How to Do Customer Segmentation: А Guide for Growth

How to Do Customer Segmentation

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.

What’s a Customer Segmentation Analysis?

Customer segmentation analysis involves a comprehensive study of user data to adequately categorize them into groups that share similar characteristics. This process helps you understand user needs and behaviors within your SaaS platform.

By using data-driven insights, you can learn how to improve customer segments, create effective strategies that will personalize the user experience and offer each segment exactly what it requires. If done properly, this analysis can improve customer satisfaction, optimize marketing efforts, and drive business growth by consistently delivering solutions that resonate with the needs of segmented user groups. 

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.

Benefits of Customer Segmentation in the SaaS Industry

If done properly, customer segmentation can have a huge impact on the user experience, product development, and overall business success. Here are its crucial benefits:

  • Personalized Customer Experience
    • Segmentation helps you tailor experiences for various user groups by understanding their distinct preferences and needs.
  • Product Improvement and Development
    • By understanding segmented groups and the functionalities that fit them specifically, a company can identify areas for product improvement or feature development.
  • Targeted Marketing
    • When you learn how to select customer segments to increase sales, segmentation becomes a great tool that enables precise targeting in marketing campaigns and, naturally, better sales outreach.
  • Customer Support Optimization
    • Offering superior customer support is crucial for customer satisfaction. Segmentation helps in providing relevant guides and resources for support and assistance aligned with the needs of different user groups.
  • Customer Retention Improvement
    • A personalized user experience can contribute significantly to customer loyalty. Therefore, by addressing the unique preferences of each segment, a business has a greater chance to improve retention and reduce churn.

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!

Frequently Asked Questions

How can my SaaS company ensure accurate and dynamic customer segments?

By continuous data analysis, testing and validation of segmentation criteria, and using advanced tools to adapt segments properly.

How often should I review and update segmentation strategies?

You should review the segmentation strategies periodically, but analyze their performance frequently to see how they align with user needs and marketing trends.

Is customer segmentation necessary for SaaS startups?

Yes! You are ensuring your customers a personalized experience with segmentation, which positively affects user satisfaction and retention. Also, it helps you optimize product development and resources, which can then help the startups rank higher in the oversaturated SaaS market!

Related Articles

Best Customer Success Software Best Customer Success Software for Your CS Department in 2024

If you are reading this, you are faced with a real challenge. Either you already manage a customer success function and your existing toolset is not fit for purpose, or you have decided to start a customer success department and want to implement the right software as a solid foundation for your Customer Success Managers […]

Read more
Top Customer Retention Software to Reduce Churn in 2024

Figuring out the right customer retention management software to help manage your Customer Retention goals can be tricky. It really comes down to what your specific goals are, what type of market you serve, the customer data you retain and where that data resides. There are some specific types of tools you should consider. Customer […]

Read more
what is customer success What is Customer Success: Short and Simple Guide

In the world of SaaS, customer churn can feel like a constant threat. But what if there was a secret weapon to turn happy trials into loyal customers? Customer success is what you seek, it’s a strategic approach that goes beyond basic support to ensure your users achieve their goals.

Read more
CSAT vs NPS CSAT vs. NPS: Differences, Formulas, Examples

Customer satisfaction is the holy grail of any SaaS business. But how do you truly measure it? Enter CSAT and NPS, two powerful metrics that can shed light on your customer experience.

Read more
customer success vs sales Customer Success vs. Sales: Differences and Similarities

Understanding the differences between customer success and sales in SaaS is crucial for navigating the intricacies of customer retention, satisfaction, and acquisition. Although both departments participate equally to ensure and maintain the business’ sustainability and growth, they work with different methodologies and goals. While customer success focuses on ensuring customers derive maximum value from the […]

Read more
customer onboarding email templates Steps to Creating a Customer Onboarding Email Template

How you begin your relationship with customers often dictates how long and successful their relationship with your company will be. Given that SaaS companies need to retain customers for a period of time in order to accrue enough subscription revenues to become profitable, delivering valuable onboarding experiences is essential.

Read more
customer success vs account management Customer Success vs Account Management: Important Differences

Understanding the fine nuances between customer success and account management will help you consider them as complementary teams that have the same objective on their agenda.  Both account management and customer success teams work towards improving customer satisfaction and loyalty, but their roles in a SaaS environment are quite distinctive.

Read more
Customer success metrics Key Customer Success Metrics You Should Track as a SaaS Company

Having in mind that customer success directly affects customer satisfaction, retention, and the general health of the business, it has become apparent that maintaining sustained SaaS growth depends on it. Thus, it’s essential to track the relevant customer success metrics in SaaS and evaluate the impact of customer success initiatives.

Read more