Customer Segmentation Guide: How to Segment Audiences and the 6 Customer Types

Professional Services crm system

Imagine knowing what makes each customer tick, what drives their buying decisions, and how to craft compelling pitches. That’s the power of customer segmentation.


While every customer is unique, understanding their shared characteristics and needs is key to unlocking sales magic.


This guide equips your sales team with the know-how to segment your customer base using your CRM. There will be no more guessing—just targeted action, proactive sales, and the sweet taste of success.

Customer Segmentation Guide- How to Segment Audiences and the 6 Customer Types

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What is Customer Segmentation?

Customer segmentation is the process of dividing your customers or leads into smaller groups based on shared characteristics. 


By segmenting your customers, you’ll understand their needs and preferences better. You can tailor sales strategies and product offerings accordingly, which enhances customer satisfaction, loyalty, and profitability.


How to Segment Customers

Here is the step-by-step guide on how to do customer segmentation.


  1. Define Your Goals

What are the goals of segmenting customers? Whether it’s to enhance sales performance, elevate customer service, or optimize marketing campaign outcomes, clarify your objectives.


  1. Gather Data

Retrieve customer data, purchase histories, survey responses, and support ticket information from your CRM system, and consolidate them. 


  1. Group Customers into Specific Segments

Decide the most suitable type of customer segmentation for your business and customers. Establish key characteristics for each segment and begin organizing your customers accordingly.


6 Types of Customer Segmentation

There are many ways to segment your customers, and it can vary depending on your industry and the products or services you sell. To help you get started, use the following six customer segments.


6 Types of Customer Segmentation


1. Demographic Segmentation


Based on shared demographic characteristics, such as age, gender, occupation, education, and income. This segmentation helps in developing targeted sales approaches, product offerings, and pricing strategies.


Use case: Financial consultant (professional services).


  • High-income clients: offer portfolio management services, tax-minimization strategies, and customized investment portfolios.
  • Low-income clients: provide debt consolidation counseling, offer financial literacy workshops, and connect clients to appropriate resources.


2. Geographic Segmentation


Based on physical location, such as countries, regions, neighborhoods, or even zip codes. This allows you to tailor the offerings, marketing, and resource allocation based on specific local needs and trends.


Use case: Construction companies.


  • Growing city: target your marketing towards developers and offer services for multi-purpose construction projects.
  • Retirement community: focus on remodeling services for aging populations and accessible home design.
  • University town: highlight experience in building student housing and offer competitive pricing.


3. Value-Based Segmentation


Based on the relative value each customer brings, such as profitability, lifetime value, growth potential, and engagement. It helps you allocate resources where they’re needed the most or in the most lucrative areas. 


Use case: Manufacturing companies.


  • High-volume buyers: offer bulk discounts, dedicated account managers, and customized production schedules.
  • Niche market customers: develop tailor-made solutions, provide technical support, and build strong relationships.
  • Price-sensitive buyers: offer competitive pricing, flexible payment options, and efficient production processes.


4. Needs-Based Segmentation


Based on the motivations and aspirations of your customers, grouping them based on the problems they seek to solve or the benefits they desire from your products or services. 


Use case: Real estate agencies.


  • First-time homebuyers need guidance on the purchasing process, financing, and navigating the competitive market. Offer educational workshops, buyer’s agent services, and pre-approval assistance.
  • Upsizing families: seek larger homes with specific features like good school districts. Offer targeted listings, community information, and connections to relevant services.
  • Downsizing retirees desire smaller, low-maintenance homes. Highlight properties with accessibility features, community amenities, and proximity to healthcare facilities.


5. Psychographic Segmentation


Based on the psychological characteristics, values, attitudes, interests, and lifestyles of your customers—diving deeper than demographics. This approach helps you understand the ‘why’ customers make certain choices.


Use case: Wholesalers and distributors.


  • Sustainability-conscious businesses: offer eco-friendly products, recycled materials, and socially responsible brands.
  • Price-driven businesses: focus on value-packed options, bulk discounts, and competitive pricing.
  • Community-oriented businesses: highlight products that support local communities, small businesses, or charitable causes.


6. Lifecycle Stage Segmentation


Based on their position within their relationship with your company, e.g., acquisition, onboarding, active buyers, renewal, and churn/dormancy.


Use case: Transportation and logistics companies for the ‘churn/dormancy’ segmentation.


  • Exit surveys: understand reasons for churn and use insights to improve overall experience.
  • Reactivation campaigns: target dormant customers with relevant offers and incentives to re-engage with your services.
  • Segmentation by churn reason: address specific concerns based on the reason for churn (e.g., pricing, service issues).


Increase Sales Efficiency with Customer Segmentation

The one-size-fits-all sales approach is like a guerrilla tactic, demanding significant sales efforts for minimal satisfactory results. If you aim for an effective and efficient sales workflow, consider segmenting your customers.


Pro tip:

By configuring a custom field within your lead management CRM, you can prompt each sales rep to categorize new leads into their respective groups. Utilizing sophisticated sales CRM software, such as Pipeline CRM, enables you to utilize conditional fields and formatting functionalities, guaranteeing accurate recording of each lead’s data before saving it.