Understand your customers' needs

By looking at factors such as geographical location, size and type of organisation, type and lifestyle of consumers, attitudes and behaviour, you can segment your customers into groups.

Why should you segment your customers?

Segmenting your customers is more than putting people into groups. It offers additional benefits, including help with:

• customising and improving your products and services to meet each segment's needs
• identifying your most and least profitable customers
• focusing your marketing on the segments most likely to buy your products or services
• tailor your marketing messages to suit each audience 
• building loyal relationships with customers by developing the products and services they want
• getting ahead of the competition

B2B and B2C segmentation

How you segment your customers will depend on whether you market your products and services to either:

• businesses (business-to-business or B2B marketing)
• individual consumers or households (business-to-consumer or B2C marketing)

If you are segmenting business markets, you could divide the market by:

• what they do - industry sector, public or private, size and location
• how they operate - technology, use of your products
• their buying patterns - how and when they place orders
• how they behave - loyalty and attitude to risk

If you are segmenting consumer markets, you could group customers by:

• location - towns, regions and countries
• profiles - such as age, gender, income, occupation, education, social class
• attitudes and lifestyles
• buying behaviour - including product usage, brand loyalty and the benefits they want from the product or service

Customer profiles

Building profiles of the type of customer you want to target can help you to understand and communicate with them. Think about the type of customer based on their demographics and behaviour and then consider their needs and how you can serve them.

An example of a customer profile for a garden centre might be:

• female aged 60+
• retired with an active lifestyle
• has time to browse for a long time and plan their gardening activities  
• appreciates knowledgeable customer service
• willing to spend more for a high quality product that will last for years

The information you collect about your existing customers will help you create these profiles. You can then look for similar prospects. 

Market research

You may already have information that will allow you to start grouping your existing customers into segments. For example, your sales records should indicate whether customers are individuals or businesses, which products or services they buy and how they prefer to buy from you.

Read more about market research and market reports.

Niche markets

Segmenting your customers could help you to identify a niche market - a specific area of your market that may be overlooked by competitors.

For more advice, create your marketing strategy.