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Segmentation is a powerful tool for business growth, but only if you know how to use it strategically. Too many companies create detailed customer segments and then struggle to turn the insights gained from them into actual results.
The difference between segmentation that sits in a presentation deck and segmentation that drives real growth lies in having a clear strategic framework. Successful companies use segmentation in three distinct ways:
- to identify where to focus their efforts
- to determine how to win with those customers
- to recognise the best way to activate their strategy across all touchpoints.
Let’s explore each approach and see how leading companies are using segmentation to unlock millions in additional revenue.
1
Identifying where to play: Choosing your battles wisely
The first way segmentation drives growth is by helping you identify which customer groups represent your biggest opportunities. Not all segments are created equal – some will be more valuable, more accessible, or more aligned with your capabilities than others.
Evaluating existing customer value
Start by examining the value of customers you already have within each segment:
- Segment size: How many customers fall into each group?
- Average order value: How much do they typically spend?
- Lifetime value: What’s their total worth over the relationship?
This analysis helps you identify your financial targets – the segments that would generate the most revenue if you could engage them effectively.
Assessing potential customer value
Next, look beyond your current customer base to understand the broader opportunity:
Proximity to your brand: How close are potential customers to choosing you? Understanding current market penetration and share of wallet helps identify your most realistic targets for increasing market share.
Motivations and barriers: What drives each segment’s purchase decisions? What stops them from choosing you? Understanding different needs, motivations, attitudes and behaviours helps you determine why each segment makes the choices they do.
Accessibility: Can you realistically reach and serve this segment with your current capabilities and resources?
The art of strategic focus
Looking at multiple layers of information informs the decisions you make around which segments would be best to target. Together, this information helps you identify segments that are substantial, valuable and attainable.
Specific targeting is about using your resources in the smartest way to maximise ROI. Rather than trying to be everything to everyone, successful companies pick their battles carefully and dominate in chosen areas.
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Defining how to win: Creating your competitive advantage
Product innovation and development
Use segmentation insights to guide your innovation pipeline:
- Adapting existing services to better meet segment needs
- Reworking current products based on customer feedback and preferences
- Developing entirely new offerings that address unmet needs in your target segments
Real Example: A white goods company used segmentation to discover that people’s cleaning habits were changing. Many customers wanted spotless homes but lacked the right tools. This insight led them to create a new cordless vacuum cleaner that transformed their business, allowing them to charge premium prices and become a major market player.
Brand positioning and messaging
Segmentation reveals how to position your brand more effectively:
- Refresh your brand positioning to address particular needs of target segments
- Refocus your brand message to resonate with what matters most to your audience
- Adjust tone and language to match how your segments prefer to communicate
Real example: A home and car insurance company facing revenue decline used segmentation to discover that a large segment simply wanted insurance that would fix their problems and let them get back on track with their lives. A well-executed brand campaign based on this insight returned the business to growth without spending any more on advertising.
Portfolio strategy
Understand which existing assets align with your target segments:
- Identify which brands or products are most relevant to your key targets
- Highlight and promote the offerings that best serve priority segments
- Consider strategic acquisitions of competitors or adjacent brands to obtain relevant value propositions
Making your offering more relevant
The goal is making your brand and products more relevant to your key targets whilst still engaging with them effectively and delivering their desired experiences.
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Activating your winning strategy: Bringing segmentation to life
Having great segments and a clear strategy means nothing unless you can activate effectively. The third way segmentation drives growth is by optimising how and where you engage with customers.
Channel strategy: Reaching customers where they are
Your segmentation should inform your channel decisions:
- What platforms and channels would be most effective for each segment?
- What media do your target segments consume?
- When and how do they prefer to engage with brands?
Understanding these preferences helps you allocate marketing spend more effectively and show up in the right places at the right times.
Advanced targeting capabilities
Modern segmentation enables sophisticated targeting approaches:
Direct targeting: Use segmentation data to understand the filters you should use to target specific groups across different platforms.
Lookalike audiences: Use your best customers from each segment as seed audiences (templates) to have digital advertising platforms target similar accounts.
Behavioural triggers: Identify the actions or circumstances that indicate someone is moving into your target segments.
Personalised messaging and experience
Match your communications to what appeals most to each segment:
- Adjust tone and language to resonate with different groups
- Customise messaging to address specific needs and pain points
- Tailor content to match the preferences and interests of each segment
Customer experience optimisation
Use segmentation to improve the entire customer journey:
CRM integration: Identify which segment each customer belongs to and tag this information in your CRM system. Where possible, take advantage of AI advancements to automatically tag customers, making it easier to personalise communications at scale.
Experience design: Design different experiences for different segments based on their preferences and behaviours.
Relationship building: Use segment insights to strengthen relationships and drive more value over time.
Bringing it all together: A comprehensive approach
The most successful companies don’t use these approaches in isolation – they integrate all three to create a comprehensive segmentation strategy:
- Strategic focus (where to play): Choose 2-3 priority segments based on value and opportunity
- Competitive advantage (how to win): Develop targeted products, positioning and portfolio strategies
- Execution excellence (how to activate): Deploy across all channels and touchpoints with personalised approaches
Real-world success: Travel industry case study
A major travel company needed two different ways to group customers:
Traveller segmentation: A person-based segmentation covering the enduring relationship with researching and booking holidays.
Trip-based segmentation: Reflecting that a person’s needs change from one trip to the next – a cultural city break with their partner versus a “fly and flop” holiday by the beach with their kids.
The traveller segments were used for brand positioning, service design, and targeting communications about trip types. The trip-based segmentation was used to create new holiday packages and offers.
The results: these segmentations were tagged to their customer database, making it easy to measure impact on ROI. The new holiday offers were hugely successful – uptake with target segments was 215% higher than any other holiday type, creating tens of millions in additional revenue.
Getting started: From insights to action
The key to successful segmentation is ensuring it’s actionable from day one. Before you even begin creating segments, think about:
- Which teams will use the segmentation and how?
- What decisions will the segmentation inform?
- How will you measure success and ROI?
Remember: segmentation is not just about understanding your customers better – it’s about using that understanding to make better business decisions that drive measurable growth.
When you combine strategic focus (where to play), competitive advantage (how to win), and execution excellence (how to activate), segmentation becomes a powerful engine for sustainable business growth.
Next in our series: We’ll explore the three main approaches to segmentation – survey-based, database-driven, and hybrid methods – and help you choose the right approach for your business needs.