What is Customer Segmentation?

Customer segmentation is the practice of dividing a customer base into smaller groups based on common characteristics such as gender, age, interests, shopping behaviors, and more. The main idea is that every customer is different, and targeted messaging creates better engagement and higher conversions.

Customer Segmentation Definition

Customer segmentation helps businesses understand customers’ needs and preferences, enabling them to deliver more relevant and personalized marketing messages. Segmentation helps companies identify which group values what, making it easier to tailor communication and increase sales.

Types of Customer Segmentation

After gathering customer data, you can divide your customers into segments. Below are the four major segmentation types:

1. Demographic Segmentation

Based on variables such as age, gender, income, occupation, etc. Over 60% of marketers believe demographic segmentation significantly enhances customer experience.

2. Geographic Segmentation

Group customers by region, country, state, or climate. Example: Porsche sells more convertibles in warm southern US states than in colder northern regions.

3. Behavioral Segmentation

Based on user interactions with your business — browsing habits, purchase frequency, interests, etc.

Common Behavioral Variables:

• Occasion: Holiday or seasonal purchases
• Usage: Repeat purchase frequency
• Thinking Process: Decision-making motivation

4. Customer Journey Segmentation

This segmentation identifies the stage of buying a customer is in—awareness, consideration, or purchase. Magento allows you to dynamically display content and promotions based on customer address, order history, cart content, and more.

Customer Segmentation Benefits in eCommerce

1. Higher Conversion Rates

Customers convert more when marketing messages match their interests and situation.

2. Long-term Revenue from Customers

Retaining customers is cheaper than acquiring new ones. Segmentation helps increase Customer Lifetime Value (CLV).

3. Better Insights Into Customer Base

Analyzing segment performance tells you what’s working and reveals trends in customer behavior.

4. Helps in Acquiring Customers

• Identify high-value vs low-value customers.
• Allocate resources efficiently.
• Target prospects who are more likely to convert.

5. Improve Customer Satisfaction and Retention

• Make customers feel valued.
• Tailor products/services by segment.
• Identify problems early.
• Deliver personalized recommendations.
• Run well-timed marketing messages.
• Boost loyalty and retention.

Create and Delete Customer Segments

Create a Segment

Example: Creating a customer segment for women in Los Angeles.

Step 1: Add a Customer Segment

• Go to Customers → Segments.
• Click Add Segment.
• Enter Segment Name and Description.
• Select Assigned to Website.
• Set Status to Active or Inactive.
• Click Save and Continue Edit.

Step 2: Define the Conditions

The default condition is If ALL of these conditions are TRUE.

Condition for Female Customers:

1. Click Add → Select “Gender”
2. Condition: is
3. Value: female
    

Condition for Customers in Los Angeles:

1. Add → Customer Address
2. Add → City
3. Condition: contains
4. Value: Los Angeles
5. Add → State/Province
6. Condition: is
7. Value: United States → California
    

Click Save and Continue Edit.

Step 3: Review Matched Customers

• Click Matched Customers.
• Review the list of customers who meet the conditions.
• If everything is correct, click Save.

Delete a Customer Segment

• Go to Customers → Segments.
• Select the segment.
• Click Delete.
• Click OK to confirm.

Conclusion

Customer segmentation in Magento is a powerful method for improving marketing efficiency, boosting sales, and enhancing customer experience. With segmentation, businesses can create personalized campaigns, optimize product offerings, and increase engagement, helping them drive long-term growth and profitability.