User segmentation is a guide for businesses to create a user base that is full of loyal customers.
Without a clear understanding of your customer base and needs, everything you do for your product or service is intangible.
By defining your target groups clearly, you’ll eliminate random marketing efforts and begin making strategic moves that lead to actionable results.
In his book, Crossing the Chasm, Geoffrey A. Moore discusses this as to successfully “cross the chasm.” In this context, “Crossing the Chasm” is the technology adoption lifecycle where Moore recognizes five segments: innovators, early adopters, early majority, and laggards.
According to him, the marketer should focus on one group at a time and consider each as a base for marketing the next segment.
To effectively “cross the chasm” or the gap between those segments, marketers need to:
- Choose a specific target segment
- Get a clear understanding of the whole product concept
- Position the product
- Find the most effective marketing strategy, distribution channel, and pricing
So, how do you put this theory into action? This article explains the benefits of customer segmentation and six types of user segmentation with examples. Let’s roll.
What is User Segmentation?
User segmentation is the act of dividing customers into groups based on how they use your product. Based on customer segments, companies can create products that are more suited to the customer.
For example, if a company has customers that use their product differently than expected, they can create new products based on these segments and target them to the correct audience.
It’s important because it helps companies understand what type of product would be best for each user segment and reach an even wider audience. It’s an important aspect of marketing as it:
- increases customer loyalty
- boosts sales by reaching out to different target demographics,
- aids in better decision-making.
Knowledge of target demographics helps identify their needs, which in turn results in effective marketing campaigns tailored to the group’s requirements.
5 Ways User Segmentation Can Help Your Business
With the help of user segmentation, marketers can create more targeted and effective campaigns. They can serve more ads to the right audience by using the information on their demographics, location, interests, and behaviors.
It also helps in discovering new opportunities for revenue generation.
For example, some business owners may be looking for ways to increase revenue without increasing costs. They may find that a customer segmentation strategy that divides users by income level could help them determine what income group spends the most with them.
So, let’s check the benefits that come with employing a user segmentation strategy one by one:
1- Deliver a Tailored User Onboarding
Personalizing your customers’ user onboarding experience based on segmentation can help you:
👉 Create more engaged users
👉 Forge stronger relationships with customers
👉 Increase retention and product adoption rates
👉 Improve the user journey
Segmentation for user onboarding goes far beyond just adding the user’s first name in your emails, aka {First name}.
User data analytics tools like Appcues, Hotjar, and Mixpanel make it easier to collect customer data and give insight into how users interact with your digital product, website, or app.
So, there are more ways to segment your onboarding process than a first name token. For example, you can:
- Segment users based on user behavior to deliver a more relevant user experience
- Offer webinars and 1-1 product demos to introduce your product or service
- Create a welcome page that greets users by their name
2- Boost Retention Rates
Most companies focus on getting new customers, thinking that it’ll raise their bottom line, while the statistics point otherwise. According to a study, the probability of selling to your existing customer base is between 60% to 70%.
Segmenting customers enables teams pinpoint the marketing methods to keep them engaged and satisfied, creating a marketing segmentation as well.
Not only that, but it’s also easier to perform thorough market research for each user segment and plan out actionable business goals.
For example, you can ask questions like:
- What is the age range of your customer base?
- Which devices are they using?
- Does your website perform well on those devices?
- Do they prefer customer support through phone calls or live chat?
Questions like these can help you segment customers and drive up retention rates.
3- Provide Personalized Experiences
Customer segmentation facilitates identifying the trends of each user persona, allowing you to deliver more personalized messages.
For example, if you identify a segment as “marketers,” you can email them your e-book or webinar about marketing. Don’t forget that this can also fit into any context, from SaaS to e-commerce.
4- Make Your Offer at the Right Time
Marketing 101: Discounts and special campaigns work best when you know the purchase behavior of your target audience and the time to start the purchasing process.
For example, you can target users who abandon their carts before purchasing and show them your offer—whether through a popup or ads campaign on social platforms.
The same logic goes for upcoming special occasions like birthdays or particular holidays like Hanukkah, Eid, Christmas, or Diwali. You can reach out to customers with your occasional offers to make them feel appreciated and take the desired action, such as buying an item.
5- Win Back Old Customers
It’s not uncommon to see most of your first-time buyers never again. They may have forgotten all about your business.
It’s on you to remind yourself and win them back.
How to do that? Just identify and segment your one-time customers to plan a strategic move to get them back.
For example, you can offer a discount on their first purchase or give away a free item upon purchase.
6 User Segmentation Types + Examples
Covering the ways businesses can benefit from user segmentation, it’s now time to move on to segmentation types to have a clear idea of how you can target them.
The following section will go over customer segmentation types from the simplest to the most complex and useful type with several examples of segmentation types:
1- Geographic
Geographic user segmentation is the process of identifying places where users of a product live.
This type requires you to identify potential customers by analyzing their location and then do marketing for them.
Geographic user segmentation helps identify product or service users based in specific areas—companies use this process to help target their customers with appropriate marketing activities.
For example, if you sell clothes, you might want to target people in specific countries with your marketing campaigns. This allows you to reach the widest possible audience and improve your chances of success.
McDonald’s example of geographic segmentation:
The worldwide fast-food company McDonald’s divides its customers into geographic segments to target each group, such as different countries, cities, and states.
This way, McDonald’s sells customized menus to local target markets. As local cultures differentiate, customer needs differ.
While it’s okay to consume a type of meat like ham or beef in one country’s religion, it might be forbidden in another. In that sense, cultural and geographic segmentations are closely tied.
McDonald’s example of geographic segmentation:
The worldwide fast-food company McDonald’s divides its customers into geographic segments to target each group, such as different countries, cities, and states. This way, McDonald’s sells customized menus to local target markets. As local cultures differentiate, customer needs differ. While it’s okay to consume a type of meat like ham or beef in one country’s religion, it might be forbidden in another. In that sense, cultural and geographic segmentations are closely tied.
2- Cultural
Cultural user segmentation is a technique of dividing users into different cultural segments; this technique is used to better understand the needs of different cultures and their particular preferences.
For example, suppose you are running a mobile application that caters to both English-speaking American and Chinese-speaking users.
In that case, you will need to design two versions of the app with separate content for each culture.
3- Demographic
Demographics is an essential aspect of user segmentation because it gives a picture of the specific characteristics of a group or individual users.
It is also very helpful when marketers are trying to formulate new marketing campaigns.
In order to analyze different needs and preferences more easily, demographic segmentation divides users based on several factors:
- age
- gender
- occupation
- religion
- income
This type helps businesses divide customers based on income or educational levels to see what kind of content they respond best to, just like Pepsi’s demographic segmentation example.
In this advertisement example, Pepsi targets people of a specific age range and their common problems–the youth and their desire to make their voices heard.
4- Occasional
Occasional user segmentation focuses on special events which are independent of the user or customer.
This customer segmentation model groups the market into categories based on occasions when a customer plans to purchase a product, when they actually buy it, or when they use it.
Typically occasion-based segmentation falls into three main categories:
- Regular personal occasions
- Rare personal occasions
- Universal occasions
5- Psychographic
Psychographic segmentation takes into account the users’ psychological characteristics, behaviors, and attitudes; these tend to be grouped into a number of categories.
For example, suppose you want to find out how high-income people use your product differently from low-income people.
In that case, you might employ psychographic segmentation to identify their differences in attitudes and behaviors as buyer personas.
Psychographic segmentation can be used to personalize, target ads and messages more precisely, and develop personas for products or services.
6- Behavioral
Behavioral user segmentation is a popular marketing strategy.
It helps organizations target their customers by giving them relevant content and offers based on the user’s past behavior.
Behavioral segmentation also helps identify and target potential customers by looking for people with similar purchasing behavior.
Behavioral user segmentation is a technique that uses customer behavior and data to determine the likelihood that someone will buy a product or service in the future.
For example, if you frequent a particular website and always purchase something when you visit, then this would be an excellent person to target.
Behavioral user segmentation can also be used to identify common behaviors within certain demographics such as gender or age group.
Frequently Asked Questions
What is a user status segmentation?
User segmentation is the practice of dividing users into different groups based on their status to help provide better customer service. There are four types of user status segmentation: active, prospective, former, and lapsed. Active users are those who continue to use the product regularly. Prospective users are those who have demonstrated interest in the product but aren’t currently using it. Former users are typically people who have stopped using the product but might be interested in resuming use in the future. Lapsed users are people who once used the product but don’t anymore and would not likely resume use in the future.
What are the types of user segmentation?
All the users of a product or service can be divided into different segments such as geographic, cultural, demographic, occasional, psychographic, and behavioral user segmentation. The two most common umbrella types of segmentation are user status segmentation and product user segmentation.
What is category segmentation?
Category segmentation is the process of grouping people with similar needs, attitudes, or behaviors. This can be done in many ways – by geographical location, socio-economic status, age group, gender, and so on. For example, Amazon does this by using product user segmentation to show one set of items to people who are interested in fashion and another set to people who are interested in books.
What is a segmentation strategy?
A segmentation strategy is a type of marketing strategy that divides a population or market into groups and targets the segments with different marketing messages. This is also called customer segmentation and can be done based on gender, age, income, location, interests, and so much more. This strategy helps companies recognize each group’s needs and wants so they can focus on their specific needs.
