Seth Godin explains the difference:
Differentiation means thinking very hard about the market and your competitors and somehow making yourself different. Any rational person spending a fair amount of time with perfect information will have no trouble figuring out why you’re different.
Segmentation is a variation of that, but it involves breaking the audience into pieces you invent, and then differentiating yourself for that segment.
Both are selfish.
Both assume that people care about you.
Both don’t work the way they used to.
Used to be that you could buy enough ads and interrupt enough people to make this strategy work. No longer. The filters are too strong. People are too resistant.
You don’t create a purple cow by being different. You do it by creating something worth talking about!