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What is customer segmentation?

A video describing the method and importance of segmentation.
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Hi there. My name is Nigel and I’ll be your moderator for this session. Now in this session, we’re going to explore an increasingly important marketing concept and technique first developed by Smith in 1957, and it’s known as customer segmentation. We’ll firstly discuss the reasons why businesses may wish to use customer segmentation before discussing some of the ways in which markets can be segmented. We’ll then discuss some of the ways in which customer segmentation can be used by the organization. Finally, we’ll look at some of the benefits and issues that can arise as a result of undertaking customer segmentation.
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Defining and profiling customers has become an even more important thing as a result of mass production, mass communication, and globalization, as these have all led to the creation of larger potential markets. Few organizations have the resources to be able to target such large markets, and so looked at ways to break down the market into more manageable parts or groups of customers with similar characteristics. In this way, organizations can focus on meeting the needs of specific customers really well, rather than trying to meet the needs of every single customer.
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The concepts of customer segmentation was first developed by Smith in 1957, and it’s defined as the art of discerning and defining meaningful differences between groups of customers to form the foundations of a more focused marketing effort. If an organization wishes to segment a market, it can do this in a number of different ways. Some of the key forms of segmentation are geographic, demographic, geodemographic, psychographic, behavior, multivariable. The implementation of customer segmentation can occur in three ways. Firstly, the concentrated approach is the most focused and will involve the organization seeking to serve the needs of one specific segment. Secondly, a differentiated strategy will involve developing a number of different marketing mixes in which each serves a different segment.
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Finally, the undifferentiated strategy assumes that the market is one group in which there were no significant differences between consumers. Benefits of customer segmentation include that customers are able to find products that meet their needs more fully. The organization can better target its marketing efforts to potential customers. The organization can gain a better understanding of its environment and competition. Issues can arise in customer segmentation if the organization does not have the appropriate skills to undertake segmentation, or if segments are poorly defined or badly implemented. In this session, we’ve explored the marketing concept of customer segmentation. We’ve looked at what the term means in addition to considering some of the reasons why organizations may wish to undertake customer segmentation.
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We’ve also discussed some of the different ways in which segmentation can be undertaken and the ways in which this segmentation can be used to inform the marketing strategy. Finally, we’ve considered a few of the potential benefits and issues that can arise when using such an approach within business. List five key points. the resources to be able to target large global markets. Two, customer segmentation is defined as the art of discerning and defining meaningful differences between groups of customers to form the foundations of a more focused marketing effort. Three, some of the key forms of segmentation are geographic, demographic, geodemographic, psychographic, behavior, multivariable. Four, the implementation of customer segmentation can take three forms, concentrated, differentiated, and undifferentiated.
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Five, a key benefit of customer segmentation is the customers are able to find products that meet their needs more fully.

Let us summarise the 5 key takeaways from this video:

  1. Few organisations have the resources to target large global markets.

  2. Customer segmentation is defined as the art of defining meaningful differences between group of customers to form the foundations of a more focussed marketing effort.

  3. Some of the key approaches to segmentation are: demographic, geographic, geodemographic, psychographic, behavioural, multi-variate.

  4. The implementation of segmentation can be concentrated, differentiated, or undifferentiated amongst others.

  5. A key benefit of customer segmentation is that customers can find products that meet their needs more fully.

We will look at these point in more detail during the next 3 weeks.

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Strategic Marketing: Segmentation, Targeting, Positioning

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