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Customer segmentation describes the process of categorizing a diverse customer base into distinct groups based on shared characteristics and behaviors. This analysis enables retailers to better understand and target specific customer segments with tailored marketing strategies and personalized experiences. Segmentation variables may include demographics, psychographics, purchase history, or shopping preferences.

By segmenting customers, retailers can identify valuable insights, such as high-value customers, emerging trends, or untapped market opportunities. This approach enables businesses to optimize resource allocation, refine product offerings, and enhance customer satisfaction.