Six types of customer segmentation

Customer segmentation organizes customers into groups based on various factors to create customer segments with shared interests, needs, and pain points.

Instead of treating customers as one homogeneous group, segmentation allows you to understand your different audiences and tailor customer experiences that meet their unique needs.

In this guide, we’ll cover six types of customer segmentation you can use to segment your customer base:

Effective customer segmentation helps companies:

Boost performance and increase ROI

Optimizing digital experiences is all about understanding what’s working and what’s not. With customer segmentation, you can analyze what works best for each customer segment. You can use these insights to fine-tune campaigns, target ads to reduce costs, and personalize landing pages to increase conversions.

Ruggable boosted conversion rates with personalized content for audience segments visiting its website from an ad or email campaign.

See how this segmentation and personalization strategy resulted in 7x higher click-through rates and a 25% increase in conversions.

Deliver the personalized experiences customers expect

The days of one-size-fits-all marketing are over. Customers expect experiences to be tailored to them, whether your target market is B2B or B2C. After all, companies have unique needs too. Crafting personalized content can be a challenge when you serve multiple markets and personas.

For example, Personio, an all-in-one HR software solution, had an opportunity to market to bigger companies but didn’t want to alienate its SMB clients (small and midsize businesses).

Firmographic segmentation and an AI-native personalization platform enabled them to deliver personalized content that increased conversion rates for both segments.

See how Personio used segmentation to personalize content for distinct customer groups.

Gain valuable customer insights for more targeted messaging

Understanding different groups within your customer base enables you to craft messaging that cuts through the noise by speaking to specific market segments. Instead of listing every feature and benefit, marketing teams can focus on the benefits most likely to appeal to each target audience.

For example, a company that sells office supplies might find that university students typically buy lower-priced options, while young professionals favor high-quality products with a durability guarantee.

Using customer segmentation, the company can tailor messaging to feature the best value proposition for each group and enhance sales across both groups.

Increase customer engagement, conversions, and loyalty

The more relevant your marketing messages are for each customer segment, the more likely you will capture their attention, increase engagement, and turn them into loyal customers. For instance, KFC made inroads into the gaming community with a campaign featuring menu items that gamers could order and eat with one hand.

Pets Deli also uses customer segmentation to make life easier for its customers. Instead of sending existing customers coupons and promo codes, the purveyor of high-quality pet food and supplies used customer segmentation to deliver unique prices and promotions for their Black Friday sales.

See how this strategy led to a 51% increase in conversion rate.

Improve products and services

Customer segmentation provides insights into each customer segment's wants, needs, and pain points. This information enables companies to create targeted products and services that address the needs of specific groups and expand their customer base.

For example, Contentful designed Contentful Studio for marketers and designers who want more autonomy to deliver customer experiences.

Combining segmentation types will give you the most complete view of your existing customers and potential customers, but trying to collect and organize customer data for every segmentation type all at once is a recipe for failure.

Start small with one customer segment and expand the effort into other segments until you achieve your desired results.

The type of segmentation you start with will depend on your company and business goals. If you’re looking for guidance, the following advice is a good place to start:

B2B

Firmographic or location-based (geographic) segmentation is the easiest starting point.

B2C

Starting with behavioral segmentation will enable you to personalize experiences based on variables such as loyalty and purchasing behavior.

CPG

Location-based (geographics) segmentation is the best starting point for big brands operating in multiple locations.

When building a segmentation strategy, it can be helpful to look at industry trends.

To compile the following data, we looked at Contentful power users within the software as a service (SaaS), ecommerce, and financial services industries.

2024 segmentation trends across all industries

As you can see, location-based or geographic segmentation (22.6%) is the most popular segmentation type, followed by behavioral segmentation (18.2%) and additional behavior-based factors.

Get the full report to learn more about how leaders in ecommerce, SaaS, and financial services segment customers for personalization.

Once you choose the customer segmentation type or types that best meet your business needs, you can start collecting data and segmenting customers.

Before we get into segment-specific factors and advice, there are a few things to keep in mind when creating customer segments.

Make sure each segment is viable

Before committing to a big marketing campaign or personalized experiences, make sure your customer segmentation strategy results in usable segments.

Each segment should be:

• Homogenous: Customers must have some similar traits.
• Heterogenous: Each customer segment has to be unique from other segments.
• Measurable: You should be able to measure the size of the targeted segment.
• Substantial: Each customer segment should be large enough to deliver a profitable ROI.
• Accessible: Customer segments must be accessible in terms of your ability to market to them.
• Responsive: Each segment should respond differently to different marketing strategies.

Avoid common data mistakes

Customer segmentation is a powerful tool, but it is only as good as the data behind it. Here are four common mistakes to look out for:

Looking only at past customer behavior: People often change their minds and opinions. Keep your customer data up to date by looking at past and present customer behavior and information.

Using the wrong data: With so much data available, it’s critical to use the most accurate, relevant data to segment your customers.

Creating segments based on assumptions: Before starting segmentation, ensure you have the data to back it up. Conduct small tests and research before finalizing your segments.

Making segments too broad: The data you choose should be narrow enough to create distinct groups with different needs and characteristics.

Customer segmentation is the first step in delivering the highly personalized experiences customers expect. Still, many marketers struggle with the limitations of legacy tools and complicated workflows that make personalization at scale impossible.

Contentful connects the dots with a unified content and personalization solution that lets you structure, manage, personalize, and scale content across any channel.

Personalize content in minutes, not weeks, with AI-powered features that fit seamlessly into existing workflows.

Are you ready to accelerate your personalization efforts?

Let our experts show you how Contentful can help.

Up next: Geographic segmentation

Learn how geographic segmentation helps businesses deliver relevant content by targeting location-specific needs and turning data into personalized content.