Customer segmentation

Make your communications more streamlined by segmenting your customers into different groups in order to connect with them more effectively. Customers have different needs, pain points, desires, and expectations of your business, and require a unique approach.

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Introduction

No two customers are the same, they have different needs, pain points, desires, and expectations of your software. The way you would communicate with one group of customers differs from the way you would approach another. Since it’s taxing to tailor your offerings for each individual customer who uses your software, we segment them based on their behaviour and traits to connect with them more effectively.


What is customer segmentation?

Customer segmentation means dividing your current customer base into different groups based on common traits or behaviours.

Without a customer segmentation strategy, your business risks being generic and failing to connect with customers on their level. Personalization of your interactions with customers is a key component of customer success and helps you decide which customers are the best candidates for engagement at a given time. Segmenting is necessary because it’s not practical for a customer success specialist to cater to each customer separately.

Some of the examples where segmentation can be useful:

  • Send targeted newsletters based on industry.
  • As a SaaS company, companies who have the highest ARR (Annual Recurring Revenue) and MRR (Monthly Recurring Revenue) are a great fit for your business’s time and attention. Retaining these customers is the most valuable for your business.
  • You might be aiming to tailor your customer communications based on new customers who hail from different geographic areas, or customers who have used all of your main features but haven’t logged in for a week. These two types of customers require a targeted approach from your team.

Benefits of customer segmentation

Customer segmentation is useful for a number of reasons.

  • For one, it can help you tailor your customer success efforts to customers who have the capability to get more from your products. Instead of guessing about what customers might need, you can zero in on specific customers who will be receptive to your messaging. It’s important to learn about your customers in a more nuanced way so you can find out about ways to adjust your content to their individual profile. Campaigns can be more personalized so your customers are more likely to respond to them.
  • For other customers, you can identify those who would be open to upsell and cross-sell opportunities, thereby increasing Customer Lifetime Value (CTLV). You are more efficient rather than trying to sell to customers who are resistant to your messages, and you can invest in customers who will stay longer with your business and spend more over the course of their relationship. You’ll be able to understand who your most valuable customers are and be able to spread your efforts accordingly.
  • You’ll be able to improve your customer support offerings by gaining a deeper understanding of the problems and hurdles that individual groups of customers are likely to face with your software. You can deliver proactive customer support and solve customer issues before they have the chance to become a bigger problem. Customers will be impressed with your proactive approach and will become more loyal to your business.
  • When you segment your customers, you get a better idea of which communication channels they prefer to use, whether that’s email, social media, text message, or something else. Customers become more receptive to your messages and your customer success receives more ROI. You start to connect with your customers in the places that they already are rather than trying to force something that was never going to happen.

How to segment customers

Segmenting customers requires collecting customer data with which you can base your categories on.

The data that you need to build customer segments is frequently held in more than one platform. In this case, a Customer Success solution like Churn360 will be an indispensable tool in helping you to collect data. Churn360 integrates data from payment tools like Stripe or Charge bee, your CRM like Salesforce, user analytics and feature usage from platforms like Segment, customer support request data from tools like Fresh service or Zoho, and more. All this data is collected in a single screen by Churn360 which makes creating useful segments very easy.

customer success help

It’s important to segment your customers based on customer success attributes – for example, what statistics about your customers do you regularly report on to your customer success team and how does your company currently perceive your different types of customers? Potential segments include active customers, account status (paying customer versus trial), or customers by size (enterprise versus SMB). You can tailor your messaging to help different segments at varying stages of the customer lifecycle, from onboarding, to adoption, renewal and expansion.

Another way to segment your customers is to gather data about exactly how customers are using your products. You can keep track of which customers are using your core features and who is logging in regularly. You can monitor who reaches the activation point with your software and who fails to complete a successful onboarding. You can construct goals for different points in your customer’s journey to see where your customer segments are hitting barriers and find ways to help them.


Customer segmentation models

Traits-based segmentation

One way of segmenting your customers is based on their demographic traits such as location, age, gender, job title, industry, ethnicity, or any other factor that defines your customer as a person. Other traits include industry, subscription plan, usage and more.

This data may be readily available online or collected by sign up forms or welcome screens. This type of data is highly useful for personalizing communications and making messages more relevant.

Needs-based segmentation

Needs-based segmentation is defined by what customers want to achieve by using your product and the problems they want to solve. Every user has unique pain points that they need to overcome and they have chosen your product as the solution.

This type of data can be collected through customer success calls or interviews. It tells you more about how customers are using your products and is helpful for tailoring customer support and success messaging to individual users.

Value-based segmentation

A very common way to segment customers is through how much they are worth to your business. These groups could be based on MRR, ARR, CLTV and churn. It makes sense to prioritize your high value customers for personalized messaging that reduces the risk of churn. You might want to devote more of your efforts towards targeting these types of customers because it will be more worthwhile than your low-value customers.


Customer segmentation examples

1. Customers by product fit

Product fit is a common way to segment your customers because it tells you about the ways in which customers are using your product. Is it being used for its intended purpose or are customers using it in unique and unexpected ways? How can this inform your customer success strategy?

2. Actively onboarding customers

Onboarding is a crucial stage in the customer lifecycle and your customer success team will want to be paying close attention to users in this segment. Determine how long the onboarding process should take and identify those customers who are struggling to complete it in the desired time frame.

3. Customers at risk for churn

Identify those customers who are at risk for churn so you can concentrate your customer success efforts on re-engaging them with your product. Warning signs could include not logging in for more than a week or failing to integrate your app with third-party software. This customer segment is a great candidate for your team’s attention. Using customer success software like Churn360 you can send out surveys and track customer health score to get a clear picture of those who might churn.

4. Location

Location tells you more about how you can reach your customers with your messaging. You might want to adjust your messaging for customers who live in different areas. For example, you will approach customers living in London in a different way compared to those living in Manchester.

5. Lifecycle stage

Lifecycle stage refers to where a customer is at in the customer journey, and informs the type of messaging that they will be receptive to. For example, is your customer a new customer who will benefit from a bespoke onboarding process to get up to speed with your product? Or is your customer a seasoned veteran at risk of churn who needs a re-engagement program?

customer segmentation examples

6. Values

When segmenting customers it’s important to get an idea of what they value so you can tailor your marketing messages accordingly. To understand their values, you need to appreciate what they want and identify common obstacles that they have to achieving their objectives. This will tell you more about what customers are looking for in a brand.

7. Net Promoter Score

Segmenting your customers through Net Promoter Score indicates how customers feel about your business as a whole. If a customer rates your business highly this shows they are satisfied with your service while a lower score suggests they may be about to churn. Finding out who your promoters and detractors are lets you get the most out of your happy customers and allows you to proactively reach out to those who are unhappy and turn their experience around.

8. Annual Recurring Revenue

Annual Recurring Revenue tells you how much a customer is worth to you over a year of doing business with you. Customers with a high ARR could be candidates for significant investment when it comes to customer success and customer support. It’s critical for your business to retain these customers to maintain overall profitability.


How to use segmentation to enhance your customer experience

When you’ve collected all this data, what do you do with it? You can use your customer segmentation to enhance the customer experience and promote more growth with your product.

  • You might want to set up personalized onboarding for high-value customers who still haven’t activated your product and reached that “aha” moment.
  • You can target those customers who haven’t logged in to the app for a period of time, are confused with the app or have failed to use a feature that fits their use case. Use this data to trigger automated emails prompting customers to take a certain action, or set up a customer success call to talk them through it.
  • You can identify customers who are unhappy by the NPS survey results and initiate steps to engage to understand the problem and avoid the risk of churn,
  • You can increase business revenue by targeting upsell messages to relevant customer segments within the app. You can present them to highly active users who have the potential to convert to a higher paid plan. Make sure customers know the value of the features they would have access to if they upgraded to increase the chance of conversion.

Wrapping up

Customer segmentation is a powerful way to increase the value of your customer success efforts and to target existing customers more effectively. By segmenting your customers into groups, you can make your messaging more relevant and increase the chance that customers will take your desired action with your software. When you know more about your customers, content can become much more personalized and this makes customers more receptive to what you’re trying to say.

Whether you’re trying to sell more or find ways to engage more customers with your app, segmentation is a great way to increase the effectiveness of your communications and gain more ROI. Less and less of your efforts are wasted in targeting individuals who don’t want to listen, and you see more successful campaigns as a result.


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