Customer Segmentation: A Step-by-Step Guide

Classic methods are no longer working

Demographic or firmographic (for B2B) characteristics such as age, gender, location, or company size provide us with only a surface-level understanding of customers.

They overlook the dynamic nature of customer behavior and the rapidly changing business environment. Customers today are more diverse, complex, and individualistic in their preferences and decision-making processes.

Let's imagine a company that sells skincare products online. They segmented their customer base using basic demographics such as age, gender, and location. However, they noticed that this approach didn't provide enough actionable insights to personalize their marketing campaigns and product offerings effectively.

Upon conducting further research and adopting a more comprehensive segmentation strategy, they discovered that a specific segment of their customers, predominantly women aged 25-35, strongly preferred organic and cruelty-free skincare products. This segment was environmentally conscious and sought brands that aligned with their values.

Using this newfound understanding, the company developed a tailored marketing campaign highlighting its skincare line's organic and cruelty-free aspects. They also implemented a chatbot feature on their website to address customer inquiries and provide personalized product recommendations based on individual skincare concerns. As a result, they witnessed a significant increase in customer engagement and conversions within this segment.

How to Segment Users: Complete Guide

First, understand that different fields require different approaches. There's no universal tactic or "silver bullet."

A few words about qualification: Imagine discovering an interesting segment that prefers artificial sweetener-free yoghurts and is willing to pay a significant amount regularly. If it represents only 1% of the market, you may ignore it. But if it's larger, consider it. How do we determine the segment's size? We need qualification questions arising from our research:

1. "Do you actively seek out artificial sweetener-free yogurts?"
2. "Are you willing to pay a premium for yogurts without artificial sweeteners?"

Another example for a marketing-oriented design agency:

1. "Have you used no-code solutions before?" - Those with experience often struggle with marketing results.
2. "Have no-code solutions met your marketing expectations?"

Step 1: Ask General questions

Here are examples, pick a few or find related ones in your field:

• What are your hobbies and interests?
• What is your current marital status?
• Do you have any children? If so, how many?
• What is the highest level of education you have achieved?
• If you have a college degree, what field is it in?

Step 2: Find out desired outcome

1. Why do you use %competitor's product or our product%? What's the reason? Why?
2. How important is it to you? Rate from 1 to 5 (1 - very unimportant; 5 - very important).
3. What did you previously use to solve your problem?
4. How satisfied are you with how you accomplished this task? (1 - very unsatisfied; 5 - very satisfied)

Step 3: Identify Push and Pull forces (JTBD)

1. What options on the market exist to solve your problem?
2. What aspects of your previous solution for %outcome% were lacking or failed to meet your needs, leading you to seek an alternative?
3. What specific features or benefits attracted you to your current solution for %outcome%?
4. Anything else to share?

Step 4: Find out "choosing patterns"

1. What are the most important parameters of such solutions?
2. How do you compare similar solutions and choose the best? Why X over Y?
3. What are the top 5 (number may vary based on the niche) essential parameters of such products?
4. Please rank the parameters by importance.

Segmentation by "choosing patterns" helps us identify the specific criteria and parameters customers consider when comparing similar products. By understanding these patterns, we can tailor our marketing and product offerings to meet their preferences and gain a competitive advantage. For example, some customers prioritize price, while others have different priorities, requiring varied communication strategies.

Aligning our offerings with customers' choosing patterns increases satisfaction and likelihood of choosing our product.

Understanding unique preferences, like a strong preference for organic and cruelty-free skincare products, enables targeted marketing and niche positioning. By aligning messaging and product features with specific desires, we create a strong emotional connection and become the go-to solution for customers seeking those attributes. Such segments may prioritize factors other than price, making it a less competitive zone. For startups, winning in price competition is hard, so this approach differentiates us.

Step 5: Analyze results and extract segments

As you can see, we've found a segment which has experience with a no-code solution but hasn't achieved marketing expectations. They wanted leads and sales increasement but got a simple website. And as I said, to measure the volume of these segments, we have to ask:

1. Did you have experience with no-code solutions before?
2. Has no code met your marketing expectations?

Step 6: Make emphatic persons using results

Empathic persons are important for designers and programmers because they possess the ability to understand and relate to the needs, emotions, and perspectives of others. This quality allows them to create products and solutions that truly resonate with users and address their pain points effectively.

Nika, Romichi Team

Product Designer