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What Is Customer Segmentation?

One of the most important techniques that businesses can use to understand and target their customers is customer segmentation. It is the process through which a business divides its customers into meaningful groups based on their characteristics. It allows one to market each group more appropriately and effectively. If you are interested in a career in customer segmentation, make sure to check out Customer Success CSM Jobs.

Customers might be segmented by a company for business-to-business marketing purposes based on the following factors.

  • Location
  • Products Purchased Previously
  • Number of Employees
  • Industry

As for business-to-consumer marketing, customers are segmented by companies based on their demographics as mentioned below.

  • Location (rural, suburban, or urban)
  • Marital Status
  • Age
  • Life Stage (married, single, widowed, divorced, retired, empty-nester, etc)
  • Gender

Why Should You Segment Customers?

Every marketer knows just how important segmentation is. It allows one to better tailor the marketing efforts to better target different subsets of the audience and can be done with the help of a customer engagement analytics tool. These efforts can either relate to product development or communications, and even both. Segmentation helps companies in the following ways.

  • Cross-sell and up-sell other services and products.
  • Enhance customer service.
  • Focus on highly profitable customers.
  • Test different pricing options.
  • Establish stronger customer relationships.
  • Find ways to improve existing products and introduce new ones.
  • Choose the best channel of communication for the segment. It might be through radio advertising, social media posts, email, or any other approach depending on the segment.

How to Segment Customers?

In order for a company to segment its customers, it needs to gather specific information about the customers to identify existing patterns which can be used for creating segments. This is where purchasing information can prove useful such as products purchased, geography, job title, and the like. It is also possible to obtain information once the customer has used the system. Online markers working on opt-in email lists can segment the messaging based on what the customers are most attracted to. The following are some of the most used methods for obtaining information.

  • Focus groups
  • General research from published information about different market categories
  • Surveys
  • Telephone or face-to-face interviews

Using Customer Segments

Once common characteristics of different customer segments have been established, they can help guide the company to better market its products and services to them. For instance, a small business offer leather goods can promote more affordable products to young musicians and premium leather jackets to older professionals using the segment knowledge which reveals that younger musicians tend to earn less as compared to an older professional. There are many ways through which customer segments can be used.


Customer segmentation is practiced by just about every successful business irrespective of its industry or size. It does not matter whether the business wants to sell in person or online. All that is need is meaningful information which can be gathered and analyzed to help take better decisions.

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