What is Segmentation?

Ruben Buijs
3 minutes • Aug 10, 2023 • Product Management

Segmentation is a crucial strategy that Saas product managers use to divide their target market into distinct groups or segments based on specific characteristics. By classifying their audience into smaller segments, product managers can tailor their strategies and offerings to meet the unique needs and preferences of each segment. Segmentation allows for a more personalized approach, leading to better customer satisfaction and increased product adoption.

Examples

Let's take a look at a few examples to better understand segmentation in the context of Saas product management:

  1. Demographic Segmentation: A project management software company might segment its target market based on demographics like age, gender, occupation, or income level. For instance, they might create different marketing campaigns and features for freelancers, small businesses, or enterprise-level organizations.

  2. Behavioral Segmentation: An email marketing tool might segment its customers based on their usage behavior, such as the frequency of sending emails, engagement with campaigns, or time spent on the platform. This segmentation can help in identifying power users, inactive users, or users who need additional support.

  3. Geographic Segmentation: A Saas company offering language learning software might segment its market based on the geographical location of its customers. They can create separate marketing strategies for different regions, considering language preferences, cultural nuances, and specific market demands.

Importance

Segmentation plays a vital role in Saas product management for several reasons:

  1. Targeted Marketing: Segmentation enables product managers to create targeted marketing campaigns that resonate with specific customer segments. By understanding the unique characteristics and needs of each segment, product managers can deliver tailored messages and experiences, leading to higher conversion rates and customer satisfaction.

  2. Product Customization: Segmentation helps product managers identify the distinct requirements and preferences of different customer segments. This knowledge allows them to develop personalized product features, pricing plans, or user experiences that cater to the specific needs of each segment, enhancing customer loyalty and retention.

  3. Resource Optimization: By focusing on the most valuable customer segments, product managers can optimize their allocation of resources. They can invest in product development, marketing efforts, and customer support initiatives that have the greatest impact on the target segments, maximizing ROI and overall business success.

How to Use Segmentation

Here are some steps to effectively use segmentation in Saas product management:

  1. Identify Key Segmentation Variables: Determine the most relevant variables to segment your target market. These variables can include demographics, behaviors, geographic location, or even psychographics like interests and values. Consider the characteristics that have a significant impact on customer preferences and purchasing decisions.

  2. Collect and Analyze Data: Gather data from various sources, such as customer surveys, analytics tools, or user feedback. Analyze this data to identify patterns, trends, and commonalities among different customer segments. Use segmentation tools or software to streamline this process and gain actionable insights.

  3. Create Customer Personas: Develop detailed customer personas for each segment. A customer persona represents a fictional profile of an ideal customer within a particular segment. Include information such as demographics, motivations, pain points, and goals. These personas serve as a reference point for designing targeted strategies and product features.

  4. Tailor Marketing and Product Strategies: Craft marketing messages, campaigns, and product features that align with the unique needs and preferences of each segment. Customize pricing plans, user interfaces, or customer support channels to enhance the user experience for different segments. Continuously iterate and refine these strategies based on customer feedback and data analysis.

Useful Tips

Consider the following tips to make the most of segmentation in Saas product management:

  • Regularly reassess segments: Market dynamics change over time, and customer preferences evolve. Regularly review and update your segmentation strategy to ensure it remains relevant and effective in addressing customer needs.

  • Avoid over-segmentation: While dividing your market into smaller segments is essential, be cautious not to create too many segments. Over-segmentation can lead to resource fragmentation and diminish the impact of your strategies. Find the right balance between granularity and practicality.

  • Combine segmentation criteria: Consider using multiple segmentation variables to create more refined segments. For example, combining geographic and behavioral segmentation can help you identify specific user behaviors in different regions.

  • Leverage automation and AI: Utilize automation tools and artificial intelligence to streamline the process of data collection, analysis, and personalization. These technologies can help you scale your segmentation efforts and deliver targeted experiences at scale.

FAQ

Segmentation in product management is the process of dividing a target market into distinct groups or segments based on specific criteria or characteristics.
Segmentation is important in product management because it helps identify the unique needs and preferences of different customer groups, allowing companies to tailor their products and marketing strategies accordingly.
Various criteria can be used for segmentation, including demographics (age, gender, income), psychographics (lifestyle, values), behavior (usage patterns, loyalty), and geographic location.
Segmentation benefits product development by providing insights into customer preferences, allowing companies to create products that better meet the specific needs and desires of each segment.
The different types of segmentation include demographic segmentation, psychographic segmentation, behavioral segmentation, and geographic segmentation.
Segmentation helps with targeting and positioning by identifying the most attractive and profitable market segments, enabling companies to focus their resources and messaging on those segments.
Challenges when implementing segmentation include accurately defining and understanding the segments, collecting relevant data, and ensuring effective communication and coordination across different segments.
Market research can support segmentation efforts by providing data and insights on customer preferences, behaviors, and market trends, helping companies identify and define their target segments.
Yes, segmentation can be used in both B2C (business-to-consumer) and B2B (business-to-business) product management to better understand and serve the needs of different customer groups.
Segmentation is an ongoing activity as customer needs, preferences, and market dynamics can change over time, requiring companies to regularly review and adapt their segmentation strategies.

Article by

Ruben Buijs

Ruben is the founder of ProductLift. I employ a decade of consulting experience from Ernst & Young to maximize clients' ROI on new Tech developments. I now help companies build better products

Table of contents

  1. Examples
  2. Importance
  3. How to Use Segmentation
  4. Useful Tips
  5. Related Terms

Ship features your users (really) want.
Collect feedback, prioritize ideas, and build a product your customers love with AI-powered tools for feedback boards, roadmaps, changelogs, and knowledge bases.

Get Started for Free

The faster, easier way to capture user feedback at scale

Join over 3,051 product managers and see how easy it is to build products people love.

Did you know 80% of software features are rarely or never used? That's a lot of wasted effort.

SaaS software companies spend billions on unused features. Last year, it was $29.5 billion.

We saw this problem and decided to do something about it. Product teams needed a better way to decide what to build.

That's why we created ProductLift - to put all feedback in one place, helping teams easily see what features matter most.

In the last four years, we've helped over 3,051 product teams (like yours) double feature adoption and halve the costs. I'd love for you to give it a try.

Ruben Buijs

Founder & Digital Consultant