What’s the best way to segment your customers?

Not all customers are the same. Customers are different ages, different races or ethnicities. They are of different genders; they have different levels of disposable income to spend;  they live in different locations, and have different values and standards.

Customer segmentation is the practice of dividing a customer base into groups of individuals that are similar in specific ways relevant to marketing such as age, gender, interests, spending habits, and so on.

The practice of customer segmentation allows companies to target groups effectively and allocate

marketing resources to optimize the results. To do this, companies need to understand which customer segments they are targeting. All too often, you’ll hear business owners saying that “everyone” is their customer. This is not helpful from a marketing perspective. If the customer is indeed every person, it is difficult to develop a marketing campaign that will be attractive to the customer because all customers are different. It also often means that the product or service may not be specific enough to be appealing to any group of customers at all because it does not target anyone’s specific needs effectively.

Companies can use customer segmentation to:

  • Develop customized marketing programs – With clear segmentation, it is possible to target marketing campaigns effectively to make sure that the widest possible audience for the product or service sees some aspect of the campaign. For example, if the product or service is targeted at a customer segment that has been identified as fairly affluent women from the ages of 18-35 who like fashion, the marketing campaign would be very different than the one for a product that was designed with the 80 year-old man in mind. The former may be targeted by placing ads in women’s magazines or carrying out social media marketing on Facebook. An 80 year-old man, however, likely does not use Facebook and probably doesn’t read women’s magazines.
  • Establish appropriate service options – If a business knows which customer segments it is targeting, it can add service options to suit this group. For example, service options designed for children may not be appropriate for adults and vice versa.
  • Prioritize new product development efforts – As mentioned above, savvy businesses that have identified their exact customer base can develop their product further to better suit their clientele.
  • Choose specific product features – In an effective marketing campaign that is targeted at a specific customer segment, certain features of the product may be highlighted to appeal to that segment.
  • Design an optimal distribution strategy – Products and services can be distributed to different segments according to their needs. For instance, let’s use the example above of a woman aged 18-35 and an 80 year old man. For the former, products might be best distributed via the Internet. The 80 year-old man may not be online, however. The best distribution channel to reach him may be his local store.
  • Determine appropriate product pricing – If the customer segment targeted is a small start-up company operating on a shoestring, there is no point pricing the product at $10,000 – this will be out of range for most start ups. It does not matter how good the product is; success depends on effective product pricing according to customer segment.

The market can be segmented in so many ways, and there is no “one-size-fits-all” approach. The best way to segment the market depends on the specific business and its products or services. Here are some ideas of how this may be done:

  1. Geography –Where does the customer reside?
  2. Industry – What business is the customer in?
  3. Customer size – How big is the customer?
  4. Benefits – What benefit does the customer seek?
  5. Customer behavior – Who are the key buying decision makers?

My company, Information Technology (www.netcomlearning.com), targets business customers or B2B. As an example, here is a basic snapshot of customer segmentation of my company, NetCom Learning:

We target each of the above customer segments using the following criteria:

  1. Geography
  2. Job Title
  3. Technology Area
  4. Client type – existing vs. new

This allows us to develop marketing campaigns or service features that are relevant to our different segments. For example, if we are selling to a new client, we have to focus our campaign on selling the company since new clients may not be aware of who we are. However, if we are trying to sell to an existing customer, this segment already knows us, so we can focus more on selling specific features of a new service to them.


About this author  An entrepreneur who inherited his passion for lifelong learning from his parents, Russell Sarder founded NetCom Learning (www.NetComLearning.com) in 1998. Sarder has led NetCom to be recognized as a technical and business training leader. Within a decade, he has grown the company into an over multimillion revenue company. Driven by Sarder’s passion and dedication, and differentiated by its focus on client excellence, the NetCom Learning has successfully aligned itself with industry leaders such as Project Management Institute, Microsoft, CISCO, CompTia, EC-Council, Autodesk, Adobe, Check Point, Novell, Oracle, and IBM. NetCom Learning was listed as one of the fastest growing private company in USA by Inc 5000 Magazine in 2008. NetCom also received CPLS of the Year 2007 award by Microsoft and EC-Council Circle of Excellence award in 2010. Sarder is also Chairman and CEO of Sarder Inc., a holding company that includes NetCom Learning, NetCom CMS (Central Management Software), Ebiz9, Technology and Training magazine and other smaller companies. Microsoft Chairman Bill Gates, Microsoft CEO Steve Ballmer, CISCO CEO John Chambers contributed to his technology magazine. Sarder is also the creator of Netcom’s Sarder Scholarship Program, awarded monthly to an ambitious individual who wishes to either begin or advance an IT career. Sarder is a frequent speaker on topics of learning culture and business management. As a motivational speaker, he has appeared in newspaper reports in the Daily News, the New York Times, and the New York Post. His TV appearances include CBS Market Watch, Yahoo Finance and New York One. Sarder has also spoken at major industry events organized by CompTia, Microsoft, and NetCom Learning. Sarder is an avid reader and passionate life-long learner who has followed in the footsteps of his father. A denizen of New York City, Sarder also lives a healthy lifestyle and writes learning books in his spare time. Specialties1. Leadership Development 2. Entrepreneurship 3. Investing in new business 4. Strategy Development 5. People Development 6. People Management 7. Team Building 8. Business Management 9. Profit Management 10. Information Technology Training 11. Business Management Training 12. Professional Speaking


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