Customer Segmentation Examples & How To Follow Them

You can feel intimidated by the concept of segmentation because there are potentially unlimited segments.

The number of segments you can create just based on various behaviors can be overwhelming. For example, you might consider breaking down your audience into segments according to their online browsing habits, social media engagement, or purchasing history.

Each of these categories can be further refined, leading to a multitude of segments. You could, for example, create segments based on the specific pages visited, the frequency of interactions, or the average order value.

We want to find that sweet spot where segmenting customers helps us understand them better without overwhelming ourselves with too many irrelevant segments. So, in this article, we’ll look at the following:

Steps to segment your customers
Customer segmentation examples from top brands
Customer segmentation models to help you get started

Table of Contents

What Is Customer Segmentation?

Customer segmentation is about grouping customers who share common traits or behaviors. These traits can be anything from how often they visit a website to what they buy or even when they buy it.

Doing this lets you better understand your customers and tailor your products or messages to suit each group’s preferences and needs. For example, you might notice customers purchasing sports items during specific times of the year. You can offer discounts or early access to new sportswear collections during those times.

Essentially, it’s a way to organize customers into meaningful categories to serve them better.

Benefits of Customer Segmentation

Here’s why customer segmentation is important.

1. Personalized communication

Segmentation allows you to tailor your messaging according to different groups of your customers. You wouldn’t, for example, send emails for athletic gear to customers who have historically only purchased office supplies. Without segmenting based on purchase history or preferences, you risk alienating customers by bombarding them with irrelevant offers.

This lack of segmentation can result in decreased engagement, as customers receive communications that don’t align with their needs or interests.

“You need to reflect what you know about that individual person,” Benjamin Shapiro, host of the Martech Podcast says. “Include their name, talk about what their purchase behavior is, take the data you know about them specifically and include it in your messaging. This is a new customer, our messaging needs to be more about onboarding and education. This is one of our best customers, we need to show our appreciation.”

2. Enhanced customer experience

Segmentation gives you the ability to improve the experience customers have with your brand. They receive relevant content that resonates with their interest.

For example, without segmentation, you’ll send the same newsletter to your entire customer base, promoting all the latest products available on your website. This lack of segmentation fails to acknowledge your customers’ diverse interests and purchase behaviors.

But when you segment them into groups, you can tailor content specific to their needs. This will increase their engagement with your brand.

3. Optimized marketing strategies

If you think about it, when you create targeted marketing campaigns for each segment, you get a higher ROI than when you promote the same content to your entire customer base.

You’re essentially honing in on what matters most to each group when you tailor your messages to specific segments. This focused approach allows you to allocate resources where they’re most effective, optimizing your marketing efforts.

How To Segment Your Customers

There are unlimited segments you can create. While we’ll look at examples of customer segmentation later on, it’s important to know how to identify segments specific to your business.

When asked about how to segment customers, Tamara Grominsky, former VP (product marketing) at Kajabi, outlined the following steps.

1. Collect customer data

Look at your data. Collect information on past and current customers, including those who signed up for trials (for SaaS companies), made purchases, and churned. You can also look at customer support interactions and email marketing campaigns.

Gathering this data helps in understanding customer behavior, preferences, and engagement patterns, forming the basis for segmentation.

“Let’s assume that you’ve been around for more than a year and you have more than a hundred customers,” she says. “So who has ever purchased from you in the past? Who’s buying from you today? Who has ever signed up for a trial?”

Here’s how you can use EngageBay to collect this data 👇🏻

Forms: You can create customized forms embedded on your website or shared through various channels. In those forms, include fields that capture relevant customer information, such as preferences or interests.
Landing pages: Develop targeted landing pages for specific campaigns or promotions. Include form submissions on these landing pages to collect data from visitors interested in the campaign, focusing on aspects that align with your segmentation goals.
Marketing automation: You can set up automated workflows triggered by customer interactions or specific behaviors. These workflows will gather data incrementally as customers engage with your content or respond to automated messages. For example, automating follow-up emails with survey links or personalized content. (20 example workflows here)
Email marketing data: EngageBay provides insights into email campaign performance, including open rates. So, you can regularly monitor and gather data on your campaigns to understand which emails resonate most with your audience.
Helpdesk reports: EngageBay also lets you monitor and analyze helpdesk reports for customer support interactions. You can then extract valuable insights from customer queries, concerns, and feedback. This will help you Identify recurring themes or issues that can inform your segmentation criteria.

2. Analyze customer data for clusters

Examine the customer data for patterns and trends. Identify clusters or groups of customers based on similarities or common traits. This could involve demographics (age, gender, location), behavior (purchase frequency, engagement), or preferences (product interests, subscription plans).

The biggest mistake most people make is to look for large customer segments. But the key is to look for data that is large enough to matter for your business. If you realize a lot of customers are from New York, this doesn’t need to be a segment if it’s irrelevant to your business.

Here’s what Tamara said about going through this data and looking for clusters:

“What trends and patterns are emerging to you? What do these different customers have in common? And this is where I always say, what you are not looking for is the largest pool of customers here. You are looking for customer segments that are large enough to matter, but they don’t have to be the biggest.”

3. Assess business performance within clusters and identify customer segments

After identifying these clusters, analyze how each segment contributes to your KPIs. Assess metrics like conversion rates, customer retention, the frequency of product usage, likelihood to make additional purchases, and advocacy for your brand. Understanding the performance of these segments helps distinguish their value to your business.

For instance, the segment purchasing fitness equipment has a high average order value, while the regular athletic clothing segment tends to have a higher retention rate and more frequent purchases.

Here’s how you can use EngageBay to assess performance 👇🏻

Integration with eCommerce platforms: Integrate EngageBay with your e-commerce platform to seamlessly gather transactional data. Assess the purchasing behavior, average order values, and frequency of purchases within each segment, enabling a more comprehensive understanding of their contribution to business performance.
Lead scoring: Assign scores to leads based on their interactions and behaviors. This can help prioritize and identify high-value segments. For instance, leads from a segment with high engagement and frequent purchases may receive a higher lead score, indicating their potential impact on business performance.
Marketing automation engagement metrics: Assess metrics such as the number of customers completing automation sequences or responding to automated messages, providing insights into segment-specific engagement.

Customer Segmentation Models

Most customer segments fall under these common segmentation models. However, these models are not comprehensive. You might create a segment that isn’t in any model, and that’s fine. What we’ll cover are the most common ones. Here are the customer segmentation models:

1. Demographic segmentation

Demographic segmentation helps you understand who your customers are. For example, a luxury skincare company might focus on women aged 30-50 with higher income levels, as they may be more inclined to purchase premium skincare products.

Examples of segments in this model are age, gender, income, education, occupation, marital status, and location.

2. Psychographic segmentation

Psychographic segmentation dives into the “whys” behind customer actions. For instance, a brand targeting adventure travelers might segment based on attitudes towards risk-taking, love for exploration, and willingness to try new experiences. This helps in creating marketing messages that resonate with specific mindsets.

This model offers deeper insights into customer motivations, desires, and purchasing behaviors. Examples of segments include personality traits, hobbies, beliefs, opinions, and lifestyle choices.

3. Behavioral segmentation

Behavioral segmentation focuses on actions rather than characteristics. An example could be a SaaS company segmenting users based on how often they utilize advanced features. This helps tailor product updates, marketing messages, and loyalty programs to suit different user behaviors.

If you have an eCommerce store, you can segment users based on their purchase frequency, abandoned carts, average order value, category interest, or purchase history. This will help you to tailor marketing campaigns and personalize product recommendations based on customer behavior.

4. Geographical segmentation

Geographic segmentation involves categorizing customers based on their location, allowing you to tailor marketing strategies, product offerings, and experiences to specific geographical regions.

An outdoor camping gear company might segment its customers into coastal dwellers (beach tents) or urban populations (compact camping gear).

This segmentation allows you to offer localized marketing campaigns, stock relevant products, and adapt your services to cater to different regions’ unique needs and preferences.

Customer Segmentation Examples From Big Brands

Now, we’ll look at examples of customer segmentation in the email marketing of some of the best brands around the world. I’ll also show you how to target customers by segment in your marketing.

1. First-time shoppers (new customers)

This segment comprises customers who have recently made their first purchase or have just signed up as new users. These customers might need further engagement through email marketing campaigns to make them repeat customers.