What Is Customer Segmentation?

Customer Segmentation

Customers like it when their desires are guessed. However, even if the client has enough money, he still needs to be persuaded to buy – to prove that he needs your product. To guess desires, you need to know your audience well. This is where customer segmentation can help.

Why you should segment customers

High-quality segmentation is the way to sell at a minimal cost. Here are some reasons for segmentation.


The better you know your customers and their expectations of a product, the easier it will meet their needs. Advertising can be tailored to the needs of different customers so that everyone believes that the product is designed specifically for him.


After segmentation, advertising will be more effective, sales will grow, and competitors’ customers can go to you. As a result, you will be able to take a large share of the market. In addition, the higher the company’s popularity, the higher the brand’s value will be.

Relevance of offers

It would be best to remind different segments of yourself when they need your product. For example, notify the high-income segment when a new collection arrives. Tell lower-income customers about discounts.

Customer segmentation methods

The simplest methods are 5W and the Kotler method. ABC XYZ and RFM analysis require knowledge in analytics and are best used by an experienced marketer. Most of the ways are suitable for any business; the exception is ABC XYZ, which can be used if you sell more than one product.

Philip Kotler method

According to the method of Philip Kotler, you can divide the audience according to four criteria:

  • Geographical. It makes it possible to analyze regions, countries, and cities, taking into account the interests of residents. After the analysis, you can decide where it is profitable to launch brand advertising and where it is not worth it.
  • Demographic. The customer base is divided by gender, age, marital status, income level, profession, and nationality. Customer preferences are closely related to this feature, so they pay special attention.
  • Behavioral. Buyers are divided by level of knowledge, attitude towards purchases, reaction to the product, reason for purchases and intensity, and preference for specific brands.
  • Psychographic. The audience is divided according to lifestyle, emotions, values, and personality type. This sign shows how people make purchases: someone takes without hesitation, looking for a better option.

This is one of the oldest types of audience segmentation.

5W Mark Sherrington

The method is called 5W because it includes five questions beginning with the letter W:

  • What – what: the product that is being sold.
  • Who – who: a potential buyer of the product.
  • Why – why: for what reason the selected audience should buy your product.
  • When – when: at what time is it more profitable to make an offer to the audience.
  • Where – where: in what place the audience learns about your product (Internet, billboards, leaflets).

Often used in marketing (both offline and online).

Other segmentation methods

The Khramatrix model is more complex. It includes segmentation based on Kotler’s methods and 5W: description of the target audience by geographic, demographic, and behavioral characteristics as well as the degree of readiness to purchase and the main action of the client.

LTV method. The technique aims to find out how much profit you can get from one client for the entire time you work with him. It depends on how much money you can spend on promotion. To calculate LTV, consider the average check, the number of purchases per month, and the time when customers buy goods.