User Segmentation: How to Segment Your User Base for Better Product Management?

User segmentation is an essential strategy in product management. It improves customer experience, increases retention, and drives product growth.

But where do you get started with user segmentation?

In this article, we cover:

• Why user segmentation is essential for product managers.
• The most common ways to segment users.
• How to use segmentation to improve customer experience.

TLDR;

• With user segmentation, you divide users into groups based on their shared characteristics (i.e. JBTDs, user roles, etc.).
• In SaaS, user segmentation is more granular than customer segmentation: customers are accounts and users are individuals within an account.
• By segmenting users, product managers can deliver tailored onboarding experiences via personalized in-app content and relevant feature highlights.
• Segment users and drive product adoption by presenting each target customer with the most valuable and relevant features.
• Segment users based on product usage to see how users engage with the product and provide extra support to retain users.
• Identify usage patterns of each user segment to see what users need to solve their JTBDs. From that, product teams can deliver better product offerings.
• Boost product growth by gauging the product needs of each user segment. Then use a tooltip to drive relevant feature discovery.
• In SaaS, there are three common user segmentation methods: Value-based segmentation, need-based segmentation, and behavioral segmentation.
• Value-based segmentation is segmenting users based on economic value. In SaaS, there are free, trial, and paid users.
• Need-based segmentation is segmenting users based on pain points, problems, needs, or motivation.
• Behavioral segmentation is segmenting users based on how they interact with your products (i.e. feature usage, in-app events, etc.).
• User segmentation can help improve the onboarding process. You can segment users based on user responses from microsurveys on the welcome page.
• Then, trigger personalized onboarding flows focusing on the essential steps and features to get them there.
• You can also segment the existing customer base by tracking in-app content engagement like onboarding checklist completion.
• User segmentation can help build better products. You can segment users to trigger feature request surveys, send feature testing invitations, and identify new improvement opportunities.
• Userpilot is a no-code solution where you can segment users based on various user attributes such as user data, company data, in-app content engagement, etc.

What is user segmentation?

User segmentation is the process of separating users into distinct groups or segments. These groups are based on shared characteristics such as their JBTD (jobs to be done), company size, business model, lifecycle stage, in-app behavior, and more.

Segmenting users allows you to tailor the onboarding process and send product recommendations to meet their specific needs.

User segmentation vs. customer segmentation

User segmentation is more granular than customer segmentation. Here’s the difference:

With SaaS products, entire teams usually share one company account. This whole account is considered the “customer” in customer segmentation. Within the account, the company will have multiple users. User segmentation groups these individual users based on their different needs.

Customers always refer to paid accounts, whereas users can be both free and paid accounts.

Product managers and product marketing managers often use the term user segmentation since they focus on retention and adoption. Sales teams and marketing teams often use customer segmentation as they focus on acquisition.

Why should product managers segment users?

User segmentation helps product managers send personalized onboarding experiences, boost product adoption, and retain more users.

Deliver a personalized onboarding experience

Segmenting users into different groups enables you to deliver a personalized onboarding experience.

You can segment users via welcome surveys with questions identifying their JTBDs and use cases. Then you can deliver tailored onboarding content that caters to their needs.

When you know what their product use case is, you can make the product onboarding process more efficient and engaging. Present only the most essential features first to help them reach activation faster.

Increase product adoption rate

Personalized experiences help increase product adoption rate over time. Segmentation enables you to introduce the most relevant features to users, making it more likely that users will engage and adopt them.

For example, a social media management tool can use a welcome screen to segment users based on job roles.

This decides the onboarding experience they’ll go through. An agency owner will be more interested in adding and organizing all of their client accounts. A social media staff will want to connect an account and get right to publishing.

Boost user retention

User segmentation can also help boost retention. By segmenting users based on shared behavioral characteristics, you can see their feature usage patterns and spot areas where users drop off or stop engaging.

Then you can provide users with a more personalized product experience by driving engagement with helpful features. This can be done using in-place tooltips.

Deliver better product offerings

A segmentation strategy isn’t only helpful for onboarding new customers. It also helps you deliver better product offerings.

You can boost upsells by segmenting your frequent users and encouraging them to upgrade.

For example, a software company could segment its users based on their feature usage. Then, they can trigger help offerings or recommend complementary features that are available on other plans.

Drive product growth

User segmentation is also critical for getting users to try new features.

The first step is to gain insights into the product usage of each user segment. From there you can identify which features users interact with, and which ones they don’t. If there’s a high-value feature they miss out on, you can use tooltips to drive feature discovery.

They’ll read about the value of the feature while trying it out for themselves.

How to segment users based on shared characteristics?

The most common types of user segmentation in product management are value-based, needs-based, and behavioral.

Value-based segmentation

Value-based segmentation groups customers based on economic value, such as if they’re free users, trial users, or paid users. It helps you prioritize certain segments to increase revenue.

Develop different engagement strategies to meet their needs. For example, users on a free plan should regularly receive in-app messages on how premium features can help them get more value.

In the below example, a segment is made of paying users with a 7+ NPS score. This shows customer loyalty, so you can send in-app messaging requesting reviews.

Needs-based segmentation

Needs-based segmentation groups customers based on pain points, problems, needs, or motivation. Collect customer data about product use cases or roles to build these segments.

This type of needs-based segmentation makes it easy to trigger personalized experiences. For example, create a segment of product managers to deliver relevant in-app guidance for their jobs to be done.

Behavioral segmentation

Behavioral segmentation involves grouping customers based on how they interact with your products. To create these segments, track in-app events and group users based on their shared activity.

For example, product teams of a social media scheduling tool could create a segment of users who have added a social account but haven’t yet scheduled a post. Then they trigger in-app guidance to encourage users to schedule a post.

Every type of segmentation we’ve covered is commonly used in product management. Other types such as geographic and psychographic segmentation are more widely used in a marketing strategy.

Examples of how to use user segmentation to improve the user onboarding process

User segmentation helps you improve the user onboarding process. It makes personalization easier, helps you collect valuable feedback, and makes tracking onboarding success simple.

Segment users based on data from microsurveys in the welcome flow

Start segmenting from day one by adding microsurveys to your welcome flow. It’s a great way to learn what users want to achieve.

Don’t overwhelm them with too many questions. Choose 2-3 critical questions to get enough data to start segmenting. Typically, you can ask about their job role, how they’ll use the product, and their goals.

Based on such data, you can start personalizing the onboarding experience.

Segment existing customer base by tracking in-app engagement

Once users have started engaging with the product, track in-app behavior to further segment users. Group users based on shared in-app behaviors. For example, you can make a segment of users who haven’t completed the onboarding checklist.

Then, you can trigger contextual in-app messages to drive engagement. Going by our previous example, you could send an in-app message nudging users to complete the remaining steps in the checklist.

Segment users to trigger conditional surveys

Segmentation is also a helpful tool for collecting relevant feedback. Trigger surveys relevant to where the user is in the journey or after reaching product milestones.

For example, use an NPS survey to collect feedback. This measures product sentiment and customer satisfaction. It asks customers how likely they are to recommend your product.

Examples of how to use user segmentation to build better products

Creating user segments helps you build better products. You can get insights into the features that users need and test product changes with current customers.

Segment users to trigger feature request surveys

With segmentation, you can group inactive users and trigger feature request surveys. Are they inactive because your product is missing a feature they need? This is the perfect way to collect feature feedback and understand what customers want to see.

You can retain customers by learning about their demands via in-app surveys and acting on them.

Invite existing customers to test your product

Segmentation also helps you beta-test new changes or products with the right customers.

For example, if you want to test changes to existing features, invite power users. These are the engaged, loyal customers who are great candidates to analyze performance. Check out how they react to the changes and make adjustments if needed.

If you want to validate a new feature idea, you can target the most relevant user segments. These are the ones who would find the most value in the feature.

Track feature interaction to identify new improvement opportunities

By tracking user activity, you can gain additional insight into how different segments are interacting with important features.

If you notice part of a specific user segment has yet to adopt an important feature, you can implement some obvious integrations or tweaks that will make it easier for them to do so.

For example, you can trigger tooltips or interactive walkthroughs to guide them through. This helps overcome feature blindness and increase adoption.

Best user segmentation software

You should look for a tool that can segment users based on many factors. Software that has analytics features and in-app experience builders are bonuses.

The top three segmentation tools to consider for your business include Userpilot, Amplitude, and Baremetrics.

Userpilot for advanced user segmentation

Userpilot helps product teams improve customer satisfaction. It features product usage tracking, in-app experienced builders, and survey builders. It also comes with advanced customer segmentation, NPS surveys, feature tagging, event triggering, and more.

Userpilot makes identifying and tackling users’ pain points and needs easy.

Product teams can segment customers based on dozens of user attributes such as:

• User Data – name, id, plan, web sessions, device type, signup date, and many others.
• Company Data – you can target the correct audience on a company level.
• Features & Events – you can build a new segment based on your feature tags.
• Content Engagement – segment users based on the experiences they’ve engaged with (such as flows events, checklist events, and NPS events). You can develop better in-app content by analyzing patterns.

That’s just the start of what you can do with segmentation in Userpilot.

To get the most out of your data sources, you can also implement analytics features, including goal-based analytics. This is especially helpful for product teams wanting to improve feature adoption, activation, user engagement, and retention.

To get the most out of your data sources, you can integrate many analytics tools such as Mixpanel, Google Analytics, and Kissmetrics.

Amplitude for user behavioral segmentation

Amplitude Analytics is one of the most popular digital analytics tools for SaaS businesses. It offers valuable insights into user behavior, helps to drive growth and improves the user experience.

Product managers can see an overview of how customers interact with the product. The tool allows you to track multiple events and segment users with bulk filters.

Amplitude is an analytics tool with highly customizable options, but unlike Userpilot, you need to know how to code.

Baremetrics for basic user segmentation

Baremetrics is a segmentation software that gives you insights into customer data. It doesn’t require advanced training or coding.

With Baremetrics, you can segment your customers into different groups and perform simple health checks to see how users are growing.

It’s a simple tool for product teams with basic segmentation needs. That being said, it’s not as powerful as Userpilot. You can‘t trigger personalized content to your segments, such as surveys or in-app experiences.

Conclusion

In SaaS, the ultimate goal of user segmentation is to improve customer satisfaction. You can deliver personalized experiences based on what customers need and want.

Want to get started with user segmentation? Get a Userpilot Demo and see how you can segment users, track in-app behavior, and build contextual experiences.