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What is Customer Segmentation?

Customer segmentation analysis provides you with the opportunity to become intimately familiar with the individuals that make up your target markets. The closer you are to the ground floor of your shop or business, the easier it will be for you to gather the kinds of information you need.

Adam R.
March 22, 2023

What is Customer Segmentation?

The process of segmenting your customers involves splitting them up into distinct groups based on their shared behaviors and characteristics. Every one of your customers wants to purchase your product to fulfill some need of theirs; yet each individual customer’s needs and buying behaviors can be radically different from one the customer shopping next to them.

How it works

Customer segmentation analysis provides you with the opportunity to become intimately familiar with the individuals that make up your target markets. The closer you are to the ground floor of your shop or business, the easier it will be for you to gather the kinds of information you need.

How is customer segmentation used?

In the digital age, every single transaction made - be it in store or online - delivers important data that is then catalogued and saved. Software tools track and monitor customers as they jump from webpage to webpage, browsing different shops and interacting with advertisements along the way. Cookies keep track of customers so that they can deliver them a personalized experience every time they return back to a particular webpage.

These are just a few of the ways that businesses gather important customer data; data that is then used to generate powerful and effective marketing campaigns.

What are customer segmentation models?

Customer segmentation models are used to give structure and meaning to the customer data you receive. These models vary in complexity, and can be used to address a wide range of business concerns.

  1. Demographic Segmentation

The most common form of segmentation, this model seeks to categorize customers on the basis of race, gender, sexual orientation, age, and other physical characteristics. Demographic data is very easy to obtain, and the model is one of the most visible forms of customer segmentation out there.

  1. RFM Segmentation

Recency, frequency, monetary (RFM) segmentation identifies customers based on three different metrics: the recency of their last purchase, how many purchases they’ve made, and the amount of money spent. RFM is very useful for marketers trying to identify high-paying and loyal customers.

  1. Customer status

Companies often divide customers into active or inactive categories, based on when the last time they engaged or purchased a product was. In these cases, active customers will be courted and marketed to more vigorously - while inactive customers will not. An active customer is typically considered to be anyone who has purchased a product from you or engaged with your brand within the last 12 months.

  1. Behavioral segmentation

This common segmentation model looks at categorizing customers into groups based on their various shared buying behaviors. These behaviors can be anything, from: the time of day/year someone purchases a product, if the shopper makes purchases for one or multiple people, and where they like to shop.

  1. Psychographic segmentation

Psychographic metrics include things like a customer’s attitudes, beliefs, lifestyle, or purchasing preferences. These beliefs are drawn out of customers through surveying and opinion polling, where marketers probe their minds with questions about their attitudes and perspectives about their product/service. 

  1. High-value customer segmentation 

High value customers are the backbone of many businesses; this style of segmentation seeks to identify who those big-spenders are and what they like. The best way to gather more HVC is to identify and cater to their shared tastes and interests.

The importance of customer segmentation models

There are several benefits of adapting your marketing to one or more customer segmentation models:

  1. Customer retention

Market segmentation models divvy up your customers into smaller, distinct groups that can be more easily catered to. Models like HVC segmentation help you to identify customer groups that require more attention; enabling you to maintain high quality user experiences, and prevent customer churn.

  1. Develops stronger brands

Most industries stopped being able to get away with undifferentiated marketing after the dot-com boom and the rise of e-commerce. Niche marketing enables businesses to tailor their products or services to a very targeted set of tastes; thus developing a more loyal and engaged customer base.

  1. Identify new market opportunities 

Identifying unfulfilled market niches - and then capitalizing on them - makes for a very profitable differentiated marketing strategy. 

  1. Efficient marketing strategy 

To get the most out of your marketing dollar, you need to market smart. Breaking down your audiences into distinct segments allows you to run ad campaigns that resonate far more with your customers than broad advertisements.

How to segment your customers

The process of segmenting your audiences begins with determining your goal. It might help to have an idea of which type of segmentation model seems the most compatible with your business before you set about conducting research. Thankfully, there are a variety of digital tools and software that make gathering and managing customer data a relatively accessible feat. 

It's not enough to merely gather customer data en masse - you have to know how to use it. Data without analysis is just numbers and figures on a spreadsheet; with the proper attention paid to question-asking, answer-finding, and likely several follow-up tests - you will find yourself with a developed, segmented audience at your disposal. 

Customer segmentation tools

With the right tools on your belt, segmenting your customers can be done much more simply than you would think. Surveying software like SurveyMonkey, Typeform, or Helpfull enable you to develop tests that can be used to gather valuable information from your customers. 

The ideal segmentation platform does more than simply allow you to probe your audiences; they can be used to develop and build communities, improve your product/service designs, and help grow the size and scope of your business - and at a very low cost.

Helpfull - The best way to segment and manage your customers

Helpfull is a living, growing platform built around the core principles of accessibility and usability. A community of thousands are ready and waiting to test your products; giving you the feedback you need to turn your project into a resounding success. 

An intuitive user-interface, coupled with the ability to gather hundreds of consumer responses in just minutes, are just a few of the features that make Helpfull the ultimate tool for any artist, designer, marketer, or inquisitive spirit.

Get the feedback you need to succeed - sign up with Helpfull today, and get surveying within minutes!

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