customer segmentation segmentation is the process of segregating any aggregated entity into separate parts or groups (segmentsthese parts may or may not share something common across them customer segmentation is similarly the process of dividing an organization' customer bases into different sections or segments based on various customer attributes it is driven by the belief that customers are inherently different and this difference is exemplified by their behavior deep understanding of an organization' customer base and their behavior is often the focus of any customer segmentation project the process of customer segmentation is based on the premise of finding differences among the customersbehavior and patterns these differences can be on the basis of their buying behaviortheir demographic informationtheir geographic informationtheir psychographic attributesand so on objectives customer segmentation can help an organization in multitude of ways before we describe the various ways it can be donewe want to enumerate the major objectives and benefits behind the motivation for customer segmentation customer understanding one of the primary objectives of customer segmentation process is deeper understanding of firm' customers and their attributes and behavior these insights into the customer base can be used in different waysas we will discuss shortly but the information is useful by itself one of the mostly widely accepted business paradigms is "know your customerand segmentation of the customer base allows for perfect dissection of this paradigm this understanding and its exploitation is what forms the basis of the other benefits of customer segmentation target marketing the most visible reason for customer segmentation is the ability to focus marketing efforts effectively and efficiently if firm knows the different segments of its customer baseit can devise better marketing campaigns which are tailor made for the segment consider the example of any travel companyif it knows that the major segments of its customers are the budget travelers and the luxury travelersit can have two separate marketing campaigns for each of the group one can focus on the higher value aspects of the company' offerings relevant to budget deals while the other campaign deals with luxurious offerings although the example seems quite trivialthe same logic can be extended in number of ways to arrive at better marketing practices good segmentation model allows for better understanding of customer requirements and hence increases the chances of the success of any marketing campaign developed by the organization optimal product placement good customer segmentation strategy can also help the firm with developing or offering new products this benefit is highly dependent on the way the segmentation process is leveraged consider very simple example in which an online retailer finds out that major section of its customers are buying makeup products together this may prompt him to bundle those product together as combined offeringwhich may increase sales margin for the retailer and make the buying process more streamlined for the customer