Segmentation approaches

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In a competitive environment, focusing on your target customer through segmentation is a step your business needs to take. Segmentation will help you determine who the most likely customers are for you, as well as your competitors, and how you might go about converting these customers into revenue.

The specific objectives of segmentation are to find systematic variations among customer types in their beliefs, attitudes and preferences, purchase behaviours, and their impact on company performance. The goal is to find some meaningful and readily observable characteristics that describe customers who are similar on one or more of those dimensions.

Some common ways of segmenting markets are:

  1. Demographics
  2. Geographic areas
  3. Product preferences
  4. Psychographics
  5. Purchasing structures or processes (for business markets).

In addition to these factors, it is also important to have a good general understanding of the customer, and specifically how they will make their decisions. Some of these considerations are:

  1. Product features
  2. Information provided
  3. Individual habits
  4. Decision makers
  5. Price sensitivity.

Each segment might make decisions differently, and therefore segments will naturally differ in how likely they are to buy your product or service. The main goal of segmentation is to determine which segments will produce the most value for your business, and how you can target those segments.

Business tool

Segmentation approaches

The following resource document includes more information on segmentation, as well as some activities that will help you understand the segments that are relevant to your product or service.

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