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Customer segmentation: Your agency guide

Updated: Feb 1

Customer segmentation pie chart on a purple background

For many companies these days, customer segmentation is no longer merely an option but a necessity. The issue now isn’t just doing it but learning how to do it well.

And it’s not simple. After all, the process can combine both advanced analytics and old-fashioned intuition, and requires collaboration among multiple departments, from production to marketing, in a given organization.

Help your clients achieve peak results by following this agency guide to customer segmentation.

What is customer segmentation?

As a term, customer segmentation refers to the process of dividing a customer base into smaller, specifically defined groups, then directly marketing to and connecting with those groups with customized messaging. You might also hear it called STP, which stands for segmentation, targeting, and positioning.

This process has become increasingly vital for businesses of all sizes, as consumers today enjoy an ever-expanding range of options and are making purchases with unprecedented speed. By focusing on more specific groups, companies can more purposefully interact with—and meet the needs of—individual segments of their customer base. Common labels for such efforts also include customizing and, at times, personalizing (although personalization technically tends to focus even more specifically on the individual, rather than any community).

For example: An e-commerce hat retailer might segment their target audience into 2 buying behaviors—those who buy hats for style and those who buy hats for sun protection. Having these two segmentations helps this retailer customize their messaging for each target audience.

Seems pretty straightforward, right?

Not necessarily. Effective customer segmentation involves multiple moving parts, and encompasses all aspects of the business funnel. The increasing sophistication of consumers is matched by the increasing sophistication of the tools and methods required for reaching them. And the use of those tools can generate results that demand further refinement of a given approach. No model is set in stone, and if it starts working, you’ll need to make sure that it keeps working.

Why customer segmentation is important for your clients