Segmentation is the process of putting potential customers into groups based on similarities. Clustering is the process of finding similarities between customers so they can be grouped together and then segmented.

An example of segmentation targeting customers by geographic location is marketing to consumers based on warm weather and what states they live in. Based off of these states, the vehicles do not require to be equipped with the winter weather package, and there are more sales of convertible cars.

 For example, Florida is an excellent state to target customers based on location. Miami has warm weather year-round. Also, convertible vehicles are marketed more in warm weather states than those that are not. Florida is the number one state with California and Hawaii close behind, so Florida is segmented based on location to target the specific customers in this state for convertibles and anti-snow weather extras.

An example of clustering using vehicles and the many features offered by vehicle makers is grouping them by similarity and the features they offer. There is so much data to segment customers based on the features, so instead, they are clustered together by the make of vehicles and the features they provide. For example, you can cluster cars by body style and number of doors. You have all makes of vehicles, and they are clustered by similarity-based off of these metrics. It is easier to cluster customers this way than to segment them because there is so much data that it would take forever to segment them. Below is an example of clustering for vehicle features.

Segmentation and clustering are both excellent marketing tactics to target your audience and also to create new clusters and segmentation.