ClusteringSegmentation is the process of dividing a market or customer-base into smaller groups that each have a unique combination of  behavioral, demographic, and/or psychographic traits.

Market segmentation is often done at the early stages of product development; it helps marketers understand the market from top to bottom: the overall consumer landscape as well as the motivations of prototypical consumers.

A proper segmentation will generally have two outputs: (1) an exclusively quantitative component that will include the sizes of each segment and the distributions of the information collected for each segment; and (2) a set of narratives that describe individual customers. The quantitative component can be used strategically to identify the best segment to target, and the qualitative narrative can help designers and product developers work with a specific customer in mind.

Segmentations usually involve customer interviews, focus groups, and survey data. The survey data is run through a clustering algorithm that generates the quantitative descriptions of each segment. This output is then analyzed along with the results of customer interviews and focus groups to generate rich narratives for each segment.