Insights Article

Customer Segmentation: How to Segment Your Audience
14th May 2024
Customer segmentation sticky notes


What is Customer Segmentation?


Customer segmentation is the process of dividing people into groups based on common characteristics to optimise marketing strategies. It’s crucial for targeting the right audience with the right message, growing market share, and increasing customer loyalty.


  • Geographic segmentation: Organises people based on their geographical borders, such as countries, cities, or postal codes. Useful for localised marketing strategies.


  • Demographic segmentation: Divides the market by age, gender, income, education, and family size. Helps tailor marketing messages to fit the life stage and economic status of customers.


  • Psychographic segmentation: Based on lifestyle, activities, interests, and opinions. This can create deeply resonant marketing campaigns by aligning with the values and attitudes of consumers.


  • Behavioural segmentation: Looks at purchasing behaviour, including usage rate, user status, loyalty, and readiness to buy. Ideal for fostering loyalty and increasing engagement.


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Why Customer Segmentation Is Important


Understanding the distinct needs and behaviours of different customer groups through segmentation can significantly enhance strategic marketing. It helps businesses deliver more personalised experiences, improve customer engagement, and optimise resource allocation. An in-depth customer segmentation delivers:


  • Enhanced customer understanding

Provides deeper insights into customer preferences and behaviours, allowing for more targeted and effective marketing strategies.


  • Improved targeting

Helps identify the most lucrative segments to tailor marketing efforts and allocate resources more efficiently.


Discover the benefits of customer segmentation


The Dangers of Demographic Segmentation


While demographic segmentation is widely used, it comes with certain pitfalls that can negatively impact marketing effectiveness, including:


  • Oversimplifying the diversity of customer experiences

Segmenting by demographic oversimplifies the customer experience by assuming that all individuals within a demographic share similar needs and wants, which is often not the case.


  • Not always adapting well to market changes

Demographic segments may not react uniformly to market shifts, making some marketing strategies quickly outdated.


  • Risk of stereotyping

Can lead to misrepresentation of your audience, alienating potential customers who do not fit the conventional demographic profiles.


  • Overlooking unidentified segments

By focusing too intently on defined demographic segments, companies may miss out on more nuanced segments that could be valuable.


Explore more on segmentation strategies


How to Segment Your Audience


At Clusters, we believe that an effective segmentation is based on the variables that most distinctly pull apart your target audience; this could be their barriers and motivations, attitudes, reaction to a proposition or many more. We think it is critical to not pre-define the variables but instead let these fall out of the data. 


A proper segmentation is essential to ensure that marketing efforts are precisely targeted, thereby minimising wasted resources and capital. Our segmentations help in identifying the most valuable customer segments, ensuring that opportunities for growth and engagement are not overlooked. This strategic focus not only optimises your marketing investments but also enhances your overall business strategy by aligning it with the true needs and behaviours of your target market.


Our unique method offers a 98% accuracy rate in segmentation, far surpassing the industry standard of 70%. This precision allows for highly targeted marketing campaigns that dramatically reduce wastage and improve conversion rates. By using our proprietary segmentation methodology, you can benefit from:


  • High accuracy

Ensures that marketing messages are delivered to the right audience, increasing the effectiveness of campaigns.


  • Reduced marketing wastage

By targeting more precisely, spend on unresponsive segments is minimised, maximising ROI.


Book a consultation today to learn how our segmentation strategy can help you achieve the results you need to grow your business.


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