Customer Development

Customer Segmentation

What is customer segmentation?

Your customer segment will define the market you want to enter. When you segment your customers, you simply group individuals that are similar in specific ways relevant to marketing, such as age, gender, interests and spending habits.

Before we get started, copy the Customer Deep-dive Powerpoint template to your Google Drive and begin defining your customer segments.

How do I segment my customers?

Businesses typically group their customers based on demographics and behaviors. You can choose to use either one or both depending on what your product or service will be.

Demographic segmentation is defined as descriptive data about people. It uses markers that describe how different populations live and define themselves. It is the most common form of customer segmentation, or ways to group customers, because you separate customers who are fundamentally different and will probably receive marketing messages differently.

For example an ad stating “$150 running sneakers with arch support, perforations throughout for additional breathability and high top to protect your ankles” will be perceived differently by a sponsored college basketball player and my a middle income mom of 5. Our basketball player may be interested in all the features, while the mom may have been stunned by the price tag.

Some examples of demographic segments you should consider are:

  • Gender

  • Age

  • City or area where your customers live

  • Average income

  • Typical profession

  • Education level or background

  • Ethnicity

  • Citizenship requirements: US citizens, Residents, Visa / other

  • Hobbies

  • Sports

  • Religious beliefs

  • Relationship Status

  • Children

  • Pets

  • Number of people living in your customer’s household

  • Political preference

  • Body shape / physique: Tall/short, Slim/full bodied

  • Clothing style: Formal, Classy, Urban, Hippy, Casual,

  • Favorite pastimes: Travel, Spending time with friends, Playing video games, Sports…

  • Causes your main customer cares about: Animals, Environment, Health, Children

Behavioral segmentation looks at how and when a consumer decides to spend their money on a product or service. It focuses on consumers’ shopping behavior, how they make their decisions, why they choose one product over the other, and how they feel about a product, company, or service.

Some examples of behavioral segments you should consider are:

  • Purchasing behavior

  • Occasion purchasing

  • Customer usage

  • Benefits

  • Loyalty gauge

  • Buying stage

Why is it important to define segment my customers?

It is important to define your target audience because it will inform how you choose to communicate with customers. Effectively communicating benefits to the consumer is a crucial step for all businesses. Though a variety of outlets through which a good or service can be promoted exists, you will need to think about which channels you will use to deliver your messages. Some channels may include social media, TV ads, search engine ads, newspaper ads and many more.

Whether it is for the purpose of launching a new product or for the purpose of doing a fresh perspective study with an aim to revamp an already existing product line-up, it is imperative that the business is up-to-date with the dynamics of an ever-changing market. If it does not do so, its competitor probably will do it and stay ahead of the game.

What is mindset segmentation?

While marketing segmentation distinguishes people according to their buying behaviors, mindset segmentation identifies people based on their emotional desires and expectations. Mindsets are a series of self perceptions or beliefs people have about themselves. They help us understand what drives people's decisions and behaviors. Businesses need a working knowledge of customers’ rational and emotional motivations, which enables empathetic communication strategies, product design, and customer-centric strategy development.

How do you segment customers using mindsets?

Mindset segmentation means putting your audience into different segments based on their mindsets, and not their mindsets about your product or brand—just their mindsets in general.

There are five major categories of audience segment attributes of mindset segmentation: beliefs, hopes and fears, emotional needs, expectations and brand perceptions.

Beliefs. Find out what your audience believes in (community, friends and family, any activities, ways of thinking, etc.) and then see how your brand can coincide with those beliefs and values.

Hopes and fears. You can think of this in relation to your industry, but try to think more big picture and talk with your loyal customers to understand what makes them feel fulfilled vs. disappointed.

Emotional needs. You probably know by now that appealing to emotions is a great marketing tactic, but you have to know what emotional needs are at play in the first place. The need for security and self-esteem can be huge.

Expectations. What is it that gets someone to trust someone else? This is where you can learn what someone thinks is unethical or what social constructs they expect in general and therefore also when they get to know your brand.

Brand perceptions. This one may seem like it doesn’t fit in with the others, but analyzing how someone might describe your company to others still tells you about their personal values.

For example, Fjord discovered four “money” mindsets in the financial services industry.

  • Achievers: “I want to reach my goals.” In this mindset, people define success by budgeting for clear, often tangible goals. This helps them feel in control and prepared for the future.

  • Balancers: “I want to get the best value I can.” In this mindset, people define success by getting the best deal in each transaction, maximizing rewards and staying on their financial plan so they don’t have to worry.

  • Experiencers: “I’m living for today.” In this mindset, people define success by enjoying the present. They seek delight in how they choose to spend money and are optimistic about the future.

  • Explorers: ”I want to keep my future open.” In this mindset, people define success by saving money and making trade offs so they can be happy and live comfortably.

Ready to start creating your own customer mindsets? Putting together focus groups, polls, surveys, and interviews, particularly from your loyal customers, is the best way you can get started creating these different segments. Start to build personas while making sure you are touching on all of the points mentioned above. Ask about their beliefs and expectations through polls on social media, and more. You can get as creative as you want, you just have to make sure that you’re changing your own mindset to ask the right questions that evoke the right answers.

Why is it important to segment my customers using mindsets?

Long-established segmentation strategies are not as useful as they once were. Consumers’ decision-making processes are messy and complicated. Focusing on simple demographics like age, marital status and income don’t reveal useful insight. To design marketing strategies of the future, businesses must look at how people behave and what’s important to them when dealing with the problem they’re trying to solve.

Pro Tips

The right marketing message at the right time is an essential element for every business, especially new businesses and it can make or break the success of your company. Make sure you narrow the range of potential customers to the ones who are willing and able to buy your product.

Just about every company can and should get started with mindset segmentation. The only time you may see a negative result is if you get too invasive and annoying, but this means you’re doing it wrong. To get started correctly with mindset segmentation, you have to make sure that you have loyal customers you can trust.