How to Use Customer Segmentation for Your Business

Many small business owners send the same message to everyone on their customer list. But there’s a problem with that approach: Different customers have different needs, goals, and reasons for buying. Over time, a large percentage of your customers learn to ignore your outreach because it isn’t relevant, prompting unsubscribes and hurting your growth.

Customer segmentation changes this dynamic by helping you create targeted messaging that resonates with specific groups of customers. Instead of speaking to everyone at once, you can send messages that address highly specific needs .

This guide will walk you through what customer segmentation actually means for small businesses, why it's worth the effort, and how to get started.

What is customer segmentation?

Imagine if the only way to generate sales was an old-fashioned one: calling customers on the phone. If you gave the same pitch to everyone, most people would probably hang up on you. A more effective method would be to understand who each customer is, what they’ve bought from you in the past, and what might motivate them to buy again.

Customer segmentation takes this logic and scales it to hundreds or thousands of customers. By organizing customers into groups based on shared characteristics—like what products they’ve bought or how often they open your emails—you can make your messaging more effective.

You can segment existing customers or your entire audience:

• Audience segmentation organizes everyone who might be interested in your business: website visitors, social media followers, email subscribers, and people who haven't bought anything yet.

• Customer segmentation focuses on people who have already purchased from you, looking at what they bought and how they behave.

Both approaches help your business, and you don't need thousands of people to start. Even with a few dozen customers, you can create groups that make your marketing more meaningful.

Here are some common ways to segment customers:

• Demographics: Age, income, job, family situation, education

• Behavior: How often they buy, what they click, how they found you

• Geography: Location and community types

• Lifestyle: Hobbies, interests, and activities

• Needs: Goals, problems, key pain points

• Values: Beliefs and preferences

Why segmenting your audience matters

When you group your customers thoughtfully, you make your marketing more effective. Here are some practical benefits:

• Your email open rates increase because people click on subject lines that relate to their situation. Instead of "Weekly Newsletter #47," you can send "Quick 15-minute workouts for busy parents" to one group and "Advanced strength training techniques" to another.

• Your conversion rates increase because your customers see content that directly matches their needs and pain points, which makes them more likely to buy from you again and recommend you to others.

• You waste less time and money on marketing that doesn't work. When you know exactly which customer segments bring in the most sales, you can focus your efforts where they have the biggest impact.

For example, a content creator running a personal finance channel could segment their audience into young professionals, families, and retirees and use that to guide their content planning. Each demographic has different needs: young professionals might be interested in videos like "A Beginner’s Guide to Saving," while retirees gravitate toward blogs like "How to Optimize Your Retirement Portfolio." By separating your audience into groups, you can make sure each subscriber only gets content they’re interested in and in the formats they prefer.

A step-by-step guide to customer segmentation

Customer segmentation shouldn’t feel overwhelming. Getting started can be as simple as picking one group—like people who bought something in the last 30 days—and sending them a personalized email.

Whenever you’re ready to create a more in-depth set of customer segments, follow this five-step process below.

1. Choose your goal

Before you start organizing people into groups, decide what you want to accomplish. Pick one goal to start with.

Common goals for small businesses:

• Get more people to buy a second time

• Bring back customers who haven't purchased recently

• Sell more of a specific product or service

• Increase email open and click rates

• Attract more local customers

Once you have a general goal in mind, add specificity: metric for success and time period. For example, you might set a goal to get 25 more people to buy a second time in the next 45 days.

Get inspiration on setting clear goals for your business

2. Gather customer information

Most small business owners have more useful customer information than they realize. Start with data that's already in your email marketing platform, payment system, or customer communications.

Information you likely have:

• Email addresses and signup dates

• Purchase history and timing

• Email open and click rates

• Customer questions and comments

An easy way to gather more information is to add an extra field to your email signup form. You can ask new customers how they heard about you or pose questions like "What's your biggest challenge with [your topic]?"

Learn more about creating signup forms for your email list

3. Create simple groups

Start with two or three groups rather than trying to create dozens of different segments you can't manage effectively.

Check your customer list and notice if people naturally fall into obvious categories. You might notice that some customers buy frequently while others buy once and disappear, or that some people engage with every email while others seem inactive.

You can also return to your goal and the list of ways you could segment customers: demographics, hobbies, behaviors, and so on. Choose groups that naturally appear and can help you reach your goal. 

Use simple names that make sense to you: "Frequent customers," "Local customers," "Online customers." You can change these labels later. For example, frequent and local customers may be easier to target for a return purchase goal.

Most email platforms have a dedicated segmentation feature that allows you to filter and group customers at scale. You can also add tags manually based on what you know about each customer. You can also create social media or other content that’s shared more widely, but with specific segments in mind.

4. Write different messages for each group

Each customer segment will have different priorities or interests you can highlight to convince them to convert. Your messages should reflect those variances. Start with small changes rather than rewriting everything:

• Write different subject lines. "Quick tip for busy entrepreneurs" for one group, "Detailed strategy guide" for another

• Change a sentence or two. “These will be available at in-person events first!” or “These will drop online in just 5 days.”

• Reference something relevant to their situation. "Since you're just getting started..." or "As a returning customer..."

Sometimes, the best message is no message at all. If you’re sharing something that’s only relevant to a portion of your list, give the rest of your audience a break.

5. Pay attention to what works

After sending targeted messages, look closely at your results. See if any patterns emerge that tell you whether your message did or didn’t work.

• Which groups open your emails most often? These are your most engaged customers. Give them extra attention.

• Which groups buy most frequently? These are your most valuable customers. Make sure they feel appreciated.

• Which groups rarely respond? Don't ignore them, but don't spend all your time trying to win them over.

Once per month, experiment with creating different targeted content for your most engaged group. It could be a special offer, early access to something new, or just a thank you note. See how they respond, then try something similar with other groups.

7 ways to use customer segmentation in your business

Here are some simple ways to use customer segmentation that can make a real difference in your business. Start with one or two that seem most relevant to your situation.

1. Send follow-up emails after purchases

Set up an automated email sequence that sends after someone buys from you. This is one of the easiest ways to get immediate results from segmentation.

A basic three-email sequence might look like:

1. Three days after purchase: "How to get the most out of your purchase" with helpful tips or instructions

2. One week later: "People who bought [their product] also love [related product]" with a relevant recommendation

3. One month later: Success story from someone similar to them, request for a review, or new releases

This works because you're providing useful information precisely at the moment that customers are most interested in your business.

See more email marketing examples

2. Automatically group people based on their behavior

Many platforms can automatically tag customers and website visitors based on their actions. This creates self-updating groups without manual work.

For example, Squarespace Email Campaigns has a smart segmentation feature that automatically organizes customers into groups like potential customers, first-time customers, and repeat customers. Use this to help you decide who to send what messages and when. Repeat customers might want to hear big business news, for example, while potential customers might respond best to a sale announcement.

3. Create different welcome messages for new subscribers

Someone who’s just getting started on their journey might need something entirely different than advanced users. For example, a fitness coach might have one series of welcome emails for weight loss and a separate one for strength training.

You can create personalized email automations for each of your most important segments to make sure everyone gets information that’s relevant to them.

Platforms like Squarespace offer the option to add custom fields to your signup forms to understand each subscriber’s primary area of interest. You can also keep track of which page users were visiting when they joined your list.

4. Re-engage customers who used to buy

Find customers who purchased from you months ago but haven't bought recently. These people already know and trust you, but may just need a gentle reminder.

Send them an email like:

"Hi [Name], it’s been a while! Here's what's new since you last shopped with us, plus 15% off your next order."

To improve your chances of bringing back inactive customers, include social proof, like customer reviews, and create urgency with a deadline on any discount you offer.

5. Ask your best customers what they want next

Instead of guessing what people want, let your most loyal customers shape the direction of your business. Send your best customers a short email with one specific question, like "What's the one thing you wish we offered that we don't?" or "What almost stopped you from buying from us?"

Use their answers to create new products, improve your website, or write content that addresses common concerns. Make sure to follow up with anyone who gave you feedback, especially if you applied their response to a change. This will make them feel heard and grow their trust in your brand.  

6. Send location-specific messages

If you serve people in different cities or regions, create location-based groups and send relevant local information.

Some examples might include:

• Free delivery for Chicago customers this week

• We'll be at the Austin farmers market this Saturday

• Special workshop for clients in the Toronto area

• Our favorite restaurants in Portland

• Where you can find our products in Ohio

This can make your business feel more personal and community-focused and makes those customers feel like they’re being given special attention.

7. Let people choose their email frequency

Segmentation isn’t just for you, it can help your audience too. Instead of sending everyone the same emails at the same frequency, let people choose when they sign up to hear from you. 

• Weekly updates for people who want all your content

• Monthly highlights for a summary of your best content

• Important announcements only for product launches and major news

This reduces unsubscribes because people get exactly what they want. You'll also create a natural filter to understand who your most engaged subscribers are.

As you start testing out segmentation, monitor your performance and make sure to adjust segments and content as you go.