Customer Segmentation Models: Ultimate Guide (Types, Strategy & Tools)

What if you could read your customers’ minds? Imagine knowing exactly what they want, when they want it, and how they want it delivered. While mind-reading might be out of reach, customer segmentation models are the next best thing.

By understanding and grouping your customers based on their behaviors and preferences, you can create personalized experiences that actually engage customers. This article will show you how to master customer segmentation, so you can stop guessing and start delivering exactly what your customers are looking for.

TL;DR

• Customer segmentation models are ways of dividing customers into groups with shared traits to effectively tailor your product and marketing strategy.
• Here are some benefits of user segmentation models:

1. Tailoring in-app content and features enhances engagement through personalized experiences.
2. Targeted marketing based on customer segments improves campaign effectiveness and conversion rates by addressing specific needs and preferences.
3. Behavioral segmentation identifies upselling opportunities by tailoring offers to users’ needs and usage patterns.
4. Personalized interactions based on customer segments enhance satisfaction, build customer loyalty, and encourage brand advocacy.

• There are eight different customer segmentation models:

1. Behavioral segmentation groups users by in-app interactions and usage patterns.
2. Psychographic segmentation categorizes users by psychological traits.
3. Demographic segmentation groups users by factors like age, gender, or income.
4. Geographic segmentation groups users by location.
5. Technographic segmentation categorizes users by the technology they use.
6. Firmographic segmentation categorizes customers by company-specific characteristics.
7. Value-based segmentation groups users by their economic value for the company.
8. Needs-based segmentation categorizes users by specific needs, preferences, or pain points.

• You can develop a customer segmentation strategy by doing the following:

1. Set specific goals and KPIs to measure success.
2. Choose a segmentation model aligned with your goals.
3. Employ customer segmentation tools like Userpilot to gather relevant data and create segments.
4. Analyze your customer segments to see how they respond to different strategies.
5. Refine your strategy based on the insights.

• Here are three customer segmentation tools to help you improve the customer journey:

1. Userpilot enables personalized in-app experiences by tailoring user journeys to different segments, driving product growth.
2. HubSpot facilitates customer segmentation for personalized email campaigns, allowing targeted communications based on behavior, demographics, and content interactions.
3. Sprout Social enhances social media marketing by enabling targeting for different audience segments.

• If you need help creating customer segmentation models, Userpilot can help. It can automatically track user behavior, analyze customer data to create new segments, and implement A/B testing to see the most effective approaches for each segment. To learn more, book a demo now.

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What is a customer segmentation model?

A customer segmentation model is a framework that divides customers into distinct segments based on shared characteristics or needs. By grouping customers with similar traits, businesses can tailor their strategies to better meet the specific needs of each segment.

Benefits of customer segmentation models

Here are some benefits you can gain from using customer segmentation models.

Personalized in-app experiences

By identifying distinct segments within your user base, you can tailor in-app content and experiences to meet each group’s preferences. This level of personalization enhances user engagement and customer satisfaction, increasing the likelihood of user retention.

For example, segmenting users of a project management tool based on their roles allows the app to present relevant features tailored to each role. Project managers might see detailed task overviews and team performance analytics. Meanwhile, team members could receive simplified task lists and collaboration tools.

Targeted marketing efforts

Understanding the characteristics of each customer segment allows you to create highly targeted marketing campaigns that resonate. Tailoring your marketing efforts to align with each segment can significantly improve conversion rates.

Suppose you’ve recently rolled out a new feature, and you notice a segment of users who frequently engage with similar existing features but haven’t yet tried the new one. You can create a targeted campaign for this group, showing how the new feature adds value to their workflow.

Upselling opportunities

Segmenting customers who are reaching limits on their current plans allows you to identify opportunities for upselling.

For instance, let’s say you’ve identified a segment of customers who have reached a limit of 15 created reports in your app. These users are highly engaged but may be approaching a point where they need more advanced features or a higher-tier plan.

By segmenting this group, you can trigger personalized in-app ads or emails that encourage them to upgrade. This targeted approach boosts the likelihood of conversion by addressing specific user needs at the right moment.

Improved customer loyalty and overall satisfaction

When you tailor your interactions with personalized messaging to meet the specific preferences of each segment, users feel more valued and understood. This personalized approach boosts satisfaction and turns users into loyal customers.

Types of customer segmentation models

Here are different ways of segmenting customers:

Behavioral segmentation

Behavioral segmentation is a customer segmentation model that groups users based on their behaviors, interactions, and usage patterns.

For example, a SaaS might segment customers based on actions such as the frequency of logins or features used. This segmentation allows you to identify active and inactive users. Then, you can create strategies to re-engage inactive users and target active users with personalized content based on what they engage with.

Psychographic segmentation

Psychographic segmentation is a customer segmentation model that categorizes users based on their psychological characteristics, such as their values, attitudes, or interests. This is valuable for crafting messaging and content that addresses the values and beliefs of your target audience.

Segmenting customers based on psychographic data, such as whether they identify as extroverts or introverts, can lead to more personalized and effective marketing strategies.

For example, for extroverted users, you could highlight features that encourage social interaction. On the other hand, you might emphasize features that allow for individual productivity or self-guided tutorials for introverted users.

Demographic segmentation

This is a customer segmentation model that groups users based on age, gender, occupation, or income.

For example, a streaming service might segment its users by age, offering different content recommendations. Teenagers might be shown the latest trending shows, while older viewers could receive recommendations for classic films or documentaries.

Geographic segmentation

Geographic segmentation is a customer segmentation model that groups users based on their physical location, such as country, region, city, or even climate. In this way, you can localize customer experience.

For example, an e-commerce company selling outdoor gear could segment its customers based on climate. It could promote winter gear to users in colder regions and summer equipment to those in warmer climates. Plus, it can localize marketing messages to resonate with regional preferences.

Technographic segmentation

Technographic segmentation is a customer segmentation model that categorizes users based on their technology, such as the device, browser, or operating system.

For example, segmenting users based on their device type (desktop or mobile) allows you to create targeted ads that emphasize features specific to each device. Additionally, you can tailor support resources and troubleshooting guides to better address the unique needs of desktop and mobile users.

Firmographic segmentation

This is a customer segmentation model primarily used in B2B contexts, where businesses divide companies into groups based on company industry, number of employees, revenue, etc.

For example, a SaaS provider might segment its customers based on company size—small businesses, mid-sized companies, and large corporations. Small businesses might be offered cost-effective, scalable solutions with flexible pricing, while large corporations could be targeted with enterprise-level features, dedicated support, and advanced customization options.

Value-based segmentation

Value-based segmentation is a customer segmentation model that groups users based on the economic value they bring to a business. This type of segmentation helps companies maximize their return on investment (ROI) by tailoring marketing, sales, and customer service strategies to the most valuable customer segments.

For example, you can create a segment of users on an enterprise plan and target them with exclusive offers, early access to new features, and personalized account management services to enhance their loyalty and encourage further spending.

Needs-based segmentation

Needs-based segmentation is a customer segmentation model that categorizes users based on their specific needs, preferences, or pain points.

For example, you may segment users who have created an invoice and then offer them tailored features such as advanced invoicing, integrations with accounting software, and personalized support to improve their billing process. This focused approach satisfies specific customer needs by providing them with relevant tools and resources.

How to develop a customer segmentation strategy to boost engagement

Here is how to develop a customer segmentation strategy to increase your product’s engagement.

Set goals and KPIs for your strategy

Goal setting provides direction and purpose, and KPIs give measurable progress indicators. Some examples of goals could be increasing engagement with a particular feature or improving conversion rates.

KPIs you can measure include segment-specific conversion rate, product engagement score (PES), etc.

Choose a customer segmentation model that aligns with your goals

You should choose one or more segmentation models from our list that align with your goals. For example, a behavioral segmentation model would be highly effective if your goal is to increase customer lifetime value (LTV) by upselling.

With behavioral segmentation, you can identify users who regularly use basic features but frequently hit their limits so you can target them with upselling offers.

Collect customer data and create customer segments

Customer segmentation tools like Userpilot allow you to collect valuable insights through surveys and in-app analytics. You can use this customer data to create segments based on shared characteristics, pain points, or goals.

Do a customer segmentation analysis

Now, it’s time to analyze how customer segments respond to different tactics, such as in-app experiences, messages, or new features. You can then identify trends or patterns that reveal the most effective strategies for each segment, allowing you to refine your approach and optimize your results.

Improve your strategy based on the insights

Once you have your insights, you can make product improvements that better meet each segment’s needs and preferences.

For example, after segmenting your users based on their behavior, you may find that a segment of power users frequently uses the advanced analytics feature but reports difficulty in accessing detailed insights. Using this data, you redesign the analytics dashboard with more intuitive navigation and customizable views.

Customer segmentation tools you can use to improve the user journey

Here are three of the best customer segmentation tools to help you streamline this process.

Userpilot: Best for creating personalized in-app experiences

Userpilot is a product growth tool that can help you create personalized in-app experiences through effective customer segmentation.

Here’s what you can do with it:

• Add properties and conditions to create advanced segments.
• Analyze the behavior of each segment with analytics reports and dashboards.
• Auto-capture clicks, text inputs, and form submissions of different segments.
• Launch surveys tailored to each segment.
• Create custom flows for different segments.
• Do A/B testing to understand how different segments respond to the same flow.

HubSpot: Best for creating personalized email campaigns

HubSpot can help you launch personalized email marketing campaigns. With HubSpot, you can segment your audience based on various criteria, such as lifecycle stage, demographics, and interactions with your content.

By integrating HubSpot with Userpilot, you can leverage the customer segments you’ve already defined in Userpilot to send even more targeted emails. This integration allows you to align your in-app experiences with your email marketing efforts. Pretty neat, huh?

Sprout Social: Best for creating personalized social media marketing campaigns

Sprout Social can help you improve your Facebook and LinkedIn strategy with its Audience Targeting feature. On Facebook, you can target the posts based on the audience’s interests, gender, age, location, relationship status, etc.

On LinkedIn, Sprout Social allows you to segment the audience based on company size, industry, function, seniority, etc.

Conclusion

Hopefully, you now know how different customer segmentation models can improve your product and marketing efforts.

Getting started with customer segmentation models can’t be any easier. Userpilot lets you create segments based on in-app behavior and surveys, automatically capture their behavior, and launch personalized product experiences. Book a demo now to learn more.

Try Userpilot and Take Your Personalized Product Experiences to the Next Level

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