Segmenting Customers into Groups - dummies

Segmenting Customers into Groups

By David Semmelroth

Part of Data Driven Marketing For Dummies Cheat Sheet

Marketers group customers together into segments in several ways. These various approaches are characterized by the type of data they use. Here are some common customer segmentation schemes:

  • Demographic segmentation: Demographic segments are developed by looking at age, income, marital status, presence of children, and other similar traits. Understanding yours customers’ financial means and lifestages helps you offer relevant products and services.

  • Geographic segmentation: Customers’ needs and attitudes vary according to where they live. Weather drives different product needs in different regions. And one has to look no farther than the red state/blue state divide of American politics to see that attitudes vary dramatically by geography.

  • Behavioral segmentation: Past purchase behavior and web browsing behavior yield powerful insights about your customers. This data can show you which customers are price sensitive versus premium benefit oriented. It also shows which customers are most loyal to your brand.

  • Customer profitability: Grouping your customers according to how much they contribute to your bottom line allows you to prioritize target audiences for your campaigns.

  • Psychographic segmentation: Based largely on survey research, psychographic segmentation is an attempt to understand the needs and attitudes of different customers. This understanding is very useful in crafting messages and offers that will resonate with customers.