees or total number of offices/locations. Segmenting by industry allows businesses to tailor content and communication to the specific challenges, needs, and language of each sector.

It’s about understanding not just who your customers are, but what they need, when they need it, and how they prefer to communicate. Improve business outcomes by offering defined segments the experience that best suits them at every stage of their journey. For example, a global brand, such as eBay, who’s attempting to launch a new service offering that targets everyone will have a very different customer segment than a brand that’s only targeting small, independent businesses.

Step #7: Implementation and monitoring

These areas might include your marketing efforts, product development, customer experience, customer service, sales, and pricing. These trends might include common reasons for purchasing a product, an increase in customers abandoning their carts, or social media posts that garner more attention and engagement. Customer experience includes every interaction between a business and its customers that will affect how they respond emotionally, intellectually, and behaviorally to the business. A customer segmentation model is what you use to divide your customer base into groups based on their common characteristics. Fields might include text areas to enter questions customers have or an option to select their time zone. Identify details like age, geographical location, relationship status, and income for B2C customers.

A more difficult but important thing for companies when segmenting consumers is understanding their behavior. Psychographics include the lifestyle, interests, opinions, and personality of the consumer. The most common way to segment consumers is by looking at geography, demographics, psychographics, behavior, and benefits sought. After creating value, companies communicate the value to consumers through the design, distribution, and advertisement of the product. The second step is targeting, in which the company selects the segment of customers they will focus on. Market segmentation and targeting refer to the process of identifying a company’s potential customers, choosing which customers to pursue, and creating value for those customers.

When you segment customers, you learn about them deeply and use that info to create content for each segment's unique needs and challenges. Segmenting customers goes beyond putting people into categories. Customer segmentation personalizes your marketing, service, and sales efforts to the needs of Customer segmentation specific groups. Customer segmentation is the tagging and grouping of customers with shared characteristics like age, industry, gender, etc. Customer segmentation is one of the best ways to reach different sections of your customers at the right time and with the right information. ECommerce success starts with data—but are you managing it right?