Every single customer in your business can’t be treated the same. There are differences and nuances when it comes to your SaaS customers, and you should honor each group by tailoring your approach. This is particularly important when it comes to developing your SaaS product because you will be able to target groups of customers and provide an enhanced customer experience.
There is no one-size-fits-all approach when it comes to SaaS product development and designing the product experience. It’s possible to increase profits and drive adoption by creating a product that caters to the needs of different customer segments who are all looking for something unique from your SaaS product.
At the end of the day, it is still the same product, but it may be presented in slightly different ways to your various customer segments. Customers won’t necessarily be buying separate products, but they will be interacting with the same product according to their own wants and needs. Smart SaaS companies take advantage of customer segmentation to provide an enhanced experience.
What is Customer Segmentation?
SaaS companies may be in such a rush to develop a product and bring it to market that they may be unwilling to take the time to stop and think about different customer segments. Customer segmentation requires the painstaking gathering of a broad range of customer data that you can then use to form customer groups.
Then, once you have segmented your customers, you can use it to tailor the product experience by providing a specific product experience that differs according to the customer group. For example, business users may contrast with customers who use the product for personal use, and they can be provided with different features and workflows. You may have a particular type of customer in mind, but they can be further broken down into smaller groups that can benefit from targeted messaging and experiences.
The types of data that you can base your customer segmentation on is limited only to your imagination. You may use behavioral data which can include customer’s past buying habits, interaction with your product and more. You may also use demographic data such as age, gender or level of education.
The Benefits of Customer Segmentation
You cannot simply trust that launching one version of your SaaS product will result in customer success. You have to employ customer segmentation if you want to increase the chances that customers will engage with your product and adopt it over the long-term.
Drives product adoption
If customers don’t have a tailored experience, they may fail to adopt your product. They might not see how your product’s capabilities are relevant to them and seek out an alternative solution that better matches their needs. Product adoption is determined by offering a unique experience for customers.
Increases customer retention
Customers who have targeted product experiences are more likely to keep using your product in the long-term. They derive increased value from your product and happily renew their subscription with your company, and are even more open to cross-sells and upsells. Customer retention is positively influenced by segmentation.
Promotes customer loyalty
Customers who feel like your SaaS company knows and understands them are more likely to feel loyal and committed to your product. Personalized experiences are more memorable and lasting and result in customers who stick around in the long-term. Loyal customers feel like your company knows them and understands their needs.
Steps for Implementing Customer Segmentation
There are several sequential steps you need to go through when implementing customer segmentation for your SaaS business.
The first step for implementing customer segmentation is collecting the data for your proposed groups. To collect data effectively, you must decide on the characteristics you want to pursue and then find out whether the data is viable. For example, it might be easiest to collect demographic data about your customers but this won’t necessarily result in the most insightful customer segments.
Once you have collected your customer segmentation data you need to analyze that data for insights. Make sure your data is in a format that can be analyzed by common data analytics tools and don’t worry too much about outliers that won’t fit into your segments. When you’ve searched for characteristics, you’ll be able to find out if you have enough customers to fit into each segment.
When you have created your segments you can then go on to decide how you want to tailor the product experience to appeal to each group. If you’ve conducted qualitative methods of gathering data such as interviews and surveys, you’ll be able to understand what each group of customers requires from your product. This form of data can result in much richer insights which can then go on to form the basis of your product experience.
Target your customers according to their specific needs and regularly revise your segmentation strategy to ensure you have the most relevant customer groups. You’ll need to measure the customer success of the segments you have targeted so you can find out whether your segmentation has actually worked. If some segments are not working particularly well then you may need to revise them to target customers who are more likely to experience success with your product.
Challenges of Customer Segmentation
Customer segmentation is not always straightforward. There are some challenges you may encounter when implementing segmentation.
Data privacy concerns
There will more than likely be customers who do not want you to collect their data and this poses a challenge of customer segmentation. You must respect their wishes when gathering data for your segmentation efforts. You also need to be careful in the way that you handle the data that you do collect to comply with data privacy laws.
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Even when you do manage to collect the data you need, there is often no way of knowing how accurate the data actually is. You need reliable data if you are going to be able to effectively segment your customers and base product experiences around the characteristics that you find represented.
Staying on top of all the data you collect can be a full-time job. Properly managing and housing that data is a key challenge for SaaS companies who are successfully segmenting their customers.
Customers who are segmented are more responsive to your company’s messages and have a higher probability of purchasing your product. No two customers are exactly alike and you can make product experiences more effective by targeting individual customers and identifying their needs.
SaaS companies who take advantage of customer segmentation are setting themselves up for increased growth and profitability. They have better insight into the nature of their customers and are able to break them down into more meaningful groups. Product experiences that are more targeted are more likely to “stick” and result in better customer retention for your SaaS.
Instead of rushing to launch a product that may not resonate, take the time to segment your customers and find out what they really need. Getting more specific is a more effective strategy than trying to appeal to absolutely everyone.