What does customer segmentation involve?

Customer segmentation involves dividing customers into groups based on common characteristics. This process allows businesses to better understand their customer base and tailor their marketing strategies more effectively. By grouping customers according to factors like demographics, purchasing behavior, preferences, or geographic location, companies can target specific segments with marketing messages that resonate with each group's unique needs and interests.

This type of segmentation enhances marketing efficiency and effectiveness, as businesses can allocate resources toward segments that are more likely to convert, thus maximizing return on investment. Additionally, it helps in creating more personalized experiences for customers, as tailored approaches can better address what each segment of the population values and requires.

The other answers focus on aspects that may utilize segmentation but do not define it. For example, estimating customer lifetime value relates to understanding how much profit a customer will bring over their lifetime but does not itself involve the grouping or classification of customers. Similarly, creating personalized marketing strategies can be a result of successful segmentation, as can analyzing customer feedback, but they are outcomes rather than the process of segmentation itself.