Segmenting Customers
Segmenting customers involves dividing the market into distinct groups of customers with similar characteristics, needs, or behaviours. This process allows organisations to target specific segments with tailored products, services, and marketing strategies.
Goal
The goal of customer segmentation is to identify nuanced customer needs and preferences, enabling product teams to develop solutions that more effectively meet the demands of different market segments, thereby increasing customer satisfaction and market penetration.
Context
While you might envision your product being a great fit for everyone in the market, the reality is that you need to differentiate initially to grow market share. This is because different customers have different needs and preferences. By segmenting customers, you can identify these differences and tailor your product strategy to better meet the needs of specific customer groups, increasing the likelihood of product success.
Types of Segmentation
| Sgementation | Description |
|---|---|
| Demographic Segmentation | Dividing the market based on demographic factors such as age, gender, income, education, and occupation. |
| Psychographic Segmentation | Segmentation based on lifestyle, personality traits, values, attitudes, and interests. |
| Behavioural Segmentation | Grouping customers based on their behaviour, usage patterns, benefits sought, brand interactions, and purchase journey. |
| Geographic Segmentation | Segmenting the market by geographical areas such as regions, cities, or countries, taking into account local preferences and needs. |
Inputs
| Artifact | Description |
|---|---|
| Trend Insights | Key findings from market trend analysis, highlighting emerging patterns and shifts in customer behaviour. |
| Customer Interviews | Direct feedback from customers on their needs, preferences, and pain points, providing qualitative insights into segmentation criteria. |
| Product Performance Data | Data on the performance of the product, including usage, engagement, and customer satisfaction. |
Outputs
| Artifact | Description | Benefits |
|---|---|---|
| Customer Segments | A list of the identified customer segments across geographic, demographic, psychographic, and behavioural dimensions. | Enables targeted product development and marketing strategies. |
Anti-patterns
- Overly Complex Segmentation: Creating too many segments can make it difficult to manage and target effectively.
- Ignoring Intra-Segment Variation: Failing to recognise that customers within a segment may have different needs and preferences.