The document discusses customer segmentation, which is the process of dividing customers into groups based on shared attributes. This allows companies to better understand their audiences and connect with different customer segments. The document outlines several types of segmentation approaches and bases that can be used, including demographic, behavioral, and needs-based segmentation. It also discusses the benefits of customer segmentation, such as improved targeting, customization, and profitability, as well as some potential drawbacks like increased costs and effort. Overall, the document promotes the use of customer segmentation to gain insights into customer journeys and needs.

1. What is Costumer
Segment?
In e-commerce today, the concept of customer
segmentation offers marketers a powerful means
of dissecting their audiences and connecting with
consumers on a more personal one-to-one level.
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How to Do Customer Segmentation Based On Customer
Journey Insights
When you leverage data insights and personalization, you can make the customer feel like they are
understood. This personalization also allows you to present them with tailor-made solutions to their pain
point.
Over time, customer segmentation makes it possible to reach the right customer, with the right message,
and the right time.
In this guide, we’ll explore this strategy in-depth, showing you how to implement customer segmentation
to understand the customer journey – and how to leverage the insights for more significant gains.

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Two Very Different Marketing Approaches
The marketing approach you opt for depends on your campaign goals. Typically, you will either predefine
your targets or else you will start with a broad scale, before refining your targeting to specified groups
afterward.
1.1. Mass Marketing
Mass marketing is advertising a product or service to a full, varied audience. Not everyone who receives
the message may be interested, so it isn’t great for pushing sales. Ideally, it should only be used for brand
awareness, as companies can broadcast mass marketing messages to reach a lot of people in a short
space of time.
Traditionally, mass marketing belongs to the realms of newspaper, television, and radio, rather than in
digital marketing.

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Two Very Different Marketing Approaches
1.2. Niche Marketing
Niche marketing is when a defined subsect of the market targets specific products or services, which are
closely aligned to the needs and interests of that audience. Niche marketing is all about relevant content
and honing in on the customer’s needs, and it is a cornerstone of virtually all digital marketing in the
modern era.
Increasing market competition drives companies to improve customer segmentation so that they can
further define their niche to cater to their customers on a more personal level.

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The Power of Personalization
Nowadays, people expect a seamless user experience from one touchpoint to the next. This experience
allows for their specific needs to be addressed the content, offers, and brand messaging they receive are
directly related to their interests.
Companies can do this by using personalized marketing, which is based on data analysis of consumer
trends, browsing behaviors, and purchasing history. As you gather more data, your marketing team can
get a better understanding of prospects. This allows them to tailor their marketing efforts to engage
people in ways that are more likely to result in a conversion.

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The Power of Personalization
Research indicates that 59% of online shoppers believe personalized marketing has a significant influence
on their purchasing decisions.
The real challenge is maintaining effective personalization as your business grows. While you may already
have a niche audience, your content can still be too generalized when it’s delivered to a larger, more
diverse audience. This can lead to a drop in audience engagement, and so, customer segmentation
becomes essential.

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What is Customer Segmentation?
Customer segmentation is the process of creating defined target groups of people within your customer
base.
Modern consumers have a vast array of options available, with intense competition and constant
innovation providing marketplaces with an embarrassment of riches. With so many products and services
to choose from, customers have the luxury of choice, forcing companies to go the extra mile if they are to
keep people interested.
As your business – and your audience – grows, you can use customer segmentation to analyze and
categorize your customer base.

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What is Customer Segmentation?
This involves grouping them by shared interests or behaviors, such as:
• Pages visited
• Products viewed
• Past purchases
• Questions asked
With every visit and digital touchpoint, you can gather more data to paint a clearer picture of each
customer, their needs, and their interests. This paves the way for better e-commerce personalization, as
you can serve targeted content to each segment, in the form of personalized content, emails, and
product recommendations.
You can achieve a high level of personalization and relevance by creating small segments. However,
having too many groups is undesirable as each group will require a certain amount of time and effort to
develop and market content.

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Why Do We Need Customer Segmentation?
Customer segmentation makes it easier for marketing teams to run targeted campaigns. With the tactic
of divide-and-conquer, marketers can tap into the raw potential of data analysis to boost engagement
metrics. Ultimately, this helps align their marketing funnel with the customer journey so that they can
achieve a higher return on investment (ROI) in their campaign efforts.
Let’s see how you can implement customer segmentation in B2B (Business-to-Business) and B2C
(Business-to-Customer) business models.

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Why Do We Need Customer Segmentation?
B2B Segments
In B2B, companies will segment their customer base – other businesses – by using attributes like:
• business line
• business vertical/horizontal business
• products/services based categorization
• retail/wholesale
• bifurcation or role-based
• revenue
• geographical location

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Why Do We Need Customer Segmentation?
B2B Segments
For example, in a vertical business model, the marketing segment is focused on a specialized product or
service. As a result, segmentation will make marketing efforts more relevant to areas linked to these
products and services.
By comparison, the horizontal business model marketing segment focuses on job roles in diverse
companies or industries. SAP and Cisco are two examples of B2B brands.
Typically, the firmographic attributes used in B2B segmentation won’t be enough for planning marketing
and budgeting. Therefore, we have other segmentation schemes available that provide a more detailed
overview of customer businesses.

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Why Do We Need Customer Segmentation?
B2C Segments
B2C is when a business sells direct to the end-user, which is also known as the sales model. In this model,
we segment customers based on human-centric attributes, such as:
• Age
• Gender
• Location
• Profession
• Income
Each segment can be influenced and further defined by considering attributes like social class,
technological knowledge, and preferences. Amazon and Google are two good examples of the B2C
business model.

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Segmentation Bases and Approaches
Generally speaking, customer segmentation is done on either the B2B or B2C model. The segmentation
bases and approach depends on the business model that attracts customers to the business.
The following approaches to segmentation are there for companies to experiment with, and they can mix
and match several of these depending on their business, product, and services.
Segmentation Approaches
1. A priori segmentation
2. Post-Hoc Segmentation
3. Needs-based segmentation
4. Value-based Segmentation

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Segmentation Approaches
The approach you take to customer segmentation will depend on many integral factors, including
business domain, data volume, and time applicability. You must also think about the resources and
knowledge that marketers have to perform segmentation.
A priori segmentation:
A Priori segmentation is the easiest, most cost-effective method. Although it focuses on public data, it
leans more towards intuition, and so the segments don’t always have an excellent marketing context.
As such, a priori segmentation is best used for mass marketing. As it doesn’t use any need-based
attributes, this approach isn’t practical or deep targeting.

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Segmentation Approaches
Post-Hoc Segmentation
Post-hoc segmentation is based on underlying customer intentions – derived from data insights. This
data-driven approach considers consumer trends, data patterns, and behaviors.
Because of this, these segments are more meaningful for marketing content, and this approach provides
a more targeted, focused marketing campaigns.
Usually, this type of analysis works by generating clusters on multiple attributes, as larger customer data
volumes offer better insights.

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Segmentation Approaches
Needs-based segmentation
This approach is all about identifying customer needs and using customer segmentation to group people
with shared or similar needs.
Need-based segmentation is valuable because it helps create defined segments, and shows you how
much that segment has already been served.
The major challenge here is discovering customer needs, which may focus on price, quality, or service.
Doing this requires thorough market research and study, and you must then align the company’s vision,
messaging, and products to cater to the needs of the market.

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Segmentation Approaches
Value-based Segmentation
When it comes to making purchasing decisions, price is a crucial metric for customers. When businesses
use value-based segmentation, they assess customers on their economic value, and group customers
with similar economic value into one segment. This approach looks at a prospect’s worth not only as a
customer but also as an influencer and a loyal brand advocate.
While it requires detailed customer interviews and reviews, value-based segmentation is product-centric.
Whereas need-based segmentation doesn’t explore the pricing and profit from a business perspective,
value-based segmentation helps businesses create multiple categories that consider varying profit ratios
from one customer segment to the next.

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7 Types of Segmentation Bases
During customer segmentation, data analysts and marketers must identify the key attributes that will
allow them to categorize customers. These attributes form the basis for customer segmentation. Here
are several common types of segmentation base in use in digital marketing today:
1. Demographic Segmentation
2. Geographic Segmentation
3. Geo-Demographic Segmentation
4. Psychographics Segmentation
5. Behavioral Segmentation
6. Socioeconomic Segmentation
7. Contextual and Situational Segmentation

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7 Types of Segmentation Bases
1. Demographic Segmentation
This divides people into groups depending on demographical attributes, such as:
• Age
• Gender
• Education
• Language
• Marital status
Demographic segmentation is a popular choice where businesses consider customers who have similar
lifestyles, interests, and purchasing behaviors.

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7 Types of Segmentation Bases
1. Demographic Segmentation
Many social media platforms will provide easy access to this type of data, and it is also widely available as
census data. Therefore, if you use this segmentation base, you can expect stiff competition as many
other businesses will also be using it.
A caveat to demographic segmentation is that it tends to assume that all customers in one segment will
have similar needs. This “One size fits all” approach never yields optimal results, especially with larger
audiences.

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7 Types of Segmentation Bases
2. Geographic Segmentation
Geographic segmentation groups customers based on predefined geographical locations. This technique
is excellent for location-based marketing, as it reduces wasted spend on advertising in irrelevant or
unwanted areas.
When you take the location of your customers into account to focus on specific countries, cities, or
regions, you can dramatically improve your marketing ROI.
Furthermore, you can customize products or services according to the language, cultural variations, or
average income of an area.

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7 Types of Segmentation Bases
3. Geo-Demographic Segmentation
Geo-Demographic segmentation is an advanced strategy that combines demographic segmentation and
geographic segmentation.
First, you group customers by geographical location and then segment them further depending on
demographic attributes. The more demographic characteristics you use, the more complicated this
technique becomes.
While it isn’t as straightforward as other methods, geo-demographic customer segmentation enables
highly-accurate targeting.

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7 Types of Segmentation Bases
4. Psychographics Segmentation
Psychographics segmentation groups customers by personality traits, including lifestyle, communication
preferences, attitudes, beliefs, and values.
When you get a better understanding of your customer’s thought process, your marketing team will be
able to create more engaging content relevant to customers’ needs and interests.
Unfortunately, this method can be a challenge to apply as it requires credible psychological surveys,
analysis, and studies of your customers.

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7 Types of Segmentation Bases
5. Behavioral Segmentation
Behavioral segmentation examines behavioral patterns that customers exhibit whenever they were
interacting with your site, products, or services.
For example, you can consider people in the product awareness stage who make queries about the
product features, its price, or any availability loyalty programs.
By analyzing onsite browsing behaviors like navigational patterns, product pages viewed, etc., we can
develop a keen sense of what customers are interested in buying. When using this type of segmentation
base, you’ll need a lot of time, data, and experience to maximize its value.

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7 Types of Segmentation Bases
6. Socioeconomic Segmentation
Socioeconomic segmentation looks at the social status and income of customers. The income level offers
insights into the buying power of customers, and also the markets, products, and services they are
interested in targeting.
In a similar way to demographic segmentation, this approach adopts a “one size fits all” attitude, which
assumes all customers in one economic group will have related needs and desires.

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7 Types of Segmentation Bases
7. Contextual and Situational Segmentation
The last on our list is relatively new. This dynamic technique isn’t limited to any specific attributes, as it
extends to situations that arise.
Marketers consider specific situations where their product or service may be useful, and they also
consider the needs of the customer. By mapping out ways of bringing the customers and solutions
together, companies can use this segmentation to discover new ways of selling their products to
customers.

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Benefits of Customer Segmentation
• Segmentation assists in financial and human resource capitalization.
• Segmentation assists in product customization and developing new products when an overabundance
of customization is needed.
• It also boosts the overall profitability since targeted marketing and budgeting are completed based on
known segment expectations.
• Thanks to segment product distribution, customer service, and product delivery can be optimized and
customized.
• Segmentation resource utilization can be optimized for service and product delivery and customer
support.

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Benefits of Customer Segmentation
• Customer segmentation can also help determine prices and define profit margins. While high-end
service segments can be charged more, low-end service segments can also be charged low – for the
same product.
• As segments are treated with a focus on service and product target marketing, customer retention is
enhanced because of the customer-centric approach.
• Need-based service and focus intensity are adjustable for each segment.
• Segmentation also helps the marketing team spend less time and energy on low return segments and
instead, focus on high-value segments. This both boosts revenue while allows for high-quality
revenue, requiring fewer resources and efforts.

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Drawbacks of Customer Segmentation
• The segmentation process requires a lot of effort when it comes to cost, time, and human resources
to perform precise and effective segmentation.
• A stronger marketing effort is needed for content preparation.
• While segmenting, costs aren’t taken into consideration.
• To satisfy product variations for every segment, and sometimes full products, investment ratio
increases.
• Market saturated segments can come with low returns and at times, losses.
• Product and product variation explosions in product catalogs become challenging to handle.
• Over time, segment definition change can occur because of different factors such as cost, age-based
population, the cost factor, and buying power. These changes threaten the already incurred marketing
and investment plans.

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Drawbacks of Customer Segmentation
• Because of product variety, inventory management becomes strenuous.
• If the product is relatively new, product-centric segmentation can’t be completed.
• The production cost may rise because of smaller-scale production since smaller customer volume and
segment-specific customization limits the segment.
• If the segment grows too big, it may develop a mass-marketing approach because of the overly
generalized content.
• Segmentation can be the result of customers missing out.
• It’s common for channels to be ignored while creating segments.

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Customer Journey and Customer Segmentation
Businesses are changing their development practices and marketing strategies to become more
customer-centric. As this happens, customer segmentation also needs to become customer-centric.
The segmentation process should always consider the customer’s needs, demands, and preferences to
produce the most customer-centric segments as possible.

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Are Businesses Customer-Centric?
While businesses are steering toward becoming more customer-oriented, they’re still running their
service or product-focused campaigns. This means the added value for customers comes in somewhere
down the line.
These days, however, customers expect businesses to make offers based on their needs – without having
products thrown at them. Customers want to be understood at an individual level.
This means this directional shift should be made from campaign-based marketing to customer
engagement oriented marketing while covering the full customer life cycle on all the channels they
prefer.

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Are Businesses Customer-Centric?
On top of personalized products and services, businesses are veering towards the customer experience.
As Jamie Brighton explains, “Whether you’re a retailer trying to anticipate what customers will need next
or a broadcaster hoping to upsell existing subscribers on a new service, traditional targeting isn’t enough
anymore. People do not want to feel targeted; they want experiences that feel tailored to their needs.
That’s what separates modern companies that know how to put customers first from those businesses
that can’t look past their products and services.”
Customers’ interactions are mainly coming from campaigns. The context and intent of these interactions
will define their requirements, willingness to choose the brand and overall loyalty.
This form of modern marketing that is now vital.

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Customer Engagement and Context Development
Customer interactions at any stage are exceedingly important since these interactions reveal the
customers’ needs and intent.
With every interaction cycle, more data is produced, and the content becomes even more precise. As
soon as the context holding datasets are analyzed, marketers are given rich insights which are geared
directly towards customer-orientation.
Through machine learning and artificial intelligence advancements, learning such insights is becoming
much more refined – and accurate as these context-focused systems anticipate customer needs.

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Customer Journey Stage-based Segmentation
By now, you should understand that the fundamental goal of customer segmentation is to group
customers based on their needs.
Arguably the most effective way of understanding the needs of your audience is to consider their intent
and the context. You should think about where your prospect is in the customer journey, and try to
understand what they may be thinking at that point.
The customer journey begins with brand awareness, moves to consideration, then leads to conversion.
When you’re marketing team is taking the right approach, the customer journey continues to
become brand loyalty.
With this journey in mind, we can use customer segmentation to focus our marketing at four distinct
stages. This is known as customer journey stage-based segmentation.

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Customer Journey Stage-based Segmentation
Brand Awareness Segment
The initial stage looks at consumers who have just discovered the brand. Data may include a lot of traffic
that is irrelevant, and therefore will not convert. By segmenting customers here, you can define leads
that are worth nurturing a relationship with, and also recognize which consumers are of little to no value.
Customer Engagement Segment
After brand awareness, interested consumers will begin engaging brands on their website and social
channels. They may be new customers or returning ones, and at this stage of the customer journey, they
will want to learn more about the brand, its product, services, and values.
Using customer segmentation in this phase helps your business see which products attract the most
interest and queries. You can also see the peak times and days where your prospects are most active and
engaged.

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Customer Journey Stage-based Segmentation
Conversion/Sale Segment
Traditionally, the most vital step in the customer journey is conversion. By using segmentation, you can
discover the efficacy of each of your channels, and learn more about which locations, times, ads, etc., are
contributing the most to your overall conversion rates.
Loyalty Segment
Getting the sale is just the beginning. When you convince customers to return, you get the chance to
build a lasting relationship that delivers more value for your business.
Customer segmentation helps you target previous customers with special offers and loyalty benefits so
that you can sell to them again.

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The Customer Needs Drive Modern Marketing
A lot has changed in the digital era, but the customer is still king.
While marketplaces are thriving with intense competition, and consumer interests are diverse and
somewhat unpredictable, businesses have a wealth of marketing technology and techniques to give
people what they want.
By experimenting with various customer segmentation strategies, your company can engage people with
more personalized marketing, and align your marketing funnel with the customer journey.
Over time, with more data, practice, and patience, you can offer a seamless user experience across
multiple channels, ensuring you make the right offer at the right time. Done right, you won’t just win
customers – you’ll earn loyal brand advocates.

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