Skip main navigation

Four methods of customer segmentation to help you understand your audience

Dividing a customer database into groups that are similar in specific ways will identify certain key and distinct characteristics
Customer segmentation is the term used by marketers for the division of a customer database into groups that are similar in specific ways. Each of these segments will contain individuals that have certain key and distinct characteristics.

These distinctions could be based on simple demographics or using more complex models. Below are some of the most common segmentation criteria.

1 Demographic segmentation An example of demographic segmentation according to age groups.

Understanding the buying habits of different age groups can help marketers to better engage with their target audience. Customers are segmented according to attributes such as their age, gender, income, religion or household size. For business-to-business, this could include company size, number of employees, or number of years trading.

Demographic segmentation is important in helping companies understand who is buying their products and services.

2 Behavioural segmentation An example of behavioural segmentation according to frequency of buying habits.

Segmenting customers according to their spending habits can also help the organisation to set the price point. Customers are segmented according to their actions with your company, for example, how much they have spent, how often, and how recently.

When deciding which of your audience to send a communication to, you may also make use of their behaviour on your websites and in your emails. For example, you could use the content of the pages they have visited and the emails they have clicked on as indicators of what they are interested in.

3 Geographic segmentation An example of geographic segmentation according to the continent.

A geographic segmentation can range from the neighbourhoods of a city to completely different continents. Customers are segmented according to where they live, or for business-to-business marketing, the location of an office. When selecting an audience for an event in a specific location, or a campaign which is running in a specific geographical location, you can select audiences who fall into that geographical area.

3 Psychological segmentation An example of psychological segmentation according to reasons for purchasing products.

Psychological segmentation often develops into personas which organisations can use as they launch new products or services. Customers are segmented according to their hobbies, interests, and attitudes.

Psychological segmentation tends to focus on what motivates each group of consumers. The process of creating these segments should help you understand your audience better. It’s not uncommon for a company to have audiences who choose their products for a variety of differing reasons.

4 Blended segmentation An example of blended segmentation according to location, spending habits and brand interest.

A well-considered blend can ensure that you reach your ideal customer in the most engaging way. Once you have your different segments, you can start blending them. You would use a blend of segmentation to select the right people who are most likely to be interested in the marketing message you want to share, making your communication more relevant and interesting to the customers receiving it.

This article is from the free online

Introduction to Marketing: Understanding your Customers

Created by
FutureLearn - Learning For Life

Our purpose is to transform access to education.

We offer a diverse selection of courses from leading universities and cultural institutions from around the world. These are delivered one step at a time, and are accessible on mobile, tablet and desktop, so you can fit learning around your life.

We believe learning should be an enjoyable, social experience, so our courses offer the opportunity to discuss what you’re learning with others as you go, helping you make fresh discoveries and form new ideas.
You can unlock new opportunities with unlimited access to hundreds of online short courses for a year by subscribing to our Unlimited package. Build your knowledge with top universities and organisations.

Learn more about how FutureLearn is transforming access to education