I Took a Deep Dive Into Market Segmentation — Here's Everything I Learned

When I started my own online store with Printify and created social media shops, I found out that marketing segmentation was very important for making steady sales.

At first, I tried to sell to everyone, thinking that reaching more people would bring in more customers. Instead, my messages were unclear, and my sales were inconsistent.

But when I began dividing my possible customers into specific groups by looking at their interests, shopping habits, and how they interact, it revolutionized how I did marketing and positioned my products.

The result? More sales, better customer service interactions, and a shop that connected well with its audience.

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My practical experience taught me a lot, but I wanted to learn more. I took a deep dive into market segmentation –– what it is, why it’s important, and how businesses of all kinds can use it to improve their strategies.

Here’s everything I learned.

Table of Contents

• What is market segmentation?
• Benefits of Market Segmentation
• Challenges of Market Segmentation
• Types of Market Segmentation
• How to Identify Your Best Market Segments
• Examples of Market Segmentation IRL

Think of it like this –– instead of casting a wide net and hoping to catch fish, market segmentation allows you to use a spear, targeting particular types of fish in their natural habitats.

This focused method makes sure your marketing and services reach people who are truly interested, helping you better connect with potential loyal customers.

Benefits of Market Segmentation

Market segmentation has many advantages, especially for improving customer service and support. Here are some important perks I’ve personally noticed and am also learning more about.

1. Improved Customer Happiness

By knowing what different customers want and need, companies can create more personalized and relevant experiences for them.

For example, if you know some of your customers want quick delivery, you can provide faster shipping choices. On the other hand, price-sensitive groups might like deals or sales.

Market segmentation helps you customize your service for different groups, which makes customers happier. And happy customers are more likely to return and recommend your brand to others.

In fact, the data shows that typically, 72% of customers share a really great customer experience with six or more people.

2. Deeper Understanding of Customer Needs

Segmentation helps you go beyond general ideas and understand exactly what your customers want.

By looking at different groups based on how they act, what they like, and how they shop, you can find similarities and useful information that might not be obvious otherwise.

For instance, you might find out that one group of customers cares a lot about eco-friendly goods, while another group prefers high-quality items. This understanding helps you tailor products, marketing messages, and customer service to fit those unique needs.

3. Better Marketing ROI

When you focus on specific groups of customers with messages that suit them, your marketing efforts work much better.

Market segmentation helps you find and focus on valuable customers who are most likely to be interested in your brand or buy your goods and services.

This focused strategy helps you get the most out of your investment by:

• Cutting down on lost advertising dollars for people who aren’t interested.
• Boosting the number of potential sales or sign-ups.

4. Optimized Product Development

Market segmentation offers important insights for creating products. By knowing what different groups like and struggle with, you can improve your goods and services to meet their specific needs better.

For example, a software company might analyze segmentation data to find features that appeal most to small businesses versus enterprise clients. This understanding can help sell products more successfully and gain a larger market share.

5. Active Customer Support and Lower Customer Loss

By identifying customer segments, you can also predict potential churn risks and directly address them.

RFM research helps you find “at-risk” customers who are losing interest. It looks at how recently they’ve bought something, how often they buy, and how much they spend. Try making win-back campaigns with personalized offers to reconnect with these groups. Taking a proactive approach to customer service can help keep customers and build trust.

Challenges of Market Segmentation

Market segmentation is no doubt a useful tool for businesses, but I’ve found it has notable challenges in today’s environment. Here are the main hurdles marketers are currently facing based on recent studies and industry trends.

1. Data Quality and Access

The growth of data has both benefits and challenges for market analysis. It provides new insights but also creates big privacy issues.

According to some research done by FasterCapital, data quality issues are among the most common problems in customer segmentation, with inaccurate or incomplete data leading to misclassified segments.

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To solve for this problem:

• Keep customer data clean and up-to-date.
• Check data for accuracy.
• Use different sources for a complete understanding.

2. Advanced Skills and Tools Required

Modern segmentation methods are complicated and require special skills and tools. Now, AI and machine learning are changing how businesses target their markets. These days, some AI systems can predict future customer behavior with more than 90% accuracy.

However, many marketing teams don’t have the skills to make the most of these tools.

To solve for this problem:

• Spend more money on training programs to improve data analysis and assessment skills.
• Think about teaming up with tech companies and data experts. Businesses that invest in AI and ML technology will most likely see an increase in their ability to make money from data in 2025.

3. Over Segmentation and Missed Opportunities

Some caution is necessary when segmenting. Research shows you can divide your market too much, making too many small segments that are hard to handle and require a lot of resources.

In customer service, dividing customers into too many groups can make processes more complicated, create disjointed experiences for customers, and waste precious company resources.

To solve for this problem:

• It’s important to find the right mix in your segments and focus on areas that are both important and easy to handle.

4. Changing Nature of Markets

Markets are always changing and developing, and customer needs, wants, and actions change over time due to different outside influences. This means you should regularly update how you handle and analyze your data.

But it’s not always easy: 82% of market researchers cite keeping up with market changes as a major challenge. For customer service, this can mean that the definitions of customer groups and strategies you provide should be checked and updated regularly to stay useful and effective.

In my experience:

During my time building the conversational AI chatbot at Dapper Labs, we regularly analyzed the chatbot interaction data and optimized the chatbot based on how our customers were engaging with it. This really helped identify what they were looking for.

5. Resource Intensity

Maintaining and applying successful market segmentation techniques can be somewhat expensive and demanding in terms of time, money, and human capital.

In regards to customer service, this can mean investing in new technologies, training support agents on segment-specific approaches, and committing ongoing segment analysis and refinement. You may want to check out HubSpot’s Service Hub if you’re in the market for new technologies.

To solve for this problem:

• Carefully consider the expenses and advantages of segmentation and give segments with the highest possible return top priority.

Types of Market Segmentation

The way you go about market segmentation should not be the same for everyone. There are different ways to split markets, each using different methods to make the divisions.

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Here are the five main types that I looked into.

1. Demographic Segmentation

This is a simple and popular type that separates the market using clear demographical factors. These factors can be measured and are clear, which makes population segmentation a useful place to start.

How to do it: Collect demographic information using surveys, market study reports, and analytics tools. You can use tools like our HubSpot CRM to help you gather and study demographic information while storing it for future uses.

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Where it works best: Products and services whose target audience is highly influenced by demographic factors.

Here are some examples that I came across:

• Age-specific products. Toys and clothes of certain ages, retirement planning services.
• Services based on income. Expensive products, affordable flights, money management services.
• Family life stage products. Baby items, family holiday deals, retirement communities.

Real-world example: A financial services company might offer different retirement planning options for various age groups.

2. Psychographic Segmentation

This type of segmentation looks at the psychological factors that influence how consumers behave, paying attention to their lifestyles, values, hobbies, and personality traits.

Psychographic segmentation looks at the reasons behind customers’ decisions, focusing on their thoughts and feelings rather than just their age or gender.

How to do it: Utilize polls, questionnaires, focus groups, and social listening to gather psychographic data. Look at customer feedback, online activities, and how they interact with the brand to understand their ideals and interests.

Where it works best: Products and services that depend a lot on what consumers value, how they live, and their personalities when deciding to buy.

Here are some examples that I came across:

• Lifestyle brands. Eco-friendly clothing, outdoor equipment, health and fitness items.
• Hobbies and interests. Sports tools, art supplies, travel and tourism.
• Products that focus on values. Fair trade coffee, goods bought ethically, and donations to charities.

Real-world example: A sustainable food business would connect with environmentally aware customers by promoting their eco-friendly values.

3. Geographic Segmention

This method segments the market by physical geography. It understands that what people want and like can change a lot depending on where they live and work.

How to do it: Use location data from your CRM system, marketing automations tools, and geographic data providers (if available). Think about all the tools that help you target ads based on location.

Where it works best: Businesses whose products or services are influenced by location.

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Here are some examples that I came across:

• Climate. Clothes for different seasons, air conditions, services for removing snow.
• Population density. Differences in goods, services, and transportation choices for rural versus urban.
• Culture. Looking into what people eat and drink, what they wear, how they choose to have fun.

Real-world example: A snowboard store would target its marketing in places where people come for winter activities or where it snows regularly.

4. Behavioral Segmentation

In my experience with online shopping and running my ecommerce stores, I’ve noticed how helpful it is to group customers based on their behaviors. This method groups customers based on what they do –– how they shop, talk to brands, and use goods. It’s about knowing who people are and how they choose to buy things.

I actually did my graduating project from San Francisco State on behavioral patterns for online shopping differences between men and women back in 2013. This kind of information can greatly enhance your understanding of your customers and how to keep them coming back.

A study by McKinsey found that companies that use behavioral data to tailor their marketing can boost their revenue by 5% to 15% and improve marketing efficiency by 10% to 30%. This shows that watching how customers behave is not just a luxury, it can be extremely beneficial.

How to do it: Look at website data, buying habits, CRM information, and customer reviews to spot trends in customer behavior. Also, don’t just look at the buying habits but how visitor traffic is engaging with your business, whether that be physical foot traffic or digital.

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Where it works best: Customer-centric industries where understanding and predicting consumer actions is crucial.

Here are some examples that I came across:

• Ecommerce. Online retailers can leverage this type of data to personalize product recommendations, optimize pricing, and tailor marketing campaigns based on browsing and purchase history.
• Subscription-based services. Companies offering recurring services can use behavioral segmentation to reduce churn, improve retention, and enhance overall customer experience.
• Financial services. Banks and fintech companies can employ this method to offer products and services based on spending patterns and financial goals.
• Travel and hospitality. This industry can benefit by tailoring offers and experiences based on past travel behavior or desired preferences.

5. Firmographic Segmentation

Firmographic segmentation is one that I had to dive a little deeper into as it’s a bit new for me, even considering my years of B2B SaaS experience. It’s similar to demographic segmentation, but instead of looking at individual customer traits, it focuses on the characteristics of organizations in B2B markets.

How to do it: Use B2B data providers like ZoomInfo, Demandbase, Clearbit, Crunchbase, and Dun & Bradstreet for information about company size, revenue, and business type. You can also leverage CRM and sales tools like HubSpot CRM or LinkedIn Sales Navigator to organize businesses and find people who make decisions.

Where it works best: B2B products and services where company characteristics influence purchasing decisions. Essentially, where factors like company size, industry, and revenue shape buying needs.

Here are some examples that I came across:

• SaaS solutions. They enable companies to customize their offerings according to factors such as company size, industry, and technology adoption levels.
• Business services. Helps organizations like consulting, finance, and logistics firms to effectively segment their business services based on industry, revenue, and employee count.
• Industrial equipment. Focuses efforts on businesses based on their production scale and geographic location.

How to Identify Your Best Market Segments

Identifying the most promising market segments is a crucial step in the process. Here’s an outline of the general best practices that I discovered while doing my research.

1. Begin with market research.

First, gather comprehensive insights about your existing and prospective customers. This involves executing surveys, interviews, and focus groups to gather both quantitative and qualitative insights. Your market research is the foundation of your market segmentation capabilities.

Pro tip: Here are 28 tools and resources you can use for conducting market research. You can also download our free market research kit to get you started.

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2. Analyze your data.

Once you’ve collected sufficient data, the subsequent step is to review it to identify patterns and trends. Leveraging statistical analysis enables the identification of common traits and behaviors across diverse customer segments.

Pro tip: Use data visualization tools to quickly spot patterns and trends in your data. Basic charts will do, but I personally love using heat maps and scatter plots. This will help you identify common behaviors and traits across customer segments more effectively, turning raw data into actionable insights.

3. Develop buyer personas.

Now is the time to leverage your data to craft detailed profiles of your ideal customers for each segment.

Buyer personas must accurately reflect your target segments, encompassing details about their objectives, obstacles, preferences, motivations, and both demographic and psychographic traits. These characters enhance the relatability of your groups and streamline collaboration.

Pro tip: Check out our free “Make My Persona” buyer persona generator.

4. Segment your market.

From here, you’ll want to use these buyer personas to divide your total market into distinct segments.

Consider trying various segmentation strategies to establish more defined and actionable groups. You want to ensure that each group consists of individuals with similar characteristics, distinct from other groups, and sufficiently sized to drive profitability.

Pro tip: When segmenting your market, ensure each segment is measurable, substantial, and actionable. Use a mix of segmentation strategies so you have more to work with as you enter the testing stage. These customer segmentation templates can help.

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5. Test and optimize.

Once you’ve identified your segments, implement your marketing and customer service strategies for each group. Monitor the feedback and outcomes to refine your approach. Market segmentation is a continuous endeavour.

Pro tip: Instead of just testing marketing tactics within existing segments, I came across this advice to A/B test different variations of the segment definitions –– like adjusting the age ranges or psychographic criteria –– to find the most responsive and profitable groups.

This type of continuous refinement is something I saw at Trendy Butler. It ensures your segments stay aligned with evolving customer behaviors rather than relying on outdated assumptions.

6. Leverage segmentation tools.

Implement technology to streamline your segmentation process. CRM platforms offer functionalities that enable users to categorize and organize contacts into lists according to various criteria.

Utilizing marketing automation tools enables the segmentation of audiences based on their behaviors, allowing for the delivery of tailored campaigns that resonate with individual preferences.

HubSpot’s list segmentation empowers businesses to gain insights into their customers, enabling them to deliver more tailored experience.

Examples of Market Segmentation IRL

While I’ve gained valuable insights into segmentation through my own work in subscription-based businesses and ecommerce, this article is the result of a deeper dive into the subject, building on both what I already knew and new discoveries I’ve made along the way.

Below, I’ll break down some real-world examples of how companies implement market segmentation strategies, what I’ve learned from them, and how they align with the principles of market segmentation.

1. Nike - Master of Psychographics

When it comes to demographic and psychographic segmentation, Nike is a master. The strategy that Nike employs to target various customer groups has been an essential component of the company’s success on a global scale.

On the surface, it may appear that Nike’s market strategy consists solely of categorizing customers according to demographic factors like age, gender, or sports interest. Nevertheless, the incorporation of psychographics is what truly stands out in their approach.

A mindset of attaining personal objectives, conquering problems, and pushing boundaries is something Nike encourages its customers to adopt.

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Through a deep customer awareness and an understanding of purchasing decisions, Nike is able to establish a strong connection with their community. Their “Just Do It” slogan places an emphasis on personal identity, as well as goals and motivation.

Despite the fact that I was already familiar with the concept of market segmentation, my research on Nike further showed me how essential it is to understand your consumers values and viewpoints.

2. Starbucks - Personalization Through Geography

Starbucks is an excellent example of how businesses can blend location and customer interests to develop a brand that is successful on a global scale — all while maintaining a sense of personalization for customers in their own local markets.

As a result of my research, I discovered that the company actually modifies both the products they sell and the layout of their stores in order to cater to the interests and cultural customs of other regions.

For example, in China they cater to the preferences of the locals by offering beverages such as red bean frappuccinos. On the other hand, during the fall season in the United States, pumpkin spice lattes are all the rage.

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Customers who view Starbucks stores as a “third place” where they can relax or hang out doing their work is exactly the type of customers they are looking to attract.

As someone who has worked in customer service for many years, I am very aware of how important it is for a company to establish a genuine human connection with the people who use its products.

I can see why Starbucks has found much success in striking a balance between a worldwide brand that is consistent and provides local flavors, ensuring that their products and experiences seem personal in each and every market.

3. Netflix - Behavioral Segmentation Beast

Netflix is a great example of how splitting customers into groups according to their activity and region may help keep customers interested in the service and lower the number of people who cancel their memberships.

Netflix is able to learn how their viewers watch episodes through the use of behavioral segmentation, which helps them provide those very accurate, personalized recommendations.

Understanding and being able to predict consumer behavior is something I’ve personally witnessed in both my scholastic endeavours and professional career, and it can really enhance your approach to customer experience, too.

If you are aware of how customers use your service, you’ll be able to better predict their demands and boost the amount of engagement you have with them.

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The manner in which Netflix utilizes geographic and behavioral segmentation is something that I found to be very interesting about their strategy. They really think above and beyond when it comes to their offerings.

In order to provide viewers in different regions the impression that their viewing experience is tailored specifically to them, Netflix adapts its content to the languages, cultures, and preferences of the local community. That, tied in with viewing behavior, can be incredibly powerful.

Market Segmentation Learnings

Deep diving into market segmentation for this post? Honestly, pretty eye-opening stuff.

It’s evident that proper market segmentation is one of the fundamental blueprints for scalable growth and creating a truly customer-centric brand. Understanding and executing on market segmentation is necessary for everyone in the startup trenches looking to optimize their GTM strategy and create long-term success.

Thinking back to my online store launch, that initial broad-stroke marketing was a classic startup move, but totally inefficient. The biggest learning curve was realizing it’s not about volume — it’s about precision. Shifting from mass marketing to truly understanding and targeting specific customer segments? That’s where the real leverage is.