The Forrester Wave™: Customer Data Platforms For B2C, Q3 2024 Read the report

Customer Segmentation

What is Customer Segmentation?

Customer segmentation is a the process of segmenting individuals into audiences based on common characteristics and attributes. A comprehensive customer segmentation strategy can help to ensure long-term success in personalization efforts, and allow you to target your high-value segments with superior contextual experiences.

Benefits of Customer Segmentation

Customer segmentation is a tried-and-true method for marketers to target valuable customer groups. It allows brands to:

  • Identify behavioral and transactional trends of customers
  • Deliver targeted experiences and messages to specific customer segments
  • Acquire new customers, retain customers, and reduce churn
  • Optimize marketing campaigns and operations

Types of Customer Segmentation: Micro-Audiences

Starting with smaller audiences allows you to offer more targeted advertising to a more relevant audience, increasing your return on ad spend by not targeting too broadly.  Focusing your audiences down to multiple micro-audiences will allow machine learning-based lookalike algorithms to start with less noise and be able to deliver the insights needed to apply hyper-targeted customer segmentation more effectively.

A few micro-audiences to think about:

  • Product Categories
  • Spend Groups (Average Order Value, Total Spend, etc)
  • Geographic Differences
  • Use Cases or Solutions
  • High Profit (Margin) customers

CDP Use Cases for Customer Segmentation

The way you use customer segments dependent on your business, customers, and industry-oriented goals. By using a CDP to segment your audiences, you can:

  • Identify customers based on where they are in the customer journey
  • Group customers into separate audiences based on buying stage, preferences, or interests
  • Avoid targeting loyal high-value customers with irrelevant messaging or experiences through audience suppression
  • Analyze customer purchase history to find more opportunities for cross-selling and upselling to those high-value customers
  • Offer next-best action recommendations for highly relevant recommendations and offers
  • Respond to high-value loyal customers who engage in positive behavior with reward points and exclusive discounts
  • Routinely analyze customer segments for changing behavioral patterns, to optimize marketing campaigns

Read More: How to Improve Ad Spend with a CDP

CDP.com Staff
CDP.com Staff
The CDP.com staff has collaborated to deliver the latest information and insights on the customer data platform industry.

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