Segmentation of target groups

Why target group segmentation is worthwhile

Target group segmentation is about breaking down your target group into smaller units. In this way, you can clearly distinguish customer groups from one another and tailor communication measures more specifically to them. Target group segmentation thus forms an important basis for persona development.
How do you segment your target groups? This basically depends on the goals you set for yourself as a company and how your company is structured. For example, it may make sense for a beverage retailer to focus on sales as a segmentation criterion, while a cosmetics company prefers to segment according to demographic characteristics.

In addition, combinations of the segmentation criteria are possible. We present the most common segmentation criteria.

Segmentation according to loyalty

A successful company relies on loyal customers: Regular customers who buy from you regularly as well as customers who recommend your products and services to others. With this segmentation variant, you should therefore develop different customer groups depending on the loyalty of your customers, e.g. distinguish between regular customers and walk-in customers.

Important: If you create a data-driven persona for a loyal customer group, turnover plays a subordinate role. The focus is on regular interaction with the company.

Example: You are a local stationery retailer. Your walk-in customers are those who come into your shop occasionally to buy a postcard, for example. In addition, you have customers who regularly shop with you. But here, too, you can make a further distinction: On the one hand, you have pupils and parents who always make a bulk purchase at the beginning of a school year. On the other hand, there are bulk buyers, such as a local authority, who order stationery at certain intervals. And then you have artists who need continuous supplies for sketches and drawings.

Remember: It is not only the purchase that determines the loyalty of the customer. Especially in online business, interactions such as reviews, likes or comments on social media can also be characteristics of loyal customers. So it depends on how you personally define loyalty for your business.

Personas help track how a target group changes over time. You learn to understand what you need to optimise in the future to turn more customers into repeat customers.

Segmentation according to reasons for purchase

It is essential for the success of a company to know the reasons why the target group buys. Why does a customer choose a certain product or service and what problem does it solve? Which features are important or decisive for the customer - price, quality or brand image?

Based on this data, you can align content and communication strategy even more closely to the target group. We recommend: Develop several data-driven personas for the purchase motives if significantly different purchase motives emerge.

Example: As a stationery retailer, you have identified different reasons for buying, e.g. there are the bulk buyers who buy for authorities and companies. They pay particular attention to price and quality. Then there are the students who have little pocket money available and prefer particularly inexpensive goods. On the other hand, there are the freelance artists with higher budgets and a focus on excellent quality.

This research into reasons for purchase reveals which customers you best address with what, what relevant differences there are between the customers, and which customer groups could be particularly interesting for the persona creation. In addition, segmentation helps to target communication measures more precisely: Where, when and how do you place advertising? Which approach and tone of voice are well received?

Segmentation according to turnover

Your customer groups differ greatly in terms of the turnover generated? Then this segmentation method might be something for you. Segmenting by turnover means that you create different customer groups depending on the turnover generated. As a rule, they are called A-, B- and C-customers. A-customers are the unit with the highest turnover, on which you will later mainly base your persona development.

An example: As a stationery retailer, you regularly supply schools and authorities with office supplies and stationery. These customers provide you with reliably high turnover and are therefore A customers. C-customers, on the other hand, are walk-in customers who occasionally buy a stapler or new staples. The turnover is rather limited here. A B customer would be classified in between, e.g. an artist who regularly buys special pens from you and spends a little more money on them.

As you can see from this example, the breakdown can vary greatly depending on the business. For example, if the retailer focuses on decorative stationery, postcards and gift items and is located in a popular holiday destination, walk-in customers could account for significantly more sales and be among the A customers.

Segmentation by revenue offers a decisive advantage: If you create your buyer personas on this basis, you have an immediate impact on company revenue. But: In a way, the customer is dehumanized and reduced to his mere profit. As a result, the resulting personas remain number-based and abstract, because the reason for purchase and pain points remain hidden.
Therefore, we always recommend using this segmentation criterion in combination with other criteria. Only in this way can you develop a living persona.

For our stationery trade, this could mean: Divide your A-customers again according to reasons for purchase or loyalty. This could result in the following customer groups: regular regular customers, seasonal customers (e.g. at the beginning of each school year) and walk-in customers. Another possible breakdown: artists, writers, pupils and students, parents.

You will find that there are many different ways to segment your target group. If your strategy is stuck, a change of perspective can be worthwhile.

Segmentation according to business objectives (B2B)

For the development of B2B personas, it is worth taking a closer look at companies you work with. Integrate company goals into your segmentation as well! These play a decisive role in the buying decision.

Depending on how many B2B customers you work with, you need a separate persona per company and vision. But: You can often group companies into clusters, e.g. if they have very similar structures, workflows, turnover, employee sizes or assortments or belong to the same industry.

Example: We link back to our stationery trade. Relevant B2B contacts can be divided into four broad groups, for example: A) Wholesalers who supply goods; B) Major customers of official institutions, such as schools and authorities; C) Major customers of the free economy, companies; D) Small customers of the free economy, start-ups.

You make this subdivision based on the different company goals. For example, for customers in group B, you identify that the focus is on punctual deliveries and a good price-performance ratio. Group C customers are less reliable and fluctuate in their orders. For example, one month a major customer only orders printer paper, while in another month it needs vast quantities of personalised pens, sticky notes and clipboards for a trade fair, and so on.

These customer groups differ so much from each other in their goals and their needs that you should create separate personas for them. But: You can group different companies into customer groups.

Segmentation according to demographic characteristics

Last but not least, demographic characteristics should not be missing as a segmentation feature. Segmentation by age, gender, income or cultural background can be particularly useful for companies with diverse customers. Depending on age and gender, customers differ in their demands. For example, young women tend to eat more health-consciously than young men and will therefore choose different products when shopping for food. They therefore need a specific approach.

An example: Our stationery shop will advertise different products differently depending on the age group. While future ABC children are more likely to be attracted by colourful displays featuring well-known characters from films and television, older pupils are more likely to be picked up by advertisements in more subdued tones and trendy designs.

Segmentation by demographics proves valuable when customers within a group are particularly alike. If you segment by age, for example, all those of the same age should not differ greatly in values and needs. The Sinus Milieus can be an orientation aid. This is a type of social typology. Within a milieu, people are similar in their views and demands. Of course, you can also combine several characteristics here, e.g. age and gender.

Moreover, cultural differences exert a not inconsiderable influence on certain communication measures, such as product design or advertising. It is therefore worthwhile to take these into account. Especially if you are setting up an international business or operating in a culturally diverse environment, this method pays off. You should pay particular attention to the visual language and tonality of texts to ensure that they harmonise with the cultural experiences of your customers.

Our infographic provides an overview of the segmentation criteria: