How to Do Customer Segmentation: А Guide for Growth

Your customers are not all the same. So why treat them the same? 

A customer segment is a group or cohort of customers with similar attributes. At a very basic level, segmenting your customers based on differences in their profiles allows you to be specific about how and when to allocate customer success and customer support resources.

Even better, more recent developments in technology allow for detailed segmentation of your customers based on changes in both their profile and their behaviour, delivering insights that enable you to ensure your customers are healthy and achieving their desired outcomes.

In this article, we dive into the concept of segments and how to do customer segmentation properly to ensure your customers are achieving success with your software.  

What Is Customer Segmentation and Why Does It Matter?

Customer segmentation is the process of grouping customers with similar traits, needs, or behaviors. When you divide the user base into specific groups that share common interests and goals, you can offer them personalized solutions in the realm of marketing, product, and communication.  

We’ll talk about customer segmentation benefits in a bit, but in essence, customer segmentation matters because it represents a roadmap for creating customized experiences, optimizing resources, and nurturing long-term relationships with your users. All the given objectives are crucial for business growth and success in the SaaS environment.

What is a Customer Segment?

A customer segment is a group of customers who have similar characteristics, like age, behavioral patterns, needs, etc. They are created to help companies understand their diverse customer bases and serve their needs accordingly.

SaaS Customer Segmentation Models

Customer segmentation models or pertinent data points (in customer segments) have a crucial role in helping you understand and cater to the diverse user groups. Here are some pertinent data points for customer segments relevant to SaaS:

1. Demographics
   • Segments can be created based on demographic data like gender, age, location, industry, job title, etc. For example, a company can have different offerings for small companies and enterprises, or the need for certain features can vary from industry to industry.
2. Behavioral segmentation
   • This form of segmenting focuses on behaviors within your platform, like usage frequency, engagement levels, and feature preferences. how much time they spend on the platform, etc. This model helps you identify and distinguish between inactive and active (power) users.
3. Need-related segmentation
   • This segmentation groups customers with similar needs or pain points. For example, some will seek advanced features, while others will prioritize more cost-effective options.
4. Customer revenue segments
   • This one refers to the revenue or value that a customer brings to your company – high-value, low-value, potential high-growth segments, etc. Creating customer revenue segments can help you allocate resources more efficiently by focusing on high-value customers to maximize retention.
5. Churn risk segmentation
   • By analyzing usage patterns, inactivity, and drops in engagement, you can intervene to retain potentially valuable customers.

How to Devise a Good Customer Success Segmentation Strategy?

By having a nuanced understanding of user preferences and behaviors, you can craft personalized approaches and strategies that fit each segment’s unique needs. To do that successfully, you’ll need to have a clear customer segmentation strategy that, if crafted well, can boost customer retention, improve user satisfaction, drive business growth, and, naturally, ensure you more recurring revenue.

Top Customer Segmentation Software in 2024

Let’s see some of the most representative ones in 2024:

HubSpot

HubSpot is a CRM with segmentation tools for SaaS companies that help you categorize and target customers based on various criteria. It can help you create personalized communication and targeted marketing campaigns for different customer segments.

Salesforce

Salesforce is a CRM that also comes with advanced tools that drive personalized engagement, but its biggest benefit is robust analytics and reporting tools to analyze customer behaviors for tailored interactions.

AkitaApp

AkitaApp is a customer success platform designed to help SaaS startups manage and improve customer relationships. It comes with advanced customer segmentation tools with numerous filtering options, allows you to analyze and monitor the health of customer accounts, integrates data with various data sources, and finally, allows you to get visualized data to help you understand patterns and trends.

How to Do Customer Segmentation: Step-by-Step Instructions

We’ve spent some time explaining customer segmentation and its models, but let’s share some practical knowledge and show you how to break down customer segments with our step-by-step guide:

1. Collect data
   • Gather user data through analytics tools and CRM systems.
     
2. Analyze data
   • Understand how the users interact with the software — feature usage, engagement, and frequency.
     
3. Identify segmentation criteria
   • Identify criteria based on the user personas, subscription types, pain points, etc., and make the segmentation based on their customer journey status (trial, active, at-risk churn). Remember not to confuse marketing segments with customer segments.
     
4. Select segmentation model
   • Choose segmentation models and create different segments considering factors like user behavior, potential for upselling, needs, etc.
     
5. Prioritize segments
   • Assess the value of segments and prioritize those that contribute to revenue growth or have the potential to do so. On the other hand, make sure to identify segments at risk of churn and apply strategies to retain them.
     
6. Develop a user persona
   • Each segment should have a detailed user persona review that contains all their pain points, motivations, and expectations from your platform. Conduct user research and surveys to validate the given personas.
     
7. Tailor strategies for different segments
   • Create targeted content, messaging, and campaigns tailored to fit each segment’s needs and goals. Also, make sure to adapt the features, UX, and/or pricing model to fit the segment’s requirements.
     
8. Perform segmentation testing
   • Validate the effectiveness of segmentation strategies by conducting A/B testing, and make sure to gather user feedback to refine strategies when necessary.
     
9. Tackle new customer segments
   • Tackling new customer segments involves understanding and engaging with previously underrepresented groups. Now, let’s see how to tackle new customer segments. First, you should identify the potential segments that haven’t been targeted before but still align with your product. Then, analyze extensive customer data to recognize patterns that indicate the presence of new segments. Finally, apply the steps above to perform new customer segmentation and monitor its performance. This is how you can broaden your customer segments, unlock new growth opportunities, and strengthen your position in the market.

How Do Segments Work with Akita’s Customer Success Platform?

Akita provides almost limitless options with which to segment your customer base. This ensures that your specific requirements can be met using your specific customer data.

Below, you can see Akita’s filters have facilitated multiple data sets to be used to create a very specific list of at-risk customers.

Once the segment has been built, automation can be used to alert you to at-risk customers or trigger playbooks to mitigate the risk.

Conclusion

In SaaS, learning how to do customer segmentation is a pivotal compass for growth. By leveraging customer data and data-driven insights, a business can successfully segment its customers and drive personalized engagement like never before. Use Akita to streamline all your customer data into a single platform, perform customer segmentation based on any trait you find crucial, and monitor and analyze health scores to be able to intervene when necessary and prevent that bothersome churn!