What is customer segmentation?

Customer segmentation divides an existing customer base into smaller groups based on shared characteristics like demographics, behavior, geography, and economic value to enable tailored marketing and product decisions.

• •Six segmentation types exist: demographic, geographic, psychographic, behavioral, firmographic (B2B), and value-based.
• •Common methods range from rule-based and RFM analysis to K-means clustering and AI/ML-driven approaches for discovering patterns and real-time personalization.
• •Effective segmentation requires a structured process: define business goals, audit data sources, unify and clean data, choose type and method, build segments, validate, activate, and measure results.
• •A segment becomes actionable when it meets five criteria: measurable, accessible, substantial, differentiable from other segments, and supports specific actions.