How & Why to Segment Your Customers

Segmentation is the process of defining who, along the spectrum of potential groups, should be your customer (who is most likely to value your offer, product or service).  Segmentation shapes every piece of the marketing strategy since the reason you exist is because you create value for a customer group.  Read why it is critical that your marketing strategy start with the customer here.

The segmentation process deserves time and thought. Below I've outlined the steps to start the segmentation process. You should seriously consider if you need to hire a marketing professional to help you complete your segmentation study if you do not have the expertise yourself. 

Segmentation Steps:

Brainstorm: Who are the Buyers?

Who are all the potential buyers or consumers of your product or service?  Make a list.  Get creative.  Think about different ways to describe them.

Brainstorm:  Consider Different Ways to Segment the Consumers

Think:  what are all the different ways you could divide the list of buyers & consumers you made?

Some common differentiators include geographic (city, nation, rural vs urban, etc.), demographic (age, income, gender, etc.) and lifestyle (luxury, modest, etc.). 

Push beyond these generalities and consider how consumers use or engage with your product or service (at a category level). For example, are there heavy users & light users?  Do they value different benefits - price vs performance?

Define the Segments

Give your segments names & descriptions.

For each segment, describe:

1) use of product or service, 

2) benefits they seek from the product, 

3) attitude and level of loyalty toward product, and

4) pain points or satisfaction level with existing options.

Create Scenarios & Evaluate

For each segment, consider what it would mean for you & your organization if you pick them.  

Take time to explore each segment fully to understand the implications to channel selection or distribution, pricing & brand positioning.

Pick a Segment

Deciding which segment to select depends on several factors.  You need to assess:

1) your "own-able" competitive advantage,

2) your business goals, 

3) available resources and 

4) the expected return or profitability of the different segments.  

Develop Your Positioning Statement

This is one of the hardest steps, but it is very important.  The goal is to "define the specific position you want to occupy in the mind of the target audience you chose." 

This is based on 3 critical elements: 

1) your point of difference or competitive advantage over the other choices your target audience has (your claim), 

2) the reason to believe your point of difference (your proof), 

3) the end benefit your target audience receives (emotional benefit, not functional).

Read more about the concept of positioning from the people who originated the idea in the short book Positioning: The Battle for Your Mind. 

Got a question about segmentation?  Need help?  Email me.