What is User Segmentation

User segmentation refers to the practice of dividing users based on common characteristics. This can help businesses in creating more optimized and personalized user experiences.

To be more specific, user segmentation is a UX term that means grouping the users of a service or a product based on certain similarities, which can be their country, language, age, device, occupation, behavior, etc. It is a widely used practice among digital products to offer users a better and a more personalized experience.

To give an example, imagine that there is a SaaS product that has millions of users worldwide. The product has 2 main functions, which are A and B. 40% of these users are more interested in A than B, while the remaining users are more interested in B than A. When a user that is more interested in B is introduced to A first, the retention rates drop, and vice versa. The company wants to prepare different tutorials for each of these groups as their interest in the product is different from each other. 

During the users’ initial signup, they ask their users if they’re interested in A or B at first, and therefore group their users based on their choice. After that, a user onboarding experience for each segment is designed, and an increase in the user adoption metrics are experienced.

What makes User Segmentation different from Market Segmentation is that the initial one is based on users of the product and more related to product teams while the second one is based on the buyers of the product and more related to marketing teams.

What is Market Segmentation

Market segmentation refers to the practice of grouping the audience of a product or a service that a company wants to sell based on common characteristics. This can help businesses position themselves better and end up in increased marketing metrics.

To be more specific, market segmentation is a marketing term that means dividing the target audience of a business into different segments based on certain similarities, which can be their language, age, device, behavior, occupation, region, etc. It is a widely used practice in marketing, especially when promoting products and services to different groups.

For example, imagine that there is a company that sells products such as shoes and shoelaces. Their services might seem related but when more thought is given especially from a customer’s perspective, one can understand that someone who wants to buy a shoe and someone who wants to buy a shoelace are very different from each other. Also, this shoe company has a single store in a certain area but ships worldwide. 

Their marketing department wants to promote their services but they can’t promote to every customers with a single ad, so they segment their users. First based on their region, because those who live close to the store might want to come in person and shop from the store. Those who live close to the store sees the location of the store in the advertisements while those who can’t visit see the web shop. And second, based on customer interest. Customers who want shoelace are divided and shown ads for shoelaces while customers who want shoes are shown shoe ads. This helps the company increase visitor to buyer rate significantly.

The difference between user and market segmentation is that market segmentation is practiced on potential customers of the business for marketing while user segmentation is  practiced on existing users for customer success and user experience.

Why do companies use Segmentation?

Whether it is market or user segmentation, segmentation in general has various benefits for companies that makes businesses adopt it. 

First off, it helps businesses practice the divide and conquer method. Each segment of user has similar characteristics and when they are grouped, marketing or engagement strategies can be more effective. For marketing, targeted ads that is locked to the needs of these groups can be much more effective than a general campaign because it would tell users exactly what they want to hear. On the product side, each segment of users can be onboarded and engaged differently based on their interest to increase product adoption.

Second, it offers each user a unique experience. If segmentation is not practiced, every user goes through the same experience and while the majority of users might be synched with the product and the services, a big chunk of users might still feel that the experience is not intended for them. If a business aims to offer a personalized experience for each customer, they are required to use user segmentation and create journeys based on their characteristics.

And lastly, it can help businesses establish a roadmap more easily. Because segmentation groups users into similar needs it can point out the pain points of these audiences more precisely. If a business wants to improve or expand, segmentation can show them which area desperately needs a solution and the business can expand there to acquire more users and better position themselves.

Selman Gokce

Selman Gokce is the Senior Inbound Marketer of UserGuiding. He is highly invested in user onboarding and digital adoption, especially for SaaS, and he writes on these topics for the UserGuiding blog. When he's not writing, you can find him either listening to LOTR soundtracks while cooking or getting angry because he lost in a video game.

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