Customer segmentation

Customer segmentation is the process by which you divide your customers up based on common characteristics – such as demographics or behaviours, so your marketing team or sales team can reach out to those customers more effectively.

These customer segmentation groups can also be used to begin discussions of building a marketing persona or product user persona. This is because effective customer segmentation analysis is typically used to inform a brand’s messaging and positioning, helps organisations know what new products are services they might want to invest in, and uncovers ways to improve how the business sells. Because of this, marketing personas need to be closely aligned to those segments in order to be effective.

The “target persona” is, by definition, a personification of a specific customer segment so it’s not uncommon for businesses to create several personas to match the various customer segments they’ve created. But for that to happen, a business needs a robust set of customer segments to form a customer segmentation model. This leads us to the next section, distinguishing the difference between customer segmentation and market segmentation, so that your segmentation is as accurate and specific to you as possible.

Customer segmentation vs market segmentation
In comparison to customer segmentation, market segmentation is more general and looks at the entire marketplace. Whereas market segmentation relates to the whole market, customer segmentation is your part of the market.

For example, if you’re in the business of selling vehicles and you typically sell directly to businesses, then your customer segment is B2B and you might compare customers that are likely to buy large commercial trucks, versus small business-owned vans. 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.

However, if you’re considering the entire market, you might compare people that are in the market for a sedan versus a sports car, which is much broader. In this instance, most market producers aren’t going to cater to the whole market, so it is more effective to focus on the selling element. You’ll see a better payoff by targeting one or two focused customer segments rather than trying to attract the whole market with a broader, shotgun approach.