Customer segmentation, also referred to as market segmentation, is the process of identifying groups of customers by their similarities to one or more specific characteristics. The most common categories are geographic, demographic, and psychographic (lifestyle and values) segmentation. Using these categories, segmentation allows you to paint a picture of the person your customer is before they walk through your door. This is considered a powerful tool in optimizing marketing, but it can benefit in many ways.  

Create value for customers:Let's say your main area of business is working on upper-middle-income homes. Perhaps, they might be a dual-income professional household with limited time on their hands. From here you can identify areas they may value such as clear, timelycommunication and how to provide that for them. Should you offer somewhere they can go for real-time information on their home? This is just one generic example; however, you can get very specific in these breakdowns so that you come to customers knowing what they value before they even say it.  

Knowing who does not fit into your segment: Just as it is important to know who your customers are, it is also important to know who your customers are not. This is not to say you turn away anyone who isn't a perfect match to the segments you'veidentified. It simply means your focus is put on people who are the most likely to create a return. Not everyone can become your customer and knowing who fits and who doesn't will save time, energy, and money.  

Knowing where to expand: You can also use segmentation as a tool to logically expand your business. If we go back to our prior example of upper-middle-income homes, we see two working professionals who value their time. What other areas might you find people like this who need contracting? Perhaps entrepreneurs who need commercial contracting might be a good fit. Perhaps the homeowners you work with own other properties such as rentals or vacation homes. Once you have your customer identified, it becomes easier to see these connections.