Types Of Customer Segmentation And Why You Need Them

Do you know when you are your customers’ favourite? When they feel the ad or the campaign is specifically created for them! The idea is to be precise and focused, which comes from actionable, differentiable, accessible, substantial, and measurable customer segments. Since you already know what customer segmentation is; let’s see what are the different types of customer segmentation.

Customer Segmentation

It’s well-understood that the objective of marketing is understanding the consumer so well that the service/product fits and sells itself.

Again, selling to someone who wants to listen from you is effective than selling to someone who’s not! That’s just like interrupting strangers if you think about that.

Therefore, when you segment your customers based on their preferences, purchasing history, demographics, etc. you become familiar with them. Then your campaign will make sense to them, and you will no longer sound like a stranger.

That’s what customer segmentation do. It divides a massive number of customers/users to smaller segments so that you can target better.

Further, the data or the information that you get from segmentation will also help you boost customer engagement. You can increase customer engagement with data-driven marketing.

You have a fair idea about customer segmentation, but to summarize the concept, here’s a brief definition.

Customer segmentation

Customer segmentation is a practice where you divide your customers into individual groups. These groups usually are based on a few relevant factors like spending habits, interests, gender, and age.

The whole process of customer segmentation analysis will include the following:

  • Determining the kind of data that should be collected and how.
  • Collecting and integrating the data from all the sources.
  • Analyzing and segmenting the collected data.
  • Establishing an effective communication system among business units, like customer service and marketing team.
  • Implementing the applications effectively on the collected and segmented data.
  • Finally, respond to the information.

You see, gathering data or information shouldn’t be taken for granted, as your future campaigns will depend on them.

The types of customer segmentation are crucial as they will determine your relevance in your customers’ eyes.

You’ll know more about the types of customer segmentation in the next segment. We’ll see what are they with customer segmentation examples wherever I can cite one.

Types of customer segmentation

Customer segmentation analysis relies on identifying crucial differentiators, which divide users/customers into smaller groups. Formation of smaller groups is essential to make the process of targeting easy.

To understand the customer better and ultimately target better, the customer segmentation analysis will be based on the information. Information like:

  • Demographics (education level, monthly/yearly income, ethnicity, family size, gender, religion, race, and age)
  • Psychographic (personality characteristics, lifestyle, and social class)
  • Geography (current location and workplace)
  • Behavioural (desired benefits, usage, consumption, and spending habits)

Demographics segmentation


Let’s start with the basic meaning:

Demographic segmentation can be defined as the practice where you segment the market. The segmentation will be based on your audience’s characteristics.

Usually, characteristics include occupation, marital status, income, education, religion, gender, age, ethnicity, and race. These are the usual factors, but there could be more.

Demographic segmentation is usually effective when you are targeting multiple segments at the same time.

Here’s an example:

A luxury product/brand will be more interested in marketing to the demographic that consists of users with a high annual income.

At the same time, that luxury brand will also see an opportunity in marketing to 25-30-year-olds too, who live in an urban area or enjoy a lavish lifestyle.

In the above-cited example, there are other factors too that will have a role to play. The gender, age, income, and behavioural factors will all be crucial.

Combining all the demographic factors, you can reach the targeted niche market. At the same time, boost the sales and maximize the value of every penny spent on marketing.


When you use demographic segmentation in B2B targeting or markets, the factors will change. The demographic factors will include the duration of working, role, industry, company size, etc.

Usually, the market segmentation is done by industry. Further, one can segment more by roles, like creative directors or marketing managers.

Psychographic segmentation

Psychographic segmentation is not as concrete as demographic and geographic segmentation. It is far less concrete because the features/characteristics used for segmentation are less prominent comparatively.

Psychographic segmentation categorizes the market on factors like personality, social class, values, and lifestyle. It is difficult to implement as compared to demographic or geographic segmentation.

To segment the market correctly, based on the psychographics, you need to invest time to know your past and current customers. You need to define precisely the best buyer persona for your service/product and then develop relationships with your customer base.

Here’s an example of psychographic segmentation:

Suppose you are targeting an audience who are smart buyers. The smart buyers are usually those who are budget conscious and appreciate good deals.

You can target your customers with ads that will appeal to their budget-savvy intrinsic personality.

However, this understanding comes when you know your customers.

Discount stores ads using terms like, “unbeatable prices,” and “best prices” are another example of marketing using psychographic segmentation. It easily resonates with buyers who they are targeting!

Geographic segmentation

Geographic segmentation will divide the market based on the target audiences’ location. Further, the segments can be broad (region or country) or narrow (streets or locality). It is common in both small and large businesses.

Geographic segmentation is easy to implement for companies who have the addresses of customers from credit cards and landing pages.

Behavioural segmentation

Behavioural segmentation is much like psychographic segmentation because it is less concrete compared to geographic and demographic segmentation.

The attributes that behavioural segmentation considers are purchase patterns, liking, knowledge, occasions, awareness, loyalties, and usage.

Behavioural segmentation helps marketers to create more relevant messages and campaigns. It will increase the chances of the target audience to resonate well with the campaigns.

There’s the answer: Segment smart!

It’s not a good idea to put all the eggs that you want to sell in one basket.

You need to reach your audience in a manner that they would prefer. That is when segmentation and advertising based on the segmentation come in.

We saw the types of customer segmentation and understood how they would benefit you. You will have to use them with conjunction to the rest, and that will ensure maximum reach.

You will have to reach more specific markets and audience, and that’s when you should combine the different types of customer segmentation.

These types of customer segmentation are not a new-found tactic. It is still universally applicable.

While you know that data-driven marketing is the future, you will have to gather and analyze data carefully.  It will determine your relationship with your customers in the next few years. Customer segmentation can be of great help here!

Therefore, with billions of people living today with us in the world, you must narrow the pool. To narrow down your target customers, you need customer segmentation.

The types of customer segmentation will help you reach customers based on their personalities and buying habits.

I hope now you can do your customer segmentation analytics better. Also, I am sure the customer segmentation examples helped to put across the point better!

Tell us your take on the types of customer segmentation?

Share your opinion.

Anirban Dey

Anirban switched his career from the pharma industry to digital marketing, banking on his ability to find marketing insights from everything around him. Currently, he writes in-depth articles on digital marketing and content marketing for Way2Online, passing on his knowledge and expertise to marketers. He likes to spend his leisure surrounded by comics, movies, and novels.

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