Understanding differences within your market

Customer segmentation involves dividing a customer base into subsets of customers that have, or are perceived to have, common needs, interests, and priorities, and then designing and implementing strategies to target them.

The following are the most common forms of customer segmentation practices.

  • Geographic segmentation – City vs country.
  • Demographic segmentation – Based on variables such as age, sex, generation, religion, occupation, and education level.
  • Feature based segmentation.
  • Behavioural segmentation – Based on the customer’s knowledge, attitudes, or uses of a product.
  • Lifestyle segmentation – The activities, interests, and opinions of customers.
  • Segmentation by benefits.

Businesses use customer segmentation to develop different products, pricing, and marketing for each customer segment. Telstra for example has over 100 phone plans segmented between the BYO phone plan, casual, overseas, and mobile. This is then divided into children, teenagers, retirees, consumers, small business, big business and government. Clearly marketing mobile telephone services to a teenager is going to be completely different from the government.

The three stage customer segmentation process is:

  • Identify the main five to ten customer segments for your business.
  • For each customer segment tailor your product or service to their specific needs or wants. One size or colour does not fit all.
  • For each customer segment specifically tailor the marketing. Marketing to teenagers for example, may best be done through Facebook, whereas for retirees it may be direct mail.

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