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Types of Customer Segmentation Models : Process and Benefits

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What is customer segmentation?

Customer segmentation , as the name suggests, is the process by which you can divide your customers up, usually based on their common characteristics like behavioral traits or demographics in order to market those customers more effectively and efficiently . Customer segmentation groups are basically used to inform the positioning of a brand and its market value . Also , to improve how a business sells itself . It is a very effective tool for business for the alignment of strategy and tactics and to set up a better target .Every customer is different from each other and the customer journey varies from customer to customer so a single path approach may not work everytime and this is where customer segmentation gains its importance.

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Customer Segmentation vs Market Segmentation

Customer segmentation will help you to have a better understanding of your existing customers . One of the signature features of customer segmentation is to create buyer personas in order to help you improve your marketing and advertising to a particular group . You can also say that customer segmentation is about what is right in front of you.

While on the other hand when we are talking about market segmentation , it is a much broader aspect . Market segmentation is about looking at the target market as a whole . It is about creating brand awareness to connect to new customers , creating new lines of products meeting the market need or improvising the existing products.

In simple words , market segmentation is a bit more general and takes the whole market into consideration and customer segmentation is more about just your side of the market

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Types of Customer Segmentation

Demographic or Socioeconomic Segmentation

It is one of the most easy to understand and widely used types of customer segmentation . Demographic segmentation usually looks at age and gender but one the other hand , socioeconomic factors such as marital status , income , occupation or industry and education falls under this category too. 

Geographic Segmentation

This is also another widely used type of customer segmentation . The demands of customers vary from city to city , country to country . It is more important in case of larger countries with a particular topography or economically diverse regions . Cultural characteristics and different consumer demands varying from region to region forms a part of their targeting strategy .

Behavioural Segmentation

It can be figured out from the name that this type of customer segmentation deals with the consumer behaviors and habits . This may include online behavior or buying habits or technology usage or online hours. Organic social posts and email campaigns for consumers when they are most active online are some marketing efforts that are taken in this segment. 

Psychographic Segmentation

 Psychographic segmentation is very similar to behavioral segmentation as it attempts to understand a customer more intimately, mostly based on their personality , interests and benefits, not something based on their past actions . This segment is powerful to build a full profile of your target consumers and makes you more confident about who you are targeting and why.

Social Media Segmentation

Social media segmentation categorizes your target audience by platform to get an idea of where they are the most active. These insights are really helpful to determine where to post your advertisements or improvise your content for the desired results.

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Benefits of Customer Segmentation

  1. Ensures a loyal and healthy relationship with customers by offering them their desired products and services . 
  2. Improves all over customer services .
  3. Identifies the least profitable customers and helps the business to target the most profitable customers who are most likely to buy your products .
  4. Helps to increase profits and reduce the cost .
  5. Helps to improve or modify products as per consumer wants and desires .
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How to Segment Customers?

  • Reviewing company databases and market analysis .
  • Examining the company’s current customer database .
  • Always considering a customer segmentation tool .
  • Collection of consumer’s experience data . 
  • Analysis of the data of customer’s experience .
  • Lastly , refining your customer segments .
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  Customer segmentation has a huge effect on the whole customer management process by categorizing and dividing the consumers into various groups having identical needs and desires . The company markets each group in a different way and tries to focus on what each customer desires or wants at any given moment .

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Q 1 . What is the difference between a market and a customer ?

Answer : A customer is a single entity or individual  who buys a given commodity . A market is a place where buyers and sellers of products buy and sell , respectively . 

Q 2 . What are the five criteria for choosing a customer segment ?

Answer : Five criteria for customer segmentation are 

  • Gender
  • Age
  • Nationality
  • Education
  • Profession or income 

Q 3 . What are segmentation methods ?

Answer : 1 . Demographic 

               2 . Geographic 

               3 . Psychographic 

               4 . Behavioral 

               5 . Needs based 

Q 4 . How do you identify customer segments ?

Answer : a) Identify your customers

  1. b) Creating  list of target segments 
  2. c) Narrowing your list to the most promising segments 

Q 5 . What are the most important customer segments ?

Answer : Demographic , psychographic , behavioral and geographic segmentation are the most important ones .

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