Segmenting your customers

Breaking customers into well-defined groups helps you focus only on the most relevant customers and avoids wasting time and money on the less relevant. It’s called segmentation. Now, there are four ways to segment a market. Demographic segmentation is where you group customers by their characteristics, such as income level, age, gender, or their height and weight. It’s useful for certain products or services that deliver a benefit specifically tied to that characteristic. Geographic segmentation groups customers by where they are physically. Hey, knowing where your customers are helps you know where to place stores, for example, and where to communicate or sell to them. Behavioral segmentation is grouping customers by the things they do. It can be customer-related behaviors, such as how much they purchase, how frequently they purchase, or their price sensitivity. It can also be behaviors such as hobbies or habits. And last is psychographic segmentation. This is grouping people by how they think, their attitudes and aspirations, especially about the benefits that a product or service delivers. An example of a psychographic benefit would be need for prestige or perhaps need for convenience. Segmenting this way tends to be very powerful. So which way is best? Well, all of them. You want to do all four types. Here’s why. Demographic and geographic segmentation help you quantify the market potential and what market areas have the most opportunity. Behavioral segmentation helps you predict sales and shopping behavior. Psychographic segmentation helps you define and create your value proposition, that is, what you say to the market to attract and retain customers. Segmentation is a critical tool that will help you know exactly who to go after and how to reach them.