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For any SaaS business, data is the holy grail. Undoubtedly it gives unique insights about the business that you wouldn’t be able to get your hands on without it. Numbers are important, but always looking at an average can conceal some major flaws. For example, you might have one small set of customers contributing to your growth rapidly and consistently. In contrast, a bigger set contributes more than $100,000 every month but churning periodically. This will lead your organization to a debate and conflicts. To avoid such things, you need to think about the current scenario of customer segmentation.

Are you doing it only according to their time log? Or just according to the MRR?

So if you have answered yes to any of these questions, you need to reverse engineer the segmentation process.

What is customer segmentation?

Customer segmentation is the process of splitting up the customers into different groups according to the various characteristics. It’s the first crucial step in creating a sales funnel that works across multiple demographics.

The customer segmentation strategy will be primarily influenced by your product and the similarities between the people already buying it.

There are certain factors of an ideal customer segment:

Profitable

The segment should be large enough for you to earn a profit. 

Stable

The customer segment should not be something that’s not stable and is about to vanish after a short time.

Attainable

The customers segment should be realistic and reachable by the marketing strategies.

Consistent

The procedure of customer segmentation allows marketers to prioritize several products and services to their respective target audiences. This helps in allocating the marketing resources and strategies efficiently.

While you create customer segments it should not be something that reacts differently to each of your marketing strategies.

 

Types of customer segmentation

Based on their qualities

Quality-based segmentation is one of the most commonly used approaches by the sales team to segment the customers. It uses the demographic traits of the customers such as their age, industry, company size, etc.

The only advantage of segmenting your customers this way is you can recognize them easily. But if you’re moving forward with this segmentation, you’ll have to assume that companies with the same qualities share the same goals and desired outcomes. And that might not be right every time.

Based on their needs

Every company has a specific goal they want to achieve, so you can group your customers based on those goals. You can collect this information through sales calls, customer research, and market research.

Based on their value

This segments the users according to their economic value, existing ARR, whitespace ARR, product adoption rates, churn rates,and MRR. You can find the data through your accounts, revenue, and sales data.

This technique is highly crucial to understand the segments with growth potential. It also enables you to understand the segments which would churn or aren’t providing an equal amount of value.

How to segment your SaaS product users to drive more conversions?

The customer segmentation strategy begins with the right goal setting and ends with personalized experiences for every customer segment. Let’s uncover the five steps to create your customer segment.

Clarity on your customer segmentation goals

The initial step in creating a customer segmentation strategy is to clarify your goals and objectives. Without enough clarity you’ll be stuck in a loop of trial and error forever. Here are some of the questions that will help you understand it better:

  • Why are we investing time in customer segmentation?
  • How being a product-led company will help us?
  • Will our customers benefit from this?
  • How much time on average can we devote to segmentation?

Once you’ve answers to these questions it’ll help you in painting a defined customer picture. Think this as a broader perspective of customer segmentation. 

It aims to better understand the needs of different segments and enhance their customer journey. But your company can also set specific goals based on your various needs that cater to the right set of audience.

For example, you might want to just target the VPs of marketing as customers to sell a feature of the product that’s exactly meant for them.

Find similarities between customers

The concept behind customer segmentation is to look for common traits among the various customer segments. You need to overview your customers and look for common traits connecting them.

For example, your product is an accounting system that targets early-funded start-ups. So you find that most of them like to have a desktop app for better accessibility than just websites.

There are various ways to segment your customers, and we discussed the major three in the previous section. To ensure a better segmentation you need to recognize the key common traits that can better serve your goals and objectives.

Segment customers into multiple groups

Once you’ve recognized those common traits, you should divide them into their respective groups according to your vision. Either you can choose a blend of more than two types or go with a single model for efficient results. 

However, pay attention that it all drills down to your approach, customers, certain needs, and your goals.

For example, you might want to segment your customers geographically and according to their locations with a blend of their goals.

Focus on most profitable customer segments

If you’ve heard the 80/20 rule of marketing, 80% of an organization’s sales come from 20% of the customers.

So focusing more on the profitable or high-value segment is a good strategy, but it doesn’t mean you should ignore other segments. 

You need to look for a way to help the least profitable segment to achieve their goals and eventually add them to the most profitable segment. But, you should provide your additional care and attention to the 20% of customers that are contributing to 80% of your business sales.

Creating the right customer retention strategies and loyalty programs that focus on eliminating any challenges of your profitable customer segment should be your next step to the customer segmentation.

 

Leverage the power of Salesmachine

This sounds so good in theory, but is there any quicker and more practical way to do this? Yes, with Salesmachine, you can centralize all of your customer data into a single, 360-degree view. 

That allows you to save time and avoid the back and forth activity. You can focus on the other crucial tasks while Salesmachine takes care of coming up with data-driven alerts and insights.

You can also take advantage of advanced segmentation across the customer journey. This will help you increase customer engagement and use automated workflows for your hyper-personalized campaigns that help you to reach out to the right customers.

 

Customer Segmentation is a must!

There are various myths in the business world, and one of them is that you don’t need to go through all of these processes because it’s not useful for early-stage companies. Customer segmentation is for you even if you are a company of two people and searching for an investor or more customers.

You need to know who your customers are before you go out and sell the product to them. Remember, understanding your goals, needs, customers’ needs, and pain points, leveraging the right data, and personalizing their experience is the key to perfect growth. 

You need to find a sweet spot among the different segmentation models to get the desired results. Let Salesmachine help and make it easier for you with a product built to make your customer success team life easier.

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