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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Business Intelligence

Learn about business intelligence, including key components of business intelligence, the role of BI in decision making, business intelligence tools and techniques.

Business Intelligence

Analytics Platforms

Analytics platforms are tools that collect and analyze data from various sources, helping businesses track key metrics and make informed decisions.

Analytics Platforms

B2B Marketing Analytics

Learn about B2B marketing analytics, including key components of B2B marketing analytics, & getting started with B2B marketing analytics.

B2B Marketing Analytics

Branded Keywords

Learn about branded keywords, including identifying your branded keywords, & strategies for optimizing branded keywords.

Branded Keywords

End of Quarter

“End of Quarter” (EOQ) refers to the final weeks of a business quarter when sales teams rush to meet quotas, often leading to a flurry of deals.

End of Quarter

Psychographics

Psychographics categorizes people by their attitudes, interests, and lifestyles, revealing the 'why' behind their purchasing decisions.

Psychographics

Remote Sales

Remote sales is selling from a distance. Reps use digital tools to connect with prospects and close deals without meeting them in person.

Remote Sales

Canary Releases

A canary release is a deployment strategy where new software is rolled out to a small user group first, minimizing risk before a full release.

Canary Releases

Sales Qualified Lead

A Sales Qualified Lead (SQL) is a prospect vetted by marketing and sales, deemed ready for a direct sales pitch after showing intent to buy.

Sales Qualified Lead

Pay-per-Click (PPC)

Pay-per-click (PPC) is an ad model where you pay a fee each time your ad is clicked. It's a method of buying targeted visits to your website.

Pay-per-Click (PPC)

Buying Committee

A buying committee is a group of stakeholders within an organization who are jointly responsible for making major purchasing decisions.

Buying Committee

Direct Mail

Direct mail is a marketing method where businesses send physical promotional materials directly to potential customers' mailboxes.

Direct Mail

Lead Scrape

Lead scraping is the process of automatically extracting contact information and other relevant data about potential customers from online sources.

Lead Scrape

Accounts Payable

Accounts Payable (AP) is the money a company owes its suppliers for goods or services bought on credit. It's listed as a current liability.

Accounts Payable

Consumer

A consumer is an individual or entity that buys products or services for personal use, not for resale. They are the final user in a supply chain.

Consumer

Voice Search Optimization

Voice search optimization is the process of optimizing your content, SEO, and online listings to appear in and rank for voice-based searches.

Voice Search Optimization

Audience Targeting

Audience targeting is the process of segmenting consumers into specific groups to deliver more personalized and relevant marketing messages.

Audience Targeting

B2B Sales

Learn about B2B sales, including key strategies for B2B success, types of B2B sales models, & B2B vs. B2C sales: understanding the differences.

B2B Sales

Text message marketing

Text message marketing is a strategy where businesses send promotional messages, offers, and updates to customers via SMS or MMS.

Text message marketing

Sales Lead

A sales lead is a potential customer—an individual or organization that has shown interest in your company's products or services.

Sales Lead

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

Revenue Forecasting

Revenue forecasting is the process of estimating a company's future revenue, using historical data and market trends to guide strategic planning.

Revenue Forecasting

Field Sales Rep

A field sales representative, or outside sales rep, travels to meet prospects in person, selling products or services directly within their territory.

Field Sales Rep

Google Analytics

Google Analytics is a web analytics service that tracks and reports website traffic, offering insights into user behavior and marketing effectiveness.

Google Analytics

InMail Messages

LinkedIn InMail messages are a premium feature that lets you directly message any LinkedIn member, even if you're not connected to them.

InMail Messages

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

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)

Conversion Rate

Conversion rate is the percentage of visitors who complete a desired goal, like a purchase or sign-up, out of the total number of visitors.

Conversion Rate

B2B Marketing Attribution

Learn about B2B marketing attribution, including challenges in B2B marketing attribution, & key metrics for effective attribution.

B2B Marketing Attribution

Total Audience Measurement

Total Audience Measurement (TAM) provides a holistic view of content consumption, tracking viewership across all platforms and devices.

Total Audience Measurement

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

Bulk Application Programming Interface

Learn about bulk API, including how it works, the advantages of using it, common use cases, and tips for optimizing it.

Bulk Application Programming Interface

Business Development Representative

Learn about business development representative, including skills and qualifications for BDRs, & roles and responsibilities of a BDR.

Business Development Representative

Mobile Optimization

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

Mobile Optimization

Inbound Sales

Inbound sales attracts interested prospects who've engaged with your brand, letting sales reps connect with warm leads instead of cold outreach.

Inbound Sales

Customer Retention Rate

Customer Retention Rate (CRR) is the metric that measures the percentage of customers a company has kept over a specific period of time.

Customer Retention Rate

Lead Velocity Rate

Lead Velocity Rate (LVR) is the growth rate of your qualified leads, measured month-over-month. It's a key indicator of future revenue.

Lead Velocity Rate

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

Return on Marketing Investment

Return on Marketing Investment (ROMI) measures the revenue generated by a marketing campaign relative to the cost of that campaign.

Return on Marketing Investment

Average Revenue per Account

Average Revenue per Account (ARPA) is the average revenue generated from each customer account, usually measured on a monthly or annual basis.

Average Revenue per Account

No Forms

No Forms is a method for capturing lead data directly from your website visitors' profiles without requiring them to fill out any forms.

No Forms

Amortization

Amortization is the process of spreading out a loan or the cost of an intangible asset over a specific period for accounting and tax purposes.

Amortization

Artificial Intelligence in Sales

AI in sales uses smart technology to automate repetitive tasks, analyze customer data, and help sales reps close deals more efficiently.

Artificial Intelligence in Sales

Infrastructure as a Service

Infrastructure as a Service (IaaS) is a cloud computing service that offers essential compute, storage, and networking resources on-demand.

Infrastructure as a Service

SQL

SQL (Structured Query Language) is the standard language for managing and querying data within relational databases.

SQL

B2B Intent Data Providers

Learn about B2B intent data providers, including evaluating intent data quality, leveraging intent data for growth, & B2B intent data: key providers comparison.

B2B Intent Data Providers

Always Be Closing

“Always Be Closing” (ABC) is a sales mantra meaning every action a salesperson takes should be with the ultimate goal of closing the sale.

Always Be Closing

Sandboxes

A sandbox is an isolated testing environment where new or untrusted code can be run safely without affecting the host device or network.

Sandboxes

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

Personalization in Sales

Personalization in sales means tailoring outreach to a prospect's specific needs, interests, and context to make communication more relevant.

Personalization in Sales

Agile Methodology

Agile methodology is an iterative approach to project management and software development, focusing on delivering value in small, incremental steps.

Agile Methodology

Proof of Concept

A Proof of Concept (PoC) is a small exercise to test whether a business idea or project is technically feasible and has real-world potential.

Proof of Concept

User Testing

User testing involves observing real users interact with a product to identify usability issues and improve the overall user experience.

User Testing

Stress Testing

Stress testing is a type of software testing that determines a system's robustness by pushing it beyond its normal operational capacity.

Stress Testing

Git

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

Git

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

End of Day

End of Day (EOD) refers to the close of business hours. It's a common deadline for tasks and reports to be completed before the workday ends.

End of Day

Scalability

Scalability is a company's ability to handle increased workloads or market demands without a drop in performance or a spike in costs.

Scalability

Objection Handling in Sales

Objection handling in sales is the process of responding to a prospect's concerns about a product or service to move the deal forward.

Objection Handling in Sales

Revenue Operations KPIs

Revenue Operations KPIs are quantifiable metrics that track the performance, efficiency, and health of a company's revenue-generating engine.

Revenue Operations KPIs

Lead Generation

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

Lead Generation

B2B Data

Learn about B2B data, including sources and types of B2B data, leveraging B2B data for sales success, & ensuring the accuracy of B2B data.

B2B Data

Big Data

Learn about big data, including understanding big data characteristics, benefits of leveraging big data, & challenges in managing big data.

Big Data

Yield Management

Yield management is a dynamic pricing strategy that adjusts prices based on demand to maximize revenue from a fixed, perishable inventory.

Yield Management

RESTful API

A RESTful API is a web service interface that uses HTTP requests to access and use data, adhering to the constraints of REST architecture.

RESTful API

Buying Signal

A buying signal is any action from a prospect that indicates they are interested in making a purchase, helping sales teams prioritize leads.

Buying Signal

Closed Lost

Closed Lost is a sales term for a deal that didn't go through. The prospect decided not to buy, or the sales team disqualified them.

Closed Lost

Omnichannel Sales

Omnichannel sales is a strategy that integrates all physical and digital sales channels to create a seamless, unified customer experience.

Omnichannel Sales

Messaging Strategy

A messaging strategy defines what your brand says, how it says it, and where it says it to connect effectively with your target audience.

Messaging Strategy

Gated Content

Gated content is premium online material, like an ebook or webinar, that users can only access after providing their contact information.

Gated Content

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

Master Service Agreement

A Master Service Agreement (MSA) is a foundational contract that sets the general terms for an ongoing business relationship between two parties.

Master Service Agreement

Sender Policy Framework

Sender Policy Framework (SPF) is an email authentication method that lets you specify which mail servers can send emails on behalf of your domain.

Sender Policy Framework

Funnel Analysis

Funnel analysis is a method for understanding the steps users take to complete a goal, revealing where they drop off in the conversion process.

Funnel Analysis

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

Stakeholder

A stakeholder is any individual, group, or party that has an interest in an organization and the outcomes of its actions.

Stakeholder

Customer Retention

Customer retention refers to the strategies and activities a company uses to prevent customer churn and encourage them to continue buying.

Customer Retention

Complex Sale

A complex sale features a long sales cycle, multiple stakeholders, and a high-value transaction, demanding a strategic, consultative approach.

Complex Sale

Virtual Private Cloud

A Virtual Private Cloud (VPC) is a secure, isolated section of a public cloud. It lets you provision your own logically isolated resources.

Virtual Private Cloud

Customer Loyalty

Customer loyalty is a customer’s devotion to a brand, shown by their repeat purchases and engagement, driven by positive experiences and trust.

Customer Loyalty

Self-Service SaaS Model

The self-service SaaS model allows customers to independently sign up, use, and manage a product without any direct help from the company.

Self-Service SaaS Model

Load Testing

Load testing is a type of performance testing that determines how a system behaves under both normal and anticipated peak load conditions.

Load Testing

User Interaction

User interaction is any action a user takes within a digital interface, like clicking a button, scrolling a page, or filling out a form.

User Interaction

Analytical CRM

Analytical CRM analyzes customer data to uncover actionable insights, helping businesses make smarter decisions and improve customer interactions.

Analytical CRM

Dialer

A dialer is software that automatically dials phone numbers for agents, boosting call efficiency and connecting them to live prospects faster.

Dialer

Kanban

Kanban is a visual project management method that uses a board to visualize workflow, limit work-in-progress, and maximize team efficiency.

Kanban

Customer Data Management (CDM)

Customer Data Management (CDM) is the process of collecting, organizing, and analyzing customer data to create a unified view of your audience.

Customer Data Management (CDM)

Draw on Sales Commission

A draw on commission is an advance payment a salesperson receives against future earnings, which is later repaid from earned commissions.

Draw on Sales Commission

Sales Funnel Metrics

Sales funnel metrics are key data points that track how effectively you're moving potential customers from awareness to a final purchase.

Sales Funnel Metrics

Enterprise

An enterprise is a large-scale organization, often a corporation, defined by its complex structure and substantial number of employees.

Enterprise

Sales Quota

A sales quota is a time-bound sales goal for a rep or team, measured in revenue or units sold, to be met within a specific period.

Sales Quota

Product Recommendations

Product recommendations are a marketing strategy that uses customer data to suggest relevant products, boosting sales and customer engagement.

Product Recommendations

Sales Partnerships

Sales partnerships are strategic alliances where two companies co-sell products to expand their reach, generate new leads, and increase revenue.

Sales Partnerships

Trademarks

Think of a trademark as a brand's unique signature—a word, symbol, or phrase that legally protects its identity and sets it apart from the rest.

Trademarks

Sales Pipeline Management

Sales pipeline management is the process of organizing, tracking, and managing potential deals through every stage of your sales funnel.

Sales Pipeline Management

Consideration Buying Stage

The consideration buying stage is where potential customers have defined their problem and are now actively researching and evaluating solutions.

Consideration Buying Stage

Buyer Behavior

Learn about buyer behavior, including understanding the buyer's journey, influencing factors in buyer behavior, & buyer behavior and marketing strategy.

Buyer Behavior

Sales Process

A sales process is a structured set of steps that a sales team follows to move a prospect from an initial lead to a closed customer.

Sales Process

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

Closed Won

Closed Won is a CRM status for a sales deal that has been successfully concluded, resulting in a signed contract and a new customer.

Closed Won