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Customer segmentation is the process of dividing your target market (potential customers) into groups based on shared characteristics. For example, you can segment customers based on their needs, behaviors, lifestyles, or other attributes that may impact their purchasing behavior.
All these characteristics can be broken down into five main categories: demographic, psychographic, geographic, behavioral, and firmographic.
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We’ve gathered everything you need to know in these four steps to customer segmentation research.
Ideally, you should start your customer segmentation process with preliminary research. The easiest way to do this is with a customer segmentation survey. Surveys allow you to quickly collect deep qualitative and quantitative data on your target audience.
Geographic segmentation refers to the segmentation of customers based on the region that they live and work in, and the characteristics of that location. This includes:
The better you understand your customers, the easier it is to sell to them. Creating effective customer segments helps you gain unique insights on how to capture your audience’s attention, increase sales, and keep your customers happy.
Psychographic segmentation refers to the breakdown of customer groups based on internal, psychological characteristics that may influence their buying behaviour, including:
Behavioral segmentation is the grouping of customers based on their behavior patterns through their interactions with the company. Companies using behavioral segmentation typically segment customers based on their past purchase behavior (timing, usage, frequency) or stages in the buyer journey.
Firmographic segmentation is similar to demographic segmentation but has to do with characteristics that describe a company or organization, which can be useful for business-to-business (B2B) customers.
Reviewing the different segmentation categories can help you brainstorm what kind of questions you want to ask your audience, and how you will define or describe your segments. We recommend testing more than one type in your segmentation research.
In this step, you’ll test hypotheses and themes revealed in the exploratory study to solidify which characteristics are significant differentiators for your target segments.
Creating customer segments is an artistic process as much as it is scientific, so take your time with this step and keep an open mind when analyzing the data.
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