Terms

Customer Segmentation

Customer segmentation is the practice of dividing a customer base into distinct groups based on shared characteristics such as demographics, behaviors, or needs. This process allows businesses to better understand their customers, enabling them to tailor marketing, sales, and product strategies to meet the specific preferences and buying patterns of each group.

Benefits of Customer Segmentation

Customer segmentation allows businesses to deliver highly personalized experiences. By understanding the unique needs of different groups, companies can create more relevant marketing messages and product offerings. This targeted approach enhances customer loyalty, improves campaign effectiveness, and ultimately drives revenue growth by focusing resources where they matter most.

Methods of Customer Segmentation

There are several ways to group customers into segments. The most common methods focus on who customers are, where they live, what they believe, and how they act, allowing businesses to tailor their strategies effectively.

  • Demographic: Grouping customers by characteristics like age, gender, income, or occupation.
  • Geographic: Dividing customers based on their location, such as country, state, or city.
  • Psychographic: Segmenting based on personality, values, interests, and lifestyle choices.
  • Behavioral: Categorizing customers by their actions, like purchase history and product usage.

Customer Segmentation vs. Market Segmentation

While both practices involve grouping audiences, they serve different strategic purposes and are applied at different stages of business planning.

  • Customer Segmentation: This approach focuses on your existing customer base, grouping them by shared traits to refine strategies. It enables highly personalized marketing, which boosts loyalty and retention. Enterprises and mid-market companies prefer it for increasing customer lifetime value and optimizing marketing spend on known audiences.
  • Market Segmentation: This takes a broader view, dividing the entire potential market into groups, including non-customers. It is foundational for identifying new growth opportunities or planning market entry. Enterprises use it for high-level strategic planning, while mid-market firms use it to find their initial footing in a new area.

Challenges in Customer Segmentation

A primary hurdle is gathering accurate and comprehensive customer data. Customer behaviors and needs are not static, but constantly evolve over time. This requires segments to be continuously updated to remain relevant and effective.

Defining segments with the right specificity is also a delicate balance. Segments that are too broad lead to generic messaging, while overly narrow ones limit reach. The ultimate challenge is ensuring these groups are actionable and directly support business goals.

Applications of Customer Segmentation

This is how you apply customer segmentation across your business.

  1. Tailor marketing messages and campaigns to the specific interests and behaviors of each group.
  2. Inform product development by using segment feedback to guide new features and improvements.
  3. Direct sales teams to prioritize high-value segments for more effective outreach and resource allocation.
  4. Enhance customer support and retention by personalizing communication and creating targeted loyalty offers.

Frequently Asked Questions about Customer Segmentation

How often should customer segments be updated?

Segments should be reviewed quarterly or semi-annually. Customer behavior evolves, so regular updates ensure your marketing remains relevant and effective. Stale segments lead to missed opportunities and misaligned messaging.

What is the ideal number of customer segments?

There's no magic number. Start with 3-5 distinct, actionable segments. The goal is to create groups large enough to be meaningful but specific enough for targeted outreach, avoiding over-complication of your strategy.

How can I measure the effectiveness of my segmentation?

Measure effectiveness by tracking key metrics like conversion rates, customer lifetime value, and engagement for each segment. If these metrics improve post-segmentation, your strategy is working. Clear ROI is the ultimate validation.

Other terms

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Account View Through Rate

Account View-Through Rate (AVTR) is the percentage of target accounts that see an ad and later visit your website without clicking on it.

Account View Through Rate

Sales Forecast

A sales forecast is a projection of future sales revenue. It's a crucial tool for businesses to make informed decisions and allocate resources.

Sales Forecast

Win/Loss Analysis

Win/Loss Analysis is the process of systematically tracking and analyzing the reasons why you win or lose deals with prospective customers.

Win/Loss Analysis

Sales Compensation

Sales compensation is the total pay a salesperson receives, including salary, commissions, and bonuses, structured to motivate performance.

Sales Compensation

Warm Outbound

Warm outbound is a sales strategy for contacting prospects who've shown interest in your brand through prior engagement, like website visits.

Warm Outbound

Batch Processing

Learn about batch processing, including benefits of batch processing, best practices for implementation, & common use cases.

Batch Processing

Email Marketing

Email marketing is a digital strategy where businesses send targeted emails to prospects and customers to build relationships and drive sales.

Email Marketing

Conversational Intelligence

Conversational intelligence (CI) is AI technology that analyzes customer conversations to find insights that help sales and support teams improve.

Conversational Intelligence

Point of Contact

A Point of Contact (POC) is the designated individual or department that serves as the main hub for information and communication on a matter.

Point of Contact

User-generated Content

User-generated content (UGC) refers to any form of content, like images, videos, or text, created and shared by users on online platforms.

User-generated Content

Data Enrichment

Data enrichment is the process of enhancing raw data by adding missing information from other sources, making it more complete and actionable.

Data Enrichment

Sales Development

Sales development is the process of identifying and qualifying potential customers to create a pipeline of sales-ready leads for closers.

Sales Development

Account-Based Advertising

Account-based advertising is a hyper-focused B2B strategy that targets key accounts with personalized ads across multiple channels.

Account-Based Advertising

Sales Pipeline Velocity

Sales pipeline velocity is a metric that measures how quickly deals move through your sales funnel to generate revenue for your business.

Sales Pipeline Velocity

BAB Formula

Learn about BAB formula, including implementing BAB in sales strategies, crafting an effective BAB pitch, & comparing BAB with other sales frameworks.

BAB Formula

Product-Led Growth

Product-Led Growth (PLG) is a business strategy where the product itself drives user acquisition, conversion, and expansion.

Product-Led Growth

Git

Git is a distributed version control system that tracks changes in code, allowing developers to collaborate and manage project history effectively.

Git

Video Selling

Video selling uses personalized video messages to engage prospects, build rapport, and guide them through the sales funnel to close more deals.

Video Selling

Elevator Pitch

An elevator pitch is a short, memorable summary of what you do, designed to be delivered in the time it takes to ride an elevator.

Elevator Pitch

Persona

A persona is a semi-fictional profile of your ideal customer, based on market research and real data about your existing customers.

Persona

Process Automation

Process automation uses technology to execute recurring tasks or processes, replacing manual effort to cut costs and boost efficiency.

Process Automation

Buying Intent

Buying intent is the collection of online cues and behaviors that signal a prospect is actively researching and moving toward a purchase decision.

Buying Intent

Content Delivery Network

A Content Delivery Network (CDN) is a system of distributed servers that deliver web content to users based on their geographic location.

Content Delivery Network

Brand Awareness

Learn about brand awareness, including understanding its importance, building an effective strategy, key metrics to track, & examples in the real world.

Brand Awareness

Simple Object Access Protocol Application Programming Interface

A Simple Object Access Protocol (SOAP) API is a web service that uses XML to exchange structured information between different applications.

Simple Object Access Protocol Application Programming Interface

Warm Email

A warm email is a message sent to a prospect with whom you have a pre-existing connection, like a mutual contact or a prior interaction.

Warm Email

Hard Sell

A hard sell is an aggressive sales technique that uses high-pressure tactics to push a customer into making an immediate purchase decision.

Hard Sell

Product Champion

A product champion is an internal evangelist who drives a product's adoption and success by ensuring it solves real problems for their team.

Product Champion

Digital Advertising

Digital advertising is the practice of delivering promotional content to users through various online and digital channels like social media or search engines.

Digital Advertising

Sales Territory Management

Sales territory management is the process of grouping accounts into territories and assigning them to reps to maximize sales and market coverage.

Sales Territory Management

Churn

Churn, also known as customer attrition, is the rate at which customers stop doing business with a company over a given period.

Churn

Video Prospecting

Video prospecting is the sales technique of sending personalized videos to potential customers to grab their attention and secure more meetings.

Video Prospecting

Contact Discovery

Contact discovery is the process of finding accurate contact details for potential leads, including names, emails, phone numbers, and job titles.

Contact Discovery

Sales Enablement Content

Sales enablement content refers to the materials and tools that empower your sales team to engage prospects and close deals more efficiently.

Sales Enablement Content

X-Sell

X-Sell, or cross-selling, is a sales strategy of selling additional, related products or services to an existing customer base.

X-Sell

Brag Book

Learn about brag book, including crafting your outstanding brag book, essential components of a brag book, & brag book vs. resume: unveiling the differences.

Brag Book

Lead Nurturing

Lead nurturing is the process of developing and reinforcing relationships with buyers at every stage of the sales funnel.

Lead Nurturing

On-premise CRM

An on-premise CRM is a system hosted on a company's own servers, offering complete control over data, security, and system maintenance.

On-premise CRM

Service Level Agreement

A Service Level Agreement (SLA) is a contract defining the level of service between a provider and a client, including metrics and penalties.

Service Level Agreement

MEDDICC

MEDDICC is a sales qualification framework for complex B2B deals. It helps reps identify and validate key aspects of an opportunity to close more effectively.

MEDDICC

Affiliate Networks

Affiliate networks are platforms that act as intermediaries between publishers (affiliates) and merchant affiliate programs.

Affiliate Networks

Sales Operations Management

Sales Operations Management streamlines sales processes, tech, and data analysis to help sales teams sell more effectively and efficiently.

Sales Operations Management

Account-Based Sales

Account-Based Sales (ABS) is a focused B2B strategy where sales and marketing teams treat high-value accounts as individual markets of one.

Account-Based Sales

Sales Engineer

Sales Engineers blend deep technical knowledge with sales acumen, demonstrating a product's value and solving customer problems to drive revenue.

Sales Engineer

SDK

A Software Development Kit (SDK) is a set of tools that allows developers to create applications for a specific software package or platform.

SDK

Guided Selling

Guided selling simplifies complex sales by giving reps step-by-step instructions and data-driven recommendations to close deals faster.

Guided Selling

Net New Business

Net new business is revenue from customers who have never purchased from your company before. It’s a crucial indicator of sustainable growth.

Net New Business

Customer Retention Cost

Customer Retention Cost (CRC) is the total amount a company spends to keep an existing customer over a certain period of time.

Customer Retention Cost

Lead Enrichment Tools

Lead enrichment tools are platforms that automatically add missing data to your leads, like contact info, firmographics, and buying signals.

Lead Enrichment Tools

B2B Data Solutions

Learn about B2B data solutions, including unlocking the power of B2B data, & key components of effective B2B data solutions.

B2B Data Solutions

Competitive Analysis

Competitive analysis means identifying your rivals and assessing their strategies to pinpoint your own business's strengths and weaknesses.

Competitive Analysis

Direct-to-Consumer

Direct-to-Consumer (DTC) is a business model where companies sell products directly to customers, bypassing traditional retail middlemen.

Direct-to-Consumer

Contact Data

Contact data is the set of details, like names, emails, and phone numbers, used to get in touch with a person or business for outreach.

Contact Data

Closed Opportunities

Closed opportunities are potential deals that have concluded. They are categorized as either 'closed-won' (a sale was made) or 'closed-lost'.

Closed Opportunities

Revenue Intelligence

Revenue intelligence is the process of collecting and analyzing customer data to provide insights that help sales teams make smarter decisions.

Revenue Intelligence

Closed Question

A closed question is a type of query that elicits a simple, often one-word answer like 'yes' or 'no,' or a specific, factual response.

Closed Question

Subscription Models

Subscription models are a business strategy where customers pay a recurring fee at regular intervals for access to a product or service.

Subscription Models

Clustering

Clustering is the technique of grouping similar items. In sales, it means segmenting leads by shared traits to better personalize outreach.

Clustering

Touches

Touches are the individual interactions you have with a prospect throughout the sales process, from emails and calls to social media messages.

Touches

Warm Calling

Warm calling is contacting prospects with a prior connection, like a referral or social media interaction, to make your outreach more relevant.

Warm Calling

Customer Data Analysis

Customer data analysis is the process of examining customer information to uncover insights that drive business decisions and improve experiences.

Customer Data Analysis

Dark Funnel

The Dark Funnel describes customer buying activities that are untrackable by companies, such as private chats and word-of-mouth referrals.

Dark Funnel

Drip Campaign

A drip campaign is a series of automated messages sent to prospects or customers over time to nurture leads and drive engagement.

Drip Campaign

Webhooks

Webhooks are automated messages sent by an app when a specific event occurs. They push real-time data to another app's unique URL.

Webhooks

User Experience

User Experience (UX) refers to a person's overall feelings and perceptions while interacting with a product, system, or service.

User Experience

Personalization

Personalization is the practice of using data to tailor products, services, or content to an individual's specific needs and preferences.

Personalization

B2B Data Platform

Learn about B2B data platform, including key benefits of B2B data platforms, choosing the right B2B data platform, challenges in implementing B2B data platforms.

B2B Data Platform

Sales Manager

A Sales Manager leads a sales team, setting goals, analyzing performance, and developing strategies to drive revenue and meet targets.

Sales Manager

SPIN Selling

SPIN selling is a sales technique using a sequence of questions—Situation, Problem, Implication, Need-Payoff—to uncover a buyer's needs.

SPIN Selling

Inbound leads

Inbound leads are potential customers who proactively reach out after finding your business through content, social media, or search.

Inbound leads

Lead Scoring

Lead scoring is the process of assigning points to leads based on their attributes and actions to determine their sales-readiness.

Lead Scoring

Lead Generation

Lead generation is the process of identifying and cultivating potential customers for a business's products or services.

Lead Generation

Content Rights Management

Content Rights Management involves controlling the use and distribution of copyrighted digital media to protect intellectual property.

Content Rights Management

Account

An account is a company or organization that you're targeting for sales. It can be a prospective, current, or even a past customer.

Account

Solution Selling

Solution selling is a sales approach focused on understanding a customer's pain points to offer a comprehensive solution, not just a product.

Solution Selling

Mobile Optimization

Mobile optimization adapts your website to ensure visitors on smartphones and tablets have a seamless, user-friendly experience.

Mobile Optimization

Account Match Rate

Account match rate is the percentage of target accounts successfully identified and matched against a specific database or data provider.

Account Match Rate

Data-Driven Lead Generation

Data-driven lead generation is the process of using data insights to identify, attract, and convert high-quality leads into customers.

Data-Driven Lead Generation

CRM Data

CRM data is the information businesses use to manage customer relationships. It covers contact details, purchase history, and communication logs.

CRM Data

Purchase Buying Stage

The purchase stage is when a buyer has decided on a solution and is ready to buy. They're comparing vendors to make a final choice.

Purchase Buying Stage

Enterprise Resource Planning

Enterprise Resource Planning (ERP) is a system of integrated software that businesses use to manage and automate their core day-to-day processes.

Enterprise Resource Planning

Sales Prospecting Techniques

Sales prospecting techniques are methods used by sales teams to identify, contact, and qualify potential customers, also known as prospects.

Sales Prospecting Techniques

Touchpoints

A touchpoint is any time a potential or existing customer comes in contact with your brand, from seeing an ad to receiving an email.

Touchpoints

Network Monitoring

Network monitoring is the continuous process of tracking a computer network's performance and health to detect and resolve issues proactively.

Network Monitoring

Sales Pipeline Reporting

Sales pipeline reporting is the process of analyzing sales data to track progress, identify bottlenecks, and forecast future revenue.

Sales Pipeline Reporting

Hadoop

Hadoop is an open-source framework designed for the distributed storage and processing of extremely large data sets across clusters of computers.

Hadoop

ClickFunnels

ClickFunnels is a popular online tool that lets entrepreneurs easily build sales funnels to guide potential customers through the buying process.

ClickFunnels

No Spam

“No Spam” is a commitment to sending only relevant, solicited messages. It means avoiding bulk, unwanted emails to respect the recipient's inbox.

No Spam

CPQ software

CPQ (Configure, Price, Quote) software is a sales tool for creating accurate, configurable quotes for complex products and services.

CPQ software

Awareness Buying Stage

The awareness stage is the first step in the buyer's journey, where a potential customer realizes they have a problem or an opportunity to explore.

Awareness Buying Stage

Search Engine Results Page

A Search Engine Results Page (SERP) is the page displayed by a search engine after a user enters a query, listing results ranked by relevance.

Search Engine Results Page

Single Page Applications

A Single Page Application (SPA) is a web app that interacts with the user by dynamically rewriting the current page rather than loading new pages.

Single Page Applications

Salesforce Administrator

A Salesforce Administrator is a certified professional who manages and customizes the Salesforce platform to meet a company's specific business needs.

Salesforce Administrator

Incident Response

Incident response is an organization's systematic approach to managing and mitigating the aftermath of a security breach or cyberattack.

Incident Response

Buying Cycle

The buying cycle is the journey a customer takes from first realizing they have a need to making the final purchase decision.

Buying Cycle

Buyer Journey

The buyer journey maps the path a potential customer takes, from first learning about a product to the final decision to buy.

Buyer Journey

Average Selling Price

Average Selling Price (ASP) is the average price at which a particular product or service is sold across different markets and channels.

Average Selling Price

Channel Partners

Channel partners are third-party firms that help market and sell a company's products or services, acting as an indirect sales force.

Channel Partners

Marketing Qualified Lead (MQL)

A Marketing Qualified Lead (MQL) is a prospect who has shown interest based on marketing efforts but isn't yet ready for a sales conversation.

Marketing Qualified Lead (MQL)

Precision Targeting

Precision targeting is a marketing strategy that uses data to identify and reach a highly specific audience most likely to convert.

Precision Targeting