Everything You Need to Know About Behavioral Segmentation + Examples

If you're a sneaker retailer, for example, targeting the market segment of people who work as medical professionals can help you better speak to the level of comfort your sneakers provide. Demographic segmentation is effective because people who share each trait have things in common. Both types of segmentation divide people based on their shared traits—be that their age, interest, or purchasing habits. The more people you can target, the more chance you have at making money online, right? Marketing to the right people, at the right time, and in the right way can elevate the campaigns of any company.

For example, over 817,669 people moved away from California in 2022, and almost 75,423 left in 2023. It may also help to review segment changes alongside current events and cultural shifts that impact demographics. If you haven’t already, review your key performance indicators (KPIs) for each of your customer segments.

Combine your data with customer segments, which Shopify users can create using built-in segmentation tools. A few weeks or months into your strategy, evaluate whether key business metrics—such as new customers, customer acquisition costs, and retention rate—improved as a result of market segmentation. Much like any new marketing strategy, the most important step is evaluating whether your segmentation strategy worked. You can collect the relevant market data from your business tools—but if you're a Shopify user and segmenting using customer data, look no further than Shopify's segmentation tools.

Put simply, market segmentation helps to identify potential customers, while customer segmentation helps better reach existing ones. While closely related, customer and market segmentation are separate disciplines. If you can’t collect customer information directly, you can take steps to purchase it from third parties. Marketers can take the entirety of the information they have about each segment and use that data to build marketing programs that resonate directly with the group. One of the most common uses for customer segments is to create personalized marketing experiences designed specifically for each customer group. You might use a demographics-driven segment of only men, college-educated and 40 years old or more to develop a particular ad campaign in a men’s magazine.

In the agglomerative approach, the algorithm starts with each data point being in its own cluster. In the third step, the best solutions are selected and these are randomly changed, which is also referred to as mutation in this context. The second step is to determine the quality of the solution using a fitness function. EAs are a class of optimization methods to find an approximate solution to a problem which also includes clustering. The usage of k-medoids and other k-means variations is included in our k-means classification. Discrete wavelet transform captures location and frequency information.

It should be clear by now that there are many types of market segmentation methods, but some are more commonly used. More satisfied customers lead to glowing reviews, and you can harness the power of those recommendations and build a referral marketing strategy. Using lead scoring, you can watch as your increasingly targeted marketing brings in more relevant prospects. In fact, 80% of companies that use market segmentation have reported that they see an uplift in sales.

Step #7: Implementation and monitoring

However, if you’re considering the entire market, you might compare people that are in the market for a sedan versus a sports car, which is much broader. The “target persona” (or “marketing persona”) is, by definition, a personification of a specific customer segment so it’s not uncommon for businesses to create several personas to match the various customer segments they’ve created. These customer segmentation groups can also be used to begin discussions of building a marketing persona or product user persona. Customer segmentation is the process by which you divide your customers up based on common characteristics – such as demographics or behaviors, so your marketing team or sales team can reach out to those customers more effectively.

How to Use Customer Segments?

Expand your group of stakeholders to include representative employees from each department and team the new segment will affect. Your goals dictate how you segment your customers, and also the appropriate resources to employ. Segmentation of a broader audience usually starts with a hunch that turns into a hypothesis. Instead, you'll want to use basic analytics tools on your site and/or app to gather essential data such as demographics, geographies, technographics, behaviors, and value to the business. These segments can be combined with demographics to create personas, messaging, and playbooks that target deeper-than-basic needs. You'd segment this way to maximize the return on investment for different levels of effort and sales team resources.

Related resources

Skipping steps, particularly data unification and validation, is the most common reason segments fail to produce results. (See the machine learning and k-means clustering resources for more). Market segmentation often involves assumptions about people you haven't acquired yet. Segmentation moves you away from one-size-fits-all marketing and toward engagement that's relevant to each customer.

Customer segmentation types include demographic, geographic, psychographic, technographic, behavioral, needs-based, and values-based approaches. Customer segmentation involves dividing people into groups according to common traits. For instance, you might want a representative sample of 30 million people to see if they will buy your tea.

FAQs on customer segmentation

Why $20M+ DTC brands regret building data infrastructure in-house—and how a managed platform cuts costs, speeds time-to-insight, and eliminates key-person risk. Tired of broken APIs or building pipelines from scratch? Customer segmentation analysis doesn’t just make your marketing more relevant. This is where most brands start, and the fields they look at are age, gender, income, household size, and Customer segmentation location.

• Some companies are ready to take the next step in a few months, while others need longer planning.
• This outcome-focused approach categorizes audiences by their core functional or emotional needs, moving beyond simple demographics or behaviors.
• Start your free trial with Shopify today—then use these resources to guide you through every step of the process.
• Segmentation may sound a little familiar to another process we often discuss here on the HubSpot blog — creating buyer personas.
• The method you choose depends on what you’re trying to solve.

Market segmentation vs. customer segmentation

In the business world, grouping customers—or customer segmentation—offers valuable insight that allows you to customize your customer experience and build relationships with buyers. The process of understanding who customers are typically focused on psychographics, demographics and, in the case of B2B, firmographics. When you’re building, marketing or optimizing a product, there’s no ‘one size fits all’. Many businesses start with gender segments when building a customer segmentation program. After building your segments, the next step is to understand how they behave. By examining your customer base and gathering data, you can strengthen your observation skills and gain a deeper understanding of the people you serve.