When you’re building, marketing and selling a product, you need to acknowledge a universal truth: if you try to appeal to everyone, you won’t appeal to anyone.
That’s because your users aren’t carbon copies of each other. Your customer base is made up of many different individuals—from a range of industries and backgrounds, each with a variety of needs and preferences. If you treat them all the same, you risk creating generic products, features and marketing campaigns that are
okay, but don’t win the hearts and minds of your target audience.
The right customer segmentation strategy helps you understand and connect with your users on a deeper level. By grouping and analyzing users by shared traits or behaviors, you discover how different cohorts act—and can then use that data to deliver a more tailored, personalized customer experience (CX).
Use Contentsquare to understand how different users behave
Create meaningful customer segments to get fast, relevant insights about your most important users with Contentsquare.
Here’s how to create a customer segmentation strategy that provides valuable insights and helps you make data-driven product decisions based on customer needs.
1. Define your research question(s) or business goals
Customer segmentation is a powerful way to research user needs. So like any research project, you need to
start by clearly defining the key questions you’re trying to answer.
Once you have this pinned down, you can adapt your approach to ensure you get the right customer data for your study.
For example, if your research question is, “What prevents users from mid-size companies from signing up?”, you’d look at that customer segment—i.e. users from companies that meet your definition of ‘mid-size’—and do a deep dive into their journey to find conversion blockers.
Or, if your business goal is, “To improve customer retention by X%”, you could look at the customer segment with the highest retention rates to understand key user behaviors linked with long-term loyalty. Then, encourage other users to take these retention-boosting actions and enhance their product usage.
2. Collect your customer data
With your big question in mind, it’s time to start collecting customer data. But how do you do it in a way that’s both unobtrusive for your users and gives you accurate, reliable information?
Use a digital experience analytics platform like Contentsquare (👋) to capture detailed insights about your users and site visitors, so you can inform your customer segmentation strategy.
Here are some helpful tools and features to fuel data collection:
- Use Segments, powered by Heap (part of the Contentsquare group), to create behavior-driven user cohorts.
Automatically capture all possible activity across your site or app to get the full picture of user behavior. Identify patterns and group users together based on actions they take (like clicks, purchases or data entry) to create detailed, accurate user segments. Then, use these segments to power your experimentation, engagement and personalization strategies.
- Use Filters in Hotjar, also part of the Contentsquare group, to drill down into data from your other behavior analysis tools.
First, use Hotjar to generate heatmaps of user engagement or capture session recordings of users interacting with your site. Then, filter data based on your user’s journey, technology, session or behavior to understand how different customers act, and use your learnings to create user segments with shared traits or goals.
3. Analyze and organize your data into segments
Once you have enough data to draw on, start looking for trends and patterns.
This is where Heap’s Autocapture technology really shines: instead of needing to manually track everything you think you might possibly care about in the future, you get all of the data you need right away, allowing you to spot connections and make informed decisions from a comprehensive dataset.
As you start to define your user segments, follow these best practices:
- Limit the number of segments. Anywhere from 3–8 is generally best, hitting the sweet spot between ‘helpful and descriptive’ without veering into ‘overly specific and unwieldy’. Here’s a tip: think about how you’ll visualize your data. If your line graph representing your user segments looks more like a tangled scribble than an easy-to-read, easy-to-interpret diagram, you have too many segments.
- Seek out tipping points in your data.
The moments or thresholds when customer behavior changes can be incredibly useful. For example, what’s the difference between ‘moderately’ and ‘highly’ engaged users for you and your team? A deep dive might uncover that using your product 3x per week vs. 2x per week doesn’t correlate to an increase in value for the user, but using it 4x per week vs. 3x per week does. In this case, a highly engaged user is defined as one who uses the product four times or more every week.
- Ensure your segments are mutually exclusive and collectively exhaustive (MECE).
Think of your segments like pieces of a jigsaw puzzle: they don’t overlap, but when combined, they give you the full picture. Your segmentation strategy should follow the same principle. If you sample a population of your users and find that a meaningful number of them don’t fall into any of your defined segments, you’re missing something.
- Prioritize segmenting users where there are blind spots in your data.
What are your biggest questions about user behavior? Start your analysis there. For example, if you have gaps in your knowledge around customer engagement, focus on segmenting varying levels of product usage until you have a clear understanding.
Decide which types of customer segmentation to useThere are almost as many ways to segment users as there are actual users. Luckily, you don’t have to work entirely in the dark. As you analyze and organize your data, here are a few effective customer segmentation models you can draw on, depending on your needs:
For product teams, we recommend starting with behavioral segmentation, because understanding user behavior is usually more critical to product development than understanding user characteristics. 📖 |
4. Put your segments into action
Now that you’ve dug through the data, parsed the patterns and sorted your users into groups, it’s time to get closer to your audience by using these different customer segments to launch targeted research and product marketing campaigns.
Here are some ways to get started.
Run market research with your ideal customers
If you’ve identified high-value, loyal customers as one of your segments, find out what they love about your brand or product—and what else they’d like to see from you.
Use Surveys, powered by Hotjar, to ask this cohort questions like, “What new product offerings would you like to see from us?”, or use a user interview tool like Engage to run in-depth sessions and learn even more about these target personas.
Deeply understanding this particular segment gives you valuable data you can use to
- Improve your customer relationship
with these target users by meeting their specific needs and pain points (for example, by tailoring your product roadmap or introducing a higher tier of customer support) - Understand what led them to become high-value customers
and seek to reproduce these behaviors in similar groups of customers (like other small businesses that have the same goals) - Attract more right-fit customers from the start
by tweaking your marketing copy to highlight the features and benefits your ideal audience loves most
Reconstruct individual visitor sessions to reveal hidden behaviors.
Use your findings to
- Improve the customer journey
for segments with poor engagement by proactively fixing blockers, such as adding more information or including social proof to address their concerns - Find and fix problems affecting specific segments, like a localization or translation issue impacting the Spanish version of your site
- See what creates a frictionless experience
and aim to replicate it across other segments
Upgrade your marketing strategy
The era of one-size-fits-all marketing is over; savvy teams know that tailored experiences are the key to more conversions and long-lasting, stickier users.
Share insights with your marketing team to get even more from your segments, by sending personalized messages and creating customer-centric advertising. Use your customer segmentation strategy to
- Deliver different campaigns to different cohorts, based on their specific needs, pain points and preferences. For example, if you’re targeting ‘marketers in small businesses using this tool for project management’, highlight the features that deliver the most value to users like them in your campaigns.
- Make product or pricing recommendations.
For an eCommerce brand, this might mean showing a customer similar items based on their previous shopping habits, or displaying products that are popular with other shoppers. For a SaaS business, this could mean suggesting which pricing plan users like them get the most value from, and which products and features they use the most.
5. Perform regular customer segmentation analysis
Remember, users are people—and people change. Regularly review your customer segments to understand shifts, spot new or emerging trends and ensure your segments are still accurate and helpful. 📖
Read on to the next chapter to learn how to conduct a customer segmentation analysis(with key metrics).
Why customer-obsessed teams need a customer segmentation strategy
For teams who are serious about improving the quality of their CX, there are many benefits of customer segmentation. Here are some of our favorites.
- Improve retention and customer loyalty.
Discover the behavior behind engaged, satisfied users, and find ways to encourage others to adopt these same behaviors. Help users reach ‘aha!’ moments faster, get a better ROI and become an irreplaceable part of their workflow—leading to increased retention, loyalty and revenue.
- Attract more right-fit customers, faster.
Work backward from what your happiest high-value customers love about your product, and reverse engineer marketing messages and campaigns based on that. Connect with the people who’ll benefit from your product most, and enhance the ROI of your marketing efforts at the same time.
- Prioritize product development based on customer impact.
Focus your attention on building new features and products for your target audience. Understand what customers with the highest lifetime value want, prioritize your roadmap accordingly and allocate resources to projects that’ll have the biggest impact on your business growth.
- Create a stronger product and customer experience.
Use customer segmentation to deliver a stronger, better customer experience. Cater to users’ unique needs based on their behavioral patterns for a seamless, effortless experience that boosts customer satisfaction.
Get granular insights with customer segmentation
The right customer segmentation strategy enables you to understand your users like never before, unlocking new opportunities to connect with them and drive growth.
Use a powerful digital experience analytics platform like Contentsquare to quickly create, organize and analyze user segments that make sense for your business, so you can use segment-specific strategies to improve core KPIs.
The result? Strategic, focused enhancements to your product—and the customer experience—that delight your customers and grow your business.