Customer segmentation is the process of dividing customers in the market into groups that share similar characteristics but differ in either geographic location, income, beliefs, or lifestyle. Therefore, customer segmentation can be a powerful tool to identify their needs. Companies can allocate marketing budgets more effectively and outperform competitors by developing uniquely attractive products and services. Customer segmentation is most effective for the most profitable segments and carries distinct competitive advantages. Overall, it helps companies develop marketing campaigns and pricing strategies to extract the highest value from each customer.
How can companies perform customer segmentation?
The customer segmentation process requires managers to do the following:
Segment the market into measurable segments based on customer needs, behaviors, or demographics.
Determine the profitability of each segment by analyzing revenues and costs.
Target segments based on their profitability potential and the company’s ability to serve them.
Invest resources to adapt products, services, and markets to match the needs of each targeted segment.
Measure the performance of each segment and adjust the segmentation approach over time, making decisions according to market conditions and changes.
Why do companies use customer segmentation?
To develop new products.
To develop tailored marketing programs.
To select specific product features.
To create suitable service options.
To establish an optimal distribution strategy.
To determine the appropriate product pricing.
Thus, we can say that the customer segmentation process is essential and necessary to understand their unique characteristics and behaviors, enabling companies to develop a marketing idea that effectively resonates with them by exclusively using methods that allow reaching customer segments through segmentation.
The British Academy for Training and Development offers specialized courses in all administrative and economic sciences, as well as several university programs in marketing management and customer segmentation, aiming to elevate employees to higher levels and more experience. Additionally, we at the British Academy offer programs in other fields such as media, public relations, information technology, and healthcare management.