If you could write a personalized note to each of your prospects and customers, you would. You’d tell them exactly why they should buy your product or service, based on their love of heavy metal music, their career as a video editor or their home in the mountains. But with an audience of hundreds or thousands, it’s not always that easy.
Creating segments of customers with similar characteristics is an excellent first step in nailing your sales and marketing strategy. The next step—conducting customer segmentation analysis—helps you deeply understand your customers and optimize their experiences with your brand.
5 steps to effective customer segmentation analysis
Customer segmentation analysis is the process of assessing how your customer segments perform. This gives you a clearer picture of who your customers are and what they want.
Through customer segmentation analysis, you discover what drives some groups to make more purchases and how to better address the pain points of underperforming segments. You learn how to speak directly to different customers’ interests and preferences—leading to higher engagement, better retention and more sales.
Let’s look at how to conduct customer segmentation analysis in five steps.
1. Gather customer segment data
Performing customer segmentation isn’t too hard once you choose a customer segmentation model (like geographic segmentation or behavioral segmentation) and start collecting data.
Pull together information on how your segments performed from sources like
Sales data, which reveals patterns in purchase behavior and product preferences by segment
Website and behavior analytics, which offers insights into user engagement and conversion rates
Email marketing platforms, which track metrics like open rates and click-through rates for specific segments
Customer relationship management (CRM) software, which provides details about specific customer interactions and purchase history
Surveys and feedback, which allow you to understand your customer needs better and understand what your segments think
Social media analytics, which shows you how your segments engage with targeted posts
Customer support interactions, which reveal patterns of issues among segments
Collect customer data across different channels, tools, software, and platforms for the most comprehensive picture of your users. A segment might behave one way on social media but another way on your website. Understanding how and why customers in a segment act the way they do helps you learn how to best meet their needs in the future.
Create visualizations and reports
Once you’ve gathered your data, you need to put it in a format that’s easy to understand and share. To do that, filter your data by segment to create visualizations and reports.
For example, say you want to learn how users in different segments engage with your website. Hotjar, part of the Contentsquare group, offers color-coded heatmaps to help you visualize aggregate click, scroll and move data. Use filters, powered by Hotjar, to create special heatmaps based on user attributes, like your user’s role or the country they live in.
Hotjar filters let you create heatmaps for segments to learn how specific types of users interact with your website.
2. Measure performance against your business objectives
Deciding how to evaluate your segments can feel overwhelming—but there are dozens of ways to measure a user group’s success.
The best way to start is to think about your company’s goals and objectives—the things that matter most. Then, look at the correlating key performance indicators (KPIs) for each segment and compare them to your company’s goals.
Here are a few of the most common customer segmentation KPIs:
Customer lifetime value (CLV) is the revenue your company can expect to earn from a customer throughout their relationship with your business. You can find this data and filter it by segment in your Enterprise Resource Planning (ERP) or CRM system.
Customer satisfaction shows how happy your customer base is with your products or services. If you’ve conducted customer satisfaction (CSAT) surveys, analyze the results by segment.
Net Promoter Score® (NPS®) survey results show how likely someone is to recommend your product or service to a friend. Scores of nine or 10 within a customer segment correlate to strong retention.
Referrals are the number of people who have referred someone to your company. This metric reveals which segments bring you the most potential customers. If your business has a referral program, this metric might be a priority. You can track referrals in data analytics platforms like Google Analytics 4.
Conversion rate is the percentage of people who take a desired action on your site. This action could be a purchase or a click on a pay-per-click (PPC) ad. Find conversion data for your segments across several platforms, like Google Ads or the product analytics platform Heap, part of the Contentsquare group.
💡Pro tip:consider splitting a customer segment if the data for that group doesn’t make sense. Say you notice that half of small business owners really love your product, and the other half are strongly dissatisfied. You might want to conduct further analysis to see if you should refine this group further.
3. Compare segment performance
Now that you’ve compared your segments against business objectives, take a look at how different segments compare to each other.
Then, ask yourself questions like
Which segments generate the most revenue and the highest profitability?
Does one group have a disproportionately high customer churn rate?
Which segment has the highest market share?
Is one under- or over-performing compared to the others?
Which groups have the highest conversion rate?
Are there differences in conversion rates for specific products or services among your segments?
Does one group experience more customer service issues than the rest?
After each question you ask, follow up with another one—’Why?’ This simple question allows you to dig deeper into what makes your ideal customers tick so you can replicate a segment’s successes and prevent future issues.
Analyze customer journeys by segment
Use Contentsquare’s Customer Journey Analysis tool to visualize and compare how different segments progress through your site from start to finish.
Sort journeys by channel, persona or campaign. Then, analyze these journey visualizations side by side to quickly compare how different customer segments navigate your website. This helps you understand their intent and the nuances of their behavior so you can build better experiences for them.
Compare customer journeys by segment with Contentsquare’s Customer Journey Analysis tool.
4. Get input and feedback
Open a line of communication with your co-workers during the customer segmentation analysis process. This keeps them in the loop and allows you to validate and expand your thinking.
Your peers have their own unique experiences with your company’s target segments. For example, a content marketing manager might see that blog content isn’t landing with a particular group, and a sales rep might find that targeting a specific segment results in tons of closed-won deals. Both points of view are valuable, helping you see the big picture of your customer segmentation strategy. If your company is small, chat with your team members directly to get their input. At a larger enterprise, try these strategies to gather diverse perspectives:
Email relevant employees
Send out a survey
Organize a focus group
Run an informal poll on your company’s messaging app
💡Pro tip:connect with customers in each segment to learn how they experience your sales and marketing outreach and get suggestions on how to improve it. Interview customers one-on-one for in-depth insights withEngage, powered by Hotjar, or gather quick feedback through a survey.
5. Apply your findings
Analysis alone doesn’t create change. After you’ve analyzed your segment data and customer and employee feedback, it’s time to take action.
This might mean
Sharing results with stakeholders
Revising your current segments
Adjusting your marketing and sales strategies
Tailoring product offerings
Optimize customer service strategies for each segment
Adapting your marketing messages
Making changes based on your new insights helps you better serve your customers and reach company goals.
Monitor and adjust
Remember: customer segmentation analysis isn’t a one-and-done event. Keep an eye on how your customer segments perform in the face of new technology trends, pricing changes or demographic shifts. Use Contentsquare’s Product Analytics User Segmentation capability to assess how segments perform over multiple sessions and optimize them to boost CLV.
Contentsquare’s User Segmentation helps you monitor key customer segments.
Analyze your customer segments to create a meaningful CX
Segmenting your customers is an efficient and effective way to get to know them and their unique needs. Analyzing your segments means asking the right questions about your data—and asking the right people for their input—to understand your customers even better.
The result is more insights about your customers’ challenges and empathy for their journey. And with empathy, you ensure you tailor your messaging to attract more people to your brand and create a customer experience (CX) that delights.