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Customer segmentation



A. learn how to identify the segments of the target customers
B. learn how to dentify the characteristics of any given group
C. be prepared to give them the best customer support and services.

Time needed to review this content: 40 MIN
Customer segments refer to the different groups of customers a company wishes to serve. Since the customers are the ones that buy the products of the company, a good understanding of the customer is the heart of any business model. Without a good understanding of the customers, no company can survive for long.
One can divide its customers into various segments, either a large segment or in several smaller ones. A segment is a group of customers, which has a similar set of needs or demands, and each segment requires thus a different approach and marketing and sales strategies.

It is highly recommended to divide your customers in different segments, as only a part of the population will buy your products or services. A “one-serves-all” approach is generally less profitable than a customized approach based on segments.
When defining your segments, you have to be careful not to define a too wide a segment.

Segmentation means that you identify meaningfully different groups of customers which represent different segments whenever they:
1. Require a differentiated and tailored offer from the company;
2. Require different distribution channels to reach them;
3. Require a different type of client-relationship with the company;
4. Have different levels of profitability;
5. Are willing to pay for different items or aspects of the product of service.

Segmentation can be done on the basis of a wide variety of criteria, examples are gender, age, economic status, occupation, family composition, etc. You can use these to define the characteristics and traits by which you divide your customers into segments.

In general there are 4 major criteria which you can use for segmenting your customers:
1. Demographics, meaning you divide your costumers on the basis of religion, gender, lifestyle, age, generation, education, etc.
2. Psychology, you divide them on the basis of personality, motivation, interests, etc.
3. Geographic, you divide them based on the place where they live and the characteristics of the area (low versus high population density, urban or countryside, etc.)
4. Benefits, you divide them by using as a basis the benefits or added value they are looking for in your product or service, for example if you are a personal trainer, you might segment your potential customers into those that want to loose weight or those that want to be fit.

Segmentation means following these steps:
1. Divide your market into segments according to the 4 criteria (or a combination of them), taking into account their needs and their behavior in the past;
2. Define for each of the segments the potential profit by applying for each a cost and revenue analysis;
3. Invest time and resources in adjusting the product or service to the specific segment;
4. Define the sales and marketing strategy (including the distribution channels) and the profit margins for each of the segments;
5. Measure and monitor the performance of the segments to be able to identify changing market conditions, which might create a need for adjusting the segments or the strategy to serve them.


“How to Perform Customer Segmentation” 

“Customer Segmentation” by Big Data



• Be clear about your universe or target of customers;
• Find a good source to get different groups of people that are your potential customers;
• Get information about the different groups you’ve got.


How to identify the different groups or segments of your target?
Identify the preferences, wishes and other characteristics of the different groups in your target.



What are my customer segments, and how do I identify them based upon the 4 main criteria?
What are the distribution channels to reach each of these segments?
What is the added value I am offering each segment through my product or service?
What tools or activities can I put into place to monitor my segments and their performance?


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