What Is Customer Segmentation? + How to Reach Customer Segments

What is customer segmentation?

Customer segmentation is the process of examining customer attributes and creating groups based on how they behave, who they are, and their specific characteristics. Customer segmentation allows businesses to use targeted messaging, rather than taking a one-size-fits-all approach, to drive business results.

For example, a company that sells a music streaming service could segment its customer base according to the genres customers listen to, the times of day they typically listen, and the devices they use to stream music. The company could then use insights to attract more music lovers who match those characteristics. 

When businesses segment their customers and continually refine their segmentation strategies, they can:

• Build nuanced and robust buyer personas.

• Tailor marketing messages to each customer segment. 

• Deliver messaging via marketing channels where different customer segments are most likely to be reached.

• Spend marketing budget more efficiently.

• Test how different segments respond to pricing options. 

• Enhance products and customer experience based on segment feedback.

• Build strong customer relationships and inspire customer loyalty. 

How to segment customers 

As your industry evolves and your business adapts, you will likely notice your customer base evolving as well. How might their behaviours change based on emerging needs and desires? What differences among customers might become apparent over time?

Gather as many insights as possible throughout your business development journey to understand customers and deliver the highest level of service. 

Follow the steps below to begin your process: 

1. Review industry data and market analysis.

While you may have already researched your industry and different markets within it, it’s always a good idea to collect more data on a regular basis, such as quarterly or annually, to account for new industry trends and consumer behaviours. 

Ask yourself:

• How is my industry responding to consumer needs and desires?

• Which brands are the big players in my industry? 

• How are they segmenting their customers, as can be deduced from their marketing, content, and product descriptions?  

• What insights can I take from industry and market research to apply to current and future customer segmentation? 

2. Examine your current customer base. 

Begin identifying possible segments with a thorough review of your current customer base or leads if you haven’t yet acquired any customers. This can strengthen your observation skills, familiarize you with customer data, and create a baseline for choosing your segmentation model.

Customer segmentation models you might use include: 

• Using a demographic segmentation model, a car manufacturing company could segment its customers into married and single car shoppers and then tailor marketing messaging to appeal to people purchasing a car with a spouse or on their own.

• Using a technographic segmentation model, an e-commerce company could segment its customers into Chrome users and Safari users and then design sales pages to display in specific ways on either browser to optimize conversion. 

• Using a needs-based segmentation model, a software company could segment its customers into tech-savvy users and inexperienced users and then design the help desk experience and support documentation accordingly.  

3. Consider a customer segmentation tool.

Customer relationship management (CRM) systems house data, track insights and analytics, automate tasks, and allow businesses to segment audiences to deliver superior customer experiences. 

If your business has yet to adopt a CRM, here are four tools to consider: 

• Salesforce’s CRM tools aim to unite sales, commerce, marketing, IT, and service teams around robust customer data so that you can optimize every phase of the customer journey. 

• Hubspot’s CRM tools allow you to organize customer data, track website and email activity, schedule meetings with customers and prospects, integrate Facebook messenger, and more. 

• Sprout Social’s CRM tools allow you to keep track of conversation history, add nuanced customer information, and distribute data to everyone on your team. It also integrates with Hubspot. 

• Mailchimp is a CRM and email marketing platform that offers pre-built and customizable segmentation tags, behavioural targeting, and holistic reporting on growth, revenue, and engagement. 

4. Collect customer experience data.

Customer experience includes every interaction between a business and its customers that will affect how they respond—emotionally, intellectually, and behaviourally—to the business. Collecting customer experience data and keeping track of it in your CRM tool can enable you to segment your customers more effectively.

Here are a few ways to gather qualitative data: 

• Ask customers questions at the point of sale, such as, “What inspired you to make this purchase?” or “How do you see yourself using this product?”

• Survey customers after they make a purchase to learn how they are experiencing a product.

• Use social listening tools like HootSuite Insights and Synthesio to monitor online conversations around your brand (and competitors). 

Gather quantitative data to monitor significant, measurable trends, such as:

• Customer purchase history and the revenue for a particular product

• Changes in social media followers and which pieces of content get the most engagement

• Actions customers take in response to email campaigns, landing page opt-ins, or digital ads. 

• The number of customer support tickets opened and resolved

5. Analyze customer experience data. 

Your next step is to use the data you collect to segment customers. First, take a look at your qualitative and quantitative findings and highlight the trends. These trends might include common reasons for purchasing a product, increased abandonment of customers' carts, or social media posts that garner more attention and engagement.

Then, consider these trends in the context of other factors, including geography, psychographics, and technographics, to segment your customers into groups. 

Here’s an example of a customer segment you could create: Customers who were inspired to purchase a product and happy about it at the point of sale but opened a customer support ticket and haven’t made a subsequent purchase.

6. Refine your customer segments. 

You'll want to refine your customer segments as you acquire more customers and collect and analyze data. How might a new set of criteria reorganize your customer data into new segments? What new products or marketing opportunities might arise with refined segmentation?

Answering these questions can make expanding your business easier, developing desirable products and services, and increasing your brand equity. 

How to use customer segments

Once you’ve identified and refined your customer segments, the next step is to use data to optimize different areas of your business. 

Segment-based marketing examples 

• Tailor email campaigns to different segments, such as a nurture sequence for reluctant buyers and an upsell sequence for frequent buyers.

• Build different versions of a sales page based on generational segments and their values, such as Gen-X, Millennials, or Gen-Z. 

Segment-based product development examples

• Adapt existing products based on recurring feedback in a customer segment. 

• Offer new products to keep enthusiastic customer segments engaged. 

Segment-based customer experience examples

• Clarify the value of a product on the checkout page and streamline the checkout process.

• Develop clearer, more straightforward support documentation and train customer support specialists to troubleshoot issues faster.

Improve your marketing and business efforts with Coursera

Taking an online course can be a great way to gain marketing, customer relations, and business skills.

Learn how to reach your target market, qualify prospects, and more in the Customer Segmentation and Prospecting course, part one of Northwestern’s specialization, the Art of Sales: Mastering the Selling Process. 

Learn foundational Salesforce skills and prepare for entry-level CRM positions by getting the Salesforce Sales Operations Professional Certificate.