Did you know that 77% of marketing ROI comes from segmented, targeted, and triggered campaigns? Or that segmented campaigns can bring up to 760% revenue growth for companies? A study from Harvard Business Review shows that over a five-year period, businesses that successfully tailored their products and services achieved annual profit growth of about 15%. Awesome, right?

Due to the changing technologies used for gathering data, the new type of consumers who expect highly personalized content, and buying behaviors influenced by COVID-19, updating the way data is segmented is crucial to growing SaaS businesses. It’s important to remember that every customer journey and every customer is unique, so a single approach is going to be ineffective. In this context, customer segmentation becomes extremely valuable. But what is Customer Segmentation support, and why should I implement it? How do I segment customers properly? 

We’ll answer all these questions today, as well as:

  • What is customer segmentation?
  • Why segment customers? 
  • Types of customer segmentation
  • How to segment customers?
  • Boost your customer loyalty through customer segmentation 

Let’s dive in!

What is Customer Segmentation?

Customer segmentation is the process of separating customers into smaller groups based on common characteristics. As a result, companies can market to different groups of users accordingly and effectively. In addition, this process allows you to customize and personalize your marketing, service, and sales efforts and‌ increase customer loyalty and satisfaction. Companies can use different variables to divide their customer base. The most common ones are 

  • Customer needs: This can be determined by answering questions such as, “What does the customer want?” or “What is the best product or service to satisfy their needs?”.
  • Buying characteristics: Consumer behavior patterns usually respond to, “What are their buying habits?”, “When it comes to messaging, how do they respond?”, or “What are the most effective marketing channels for them?”
  • Personal profile: As for personal information, you could gather via asking questions similar to, “What is their age?” and “What stage of their life are they in?”
Customer segmentation 1

Customer segmentation is done for several reasons, and it provides numerous benefits, especially in the SaaS industry. Are you ready to discover them? Jump on to our next section! 

Why Segment Customers? 

Customer segmentation is a necessary process to successfully develop marketing and sales strategies. It can be done in many ways and for different reasons. Here are some of the most important ones:

  • Tailor marketing and sale messages
  • Increase conversions
  • Improve customer support experiences
  • Create tailored ads and email marketing campaigns
  • Establish better customer relationships
  • Find ways to improve your product or service
  • Find new opportunities for product, support, or services
  • Improve customer satisfaction and loyalty
  • Promote other products and services by upselling and cross-selling

Following an overview of what customer segmentation is and why it’s worthwhile to invest time in, let’s explore the most common types.

Types of Customer Segmentation

Regardless of what product you try to sell, market segmentation is essential, but you have to choose the right strategy. There are four main types of customer segmentation: 

1. Who? Demographic (B2C) / Firmographic (B2B)

One of the most common segments in the B2C industry is demographic segmentation. It includes separating your customers by occupation, age, ethnicity, gender, education level, and income.

In the B2B industry, it’s called firmographic segmentation because, instead of dividing your users through demographic characteristics, it divides them into the company’s characteristics, such as its industry, number of employees, or revenue.

2. Where? Geographic

Where do your customers live? What is the climate like in their regions? Geographic segmentation divides your customer base into locations and areas. Through this segmentation, companies can find different opportunities to sell their products or services because every location has different characteristics and needs. 

3. What and When? Behavioral

What do customers do with your product? When do they use it? Collecting all this data will help your company sort your customer base into behavioral segmentation. This enables the company to send tailored messages and campaigns based on the users’ needs and usage patterns.

4. Why? Psychographic

Why do users use your SaaS product? Psychographic segmentation answers this question and separates the users depending on their answers. It’s important for your company to know why your customers use your product and why they chose you, as this allows your company to incorporate personality into your messaging.

Every segmentation will give you different information, so you can better target your campaign and communication efforts. Create a customer segmentation strategy based on those categories and boost customer satisfaction!

How to Segment Customers?

To segment its customers, a company must gather information about them, identify similarities and differences, and create groups accordingly. In B2C marketing, the most important factors to consider are personal characteristics, consumer demographics engagement received, and buying behavior. In B2B marketing instead, the most important factors are the number of employees, industry, products previously purchased from the company, and location. 

And the question arises, how exactly do you segment? To successfully create segmentation of your customer base, you can follow the following steps:

1. Product Analysis

To understand your target, you need to assess your product and define its principal function and unique selling proposition. By doing so, you’ll have an idea about who is interested in buying your product or subscribing to your company.  

2. Buyer Persona

A buyer persona is a detailed description of someone who represents your target market. When you create a buyer persona as specific as possible, you can guide all the segmentation questions. For example, to define your buyer persona, you can try answering the following questions: Which social media platform does your buyer persona follow? How the buyer persona benefits from your product? What are their preferences? 

Answering these questions will give you a better sense of what your target audience is like and, as a result, create reliable segments.

3. Collect Market Data

Create detailed customer profiles using the four segments of customers (demographic, psychographic, behavioral, and geographic segmentation). Compare your customer profiles and purchasing information with market research. To do so, analyze behavioral data through surveys, focus groups, and interviews.

4. Compile Segments

Assemble all your collected data into segments. These segments should be organized by buying characteristics: complex buying behavior, dissonance-reducing buying behavior, variety-seeking buying behavior, and habitual buying behavior.  This will be your guide when creating marketing and sales strategies.

Customer segmentation 2

5. Focus on Current Customers

Don’t forget your current customers! During this process, you might be stressed out about gaining new customers and expanding your customer base. However, it’s important to remember that you should still focus on your current users and create strategies to improve their overall experience and satisfaction levels, such as proactive customer support or customer retention strategies

Boost your Customer Loyalty through Customer Segmentation 

Customer segmentation is a process every SaaS company should follow. Through it, your company can create more personalized and tailored marketing and sales strategies to achieve your company’s growth goals. Creating segments of your customer base will increase your customer loyalty and satisfaction, increase the conversion rate, reduce churn, establish better customer relationships, improve your product or service, and much more. 

All businesses can practice customer segmentation, regardless of size, industry, or whether they sell online or offline. Are you ready to boost your customer loyalty and satisfaction through customer segmentation?

If you’re interested in learning more, check our product flows and onboarding features or book a demo with us to learn how FROGED can help you increase your customer satisfaction.