What Is Needs-Based Segmentation and How To Collect Data for It? [Best Tools Included]

Why is needs-based segmentation important?

Segmenting your customers based on needs is highly effective as it allows you to form better relationships with users and provide a better experience for them.

Let’s jump in to see what needs-based segmentation is all about and how you can collect data for that to increase the growth of your business.

What is needs-based segmentation?

Needs-based segmentation is the process of segmenting your customers into groups based on their shared experience of a particular problem or need.

What are the benefits of needs-based segmentation?

By identifying your customers’ needs, you can offer them the right products at the right time in the right way. Adopting a needs-based segmentation approach results in several benefits, including:

• A clearer understanding of different customers in the market
• Leveraging competitive advantage and company’s strength to target opportunity segments
• Better tailored message for customer segments

A priori vs value-based vs needs-based segmentation

Research and market analysis is one of the most important steps in customer segmentation. Once you derive your data from those two steps, the next is to figure out what approach you’re taking with your segmentation. There are three customer segmentation types: A-priori, value-based and needs-based. Let’s examine the three options:

A-priori segmentation is the simplest of all segments. It uses data that you most probably already have – such as the demographic (age, family size, occupation), geographic (states, regions), firmographics (company size, industry), or behavioral data (product usage, responses, attitudes) – to segment customers.

Value-based segmentation involves grouping customers by their economic value. Data used for value-based segmentation should align with how you measure revenue in your company, such as average purchase size, average product usage per billing period, and monthly recurring revenue (MRR).

Needs-based segmentation involves grouping customers based on their pain points, problems, needs, or motivation. Needs-based segments are critical as they help you determine what needs the product or service has to satisfy.

Four most common needs-based segments

In SaaS, there are 4 most common needs-based segments that you need to differentiate.

Let’s talk about each of them below.

Price-focused segment

Price-focused segmentation involves charging different prices to different customers for the same product or solution.

A price-focused segment has a more transactional way of doing business and doesn’t look for extras to cut costs. Companies in this segment are often small and regard the product/service as of low strategic importance to their business.

Quality and brand-focused segment

The quality and brand-focused segment wants the best possible product and is prepared to pay for it. Companies in this segment are medium-size or large and regard the product/service as of high strategic importance to their business.

Service-focused segment

The service-focused segment places high importance on product quality, range, and customer service. The companies in this segment tend to work in time-critical industries and can be small, medium, or large.

Partnership-focused segment

A partnership-focused segment gives priority to trust and reliability with the solution supplier as a strategic partner. Companies in this segment tend to be large and regard the product or service as strategically important.

Needs-based segmentation use cases

Needs-based segmentation has a lot of use cases. Let’s dive deep into different use cases and see what they are all about.

Validation

It’s no surprise that most businesses fail in their first year!

While most people attribute failure to money and bad execution, they forget the root cause – lack of proper market research (validation).

If your product/service is not solving a problem for certain people, you can’t have a business. Needs-based segmentation will give you a deep understanding of how your product does or doesn’t satisfy your target customers’ needs. The insight you get can help you create a solution that addresses your customer segment’s needs.

Positioning

Knowing who is most likely to buy your product and what they need it for allows you to position your company as the best solution for their individual needs. This will result in increased product adoption and better performance against your competitors.

Marketing

In addition to improving your positioning, needs-based segmentation can help you improve marketing efforts by building real personas informed by real data rather than assumptions. Segmenting your customers based on needs can also help you develop more focused, targeted marketing messages tailored to each of your customer segments.

Sales & lead generation

Needs-based segmentation is an effective method for doing sales or lead generation.

Every customer has different needs, so it’s necessary to separate them correctly.

Through needs-based segmentation, you’ll understand the needs of your target customers, allowing you to deliver the right message at the right time to generate high-quality leads and sales.

Onboarding

Needs-based segmentation allows you to deliver a personalized UX for new users. For example, if one segment of your users complains about getting overloaded with so much information simultaneously, you can improve that by having minimal information during your onboarding. The point is you are solving a problem based on your customer’s needs.

Prioritization

When you know about your target customer’s needs and unmet needs, you can determine where your business is connecting well with them and where improvements can be made.

Customer Retention

Customer retention is a huge part of any successful business. According to a report by SmallBizGenius, 82% of companies agree that retention is cheaper than acquisition.

But that’s not all.

Another study by Hubspot shows that a 5% increase in customer retention can boost profits by 25% to 95%.

We agree with SmallBizGenius and Hubspot, but how does it apply to needs-based segmentation?

Understanding your customers’ pain points and needs makes it easier to keep them happy. You know which marketing strategies are more likely to resonate with each segment. This means you are giving them the solution that they need.

4 ways to collect data for needs-based segmentation

Now that you’ve seen all needs-based segmentation use cases, let’s look at four ways you can use to collect data for needs-based segmentation.

Use microsurveys in the welcome flow to understand users’ needs

Is there a better way to understand your users’ needs than asking them yourself?

Microsurveys in the welcome flow can be a great way to understand what your new users want to achieve with your product and what their goals are. But first, you need to know the right questions to ask to achieve your goals.

With your questions in place, you can use Userpilot to create simple microsurveys in your welcome flow.

Using the data you get from the microsurveys, you can segment your users into groups and create personalized onboarding flows according to their needs.

Use feature request surveys to learn what users want to see next

Another significant opportunity for understanding your customer needs is feature request surveys. Getting feedback on what features are missing and what can be improved can help you better understand what your users need and how to satisfy them.

Here is an example of how Postfity uses a microsurvey to capture information about missing features and what customers want to see next.

Track feature usage to determine the features with the highest and lowest engagement

Your features are designed to meet the needs of your users. Tracking the most and least used features will shine a light on the needs of your target audience. You can use Userpilot to track feature usage without having to code.

All you need to do is to create feature tags that will trigger when users click or interact with that feature.

Want to see how to track feature usage with Userpilot? Get a demo today.

Use NPS surveys to measure customer loyalty and uncover friction points

NPS surveys can help you understand how your customers feel about your company and whether they will recommend your product to their friends or network. They will also allow you to find detractors so you can proactively reach out to them before they churn.

Using the NPS survey data, you can analyze the friction points and act accordingly to make improvements as soon as possible.

You can also add qualitative feedback questions to understand the reason behind the given score.

With an NPS tool like Userpilot, you can segment your users’ responses into separate themes to identify what’s making your users loyal or not. And you can address the problems and reach out to users who need help.

Best tools for needs-based segmentation

Now, let’s take a look at some of the best tools for needs-based segmentation. Here are three tools that you can try out later.

Userpilot

Userpilot helps product teams drive customer success by analyzing user behavior, delivering in-app engagement, and measuring user sentiment.

With features such as advanced segmentation, NPS surveys, feature tagging, and many more, Userpilot makes it easy to identify your user’s pain points and needs. It doesn’t just stop at creating surveys and tracking customer loyalty. You can also do A/B testing to see how different segments compare with each other.

In a nutshell, Userpilot allows you to:

• Segment customers based on their behavior, feature usage, NPS score, etc
• Create NPS surveys and follow up questions code-free
• Track feature usage and find the most and least used features
• Create contextual microsurveys across different stages of the customer journey
• Do A/B testing to make data-driven decisions

Ready to drive customer satisfaction with Userpilot? Book a demo!

Baremetrics

Baremetrics segmentation allows you to dig deep into your data without requiring advanced training. With baremetrics, you can segment your customers into different groups and perform simple health checks to see how different groups of customers are growing.

Segment

Segment enables you to create tailored, consistent, real-time customer experiences. With its Personas feature, you can build audiences and create real-time campaigns to target the right customer with the right message at the right time. You can also segment customers’ profiles based on behaviors and send messages to different customer segments.

Conclusion

Let’s do a short recap of what we learned today about needs-based segmentation.

Customer-need-based segmentation is valuable because it reveals what your customers’ needs, pain points, and problems are. It also gives data on what needs in each segment are unmet.

You can apply a needs-based segmentation approach to jobs-to-be-done thinking and create an effective growth strategy for your SaaS.

If you want to have better insights into how your users behave inside the app, collect feedback in a contextual way, and segment your customers based on their needs, then get a Userpilot Demo to get started right away.