Harness the Power of SaaS Customer Segmentation for Maximum ROI

SaaS Customer Segmentation


Whether you’re just now starting out a SaaS business or are an experienced veteran in the space, customer segmentation is key to driving the highest returns on investment (ROI). 

Segmenting your customers into different groups allows you to provide more relevant and personalized services while saving time and money. 

By properly understanding your various market sectors, their pain points, needs, and wants; you can create highly targeted campaigns that are sure to yield maximum ROI. 

A survey from HubSpot found that marketers using targeted campaigns experienced a remarkable 760% increase in revenue.

In this blog post, we will explore how proper customer segmentation can help boost profits for a SaaS business!


What Is SaaS Customer Segmentation?


Customer segmentation is an integral process for any SaaS company, allowing them to identify and target different types of customer profiles. 

As customer preferences and behaviors evolve, it becomes increasingly important to have an understanding of which customers are more likely to respond positively to the SaaS company’s product offerings.

Fortunately, customer segmentation — the practice of clustering customers based on behavioral attributes and other characteristics — can provide SaaS companies with powerful insights into their user base. 

Without customer segmentation, you would be unable to identify users who have similar needs or prioritize marketing strategies in order to deliver the highest value possible.

Ultimately, SaaS customer segmentation is important because it allows you to develop better strategies for targeting different subgroups or segments of customers and ensuring that the most effective SaaS solutions are tailored to those groups.


Benefits of SaaS Customer Segmentation


Below are some of the primary benefits that SaaS customer segmentation provides:


1. Collect customer data 


By segmenting your customers and collecting data on their interactions with your SaaS tool, you can gain invaluable insight into how different customer types are using your solution. 

This can guide changes to the SaaS tool itself to meet customer needs, and also point to possible marketing opportunities.

Furthermore, understanding who your customers are enables you to create campaigns targeted at each segment’s unique interests and needs. 

For example, if you know that a particular segment of customers are more likely to respond positively to discounts and promos, you can use this knowledge to create campaigns specifically designed for them.


2. Make an ideal customer journey


By looking at the customers who use your solution and what they expect, it is possible to optimize their engagement from acquisition, conversion, retention, and referral. 

This could give you a competitive advantage by tailoring content and actions that can meet the needs of different segments.

Furthermore, understanding segment preferences allow for the timely restructuring of marketing campaigns for maximum efficiency. 

Through segmentation, you can identify potential target customers more easily and find ways to attract them effectively. 

It also creates opportunities to build loyal customers through personalized experiences, such as providing exclusive discounts or rewards based on user behavior.

All this allows you to have more informed strategies and design better offerings, making it much easier to create an ideal customer journey.


3. Offer a better customer experience


Segmenting your customers makes it easier for you to recognize the needs of your customers, develop a connection, and foster brand loyalty like never before. 

For example, you can easily differentiate between customers who are just looking to purchase a product and those who need more support.

Customer segmentation can also help customize communication-based on customer behaviors, preferences, and requirements. 

Ultimately this allows for personalization in customer experience which drives more engagement and sales. 

SaaS ompanies can expect to see an increase in consumer spending if they deliver exceptional customer experience across their applications – 86% of buyers indicated that they are willing to pay more for such an experience.


4.Create effective marketing campaigns 


Customer segmentation provides the data to identify which groups are likely to be interested in your SaaS tool and therefore what type of marketing they’ll be most receptive to. 

For example, it can help you determine the best channel to reach out to customers, such as email or social media.

With this information, you can create highly targeted campaigns that have a greater chance of success whilst focusing on relevancy and personalization to ensure you engage your audiences.


5. Create upsell opportunities 


SaaS customer segmentation can help you identify the most profitable customers and help target them with upsell campaigns that are tailored to their interests. 

It gives you data-driven insights into what types of products might be of value to various customer segments, allowing you to craft more effective upsell offers.

Moreover, segmentation can be used to recommend related products or services – showing customers the added value they will receive by spending more. Finally, this process also allows you to refine your service packages, ensuring you have the right offerings for each customer.


6. Improve your product


Customer segmentation helps to identify customer preferences so you can figure out which features you should focus on delivering through your SaaS tool. 

It allows you to determine precisely which features are preferable or necessary for your particular demographics and make sure those needs are met.


7. Determine your pricing


By segmenting customers into different categories and studying their needs, behaviors, and other attributes, you can identify appropriate pricing structures that meet the needs of each segment.

Additionally, by knowing which features are most important to which segments according to their respective demands, you can make decisions on the development of new features or bundles that give different groups more value for their money.


Types of Customer Segmentation in SaaS


Here are some of the most common types of customer segmentation in SaaS:


1. Trait-based segmentation


Trait-based customer segmentation enables you to focus your SaaS tool and marketing messages toward certain customers who share distinct characteristics, such as geographical location or spending habits.

In order to utilize this segmentation effectively, analytics are used to analyze customer data such as their online activity and purchasing history. Through this analysis, you can assess which segments represent the most potential for your business growth.


2. Geographic segmentation


Geographic segmentation involves analyzing customer address data and features such as local language utilities and in-market currency support.

In doing so, you can customize your SaaS tool and marketing content according to customer location. This helps create a more personalized experience for each individual customer, making it easier for them to access services since they no longer have to worry about things like language incompatibilities or currency conversion rates.

Furthermore, mobile-enabled services also benefit from geographic segmentation, as geofencing can be put into effect to pinpoint local markets.


3. Demographic segmentation


Demographic segmentation involves breaking down the population into distinct categories such as age, gender, marital status, and geography. 

Knowing who among your potential customers allows you to tailor content to those demographic groups that are more likely to respond positively. 

For example, if your business serves a certain region, you can create localized content that resonates with that specific demographic.


4.Psychographic segmentation


Psychographic segmentation is designed to target customers based on their personal values, lifestyle, interests, and other characteristics. It allows you to select customer segments that share similar traits for more effective communication and targeting.

Through psychographic segmentation, you can optimize your customer’s journey by focusing on the desires and needs of the individuals within a given segment. 

This helps create more personalized product experiences that are tailored to individual preferences.

In addition, it enables you to craft messaging that resonates with specific audiences, making each interaction memorable and relevant.


5. Job-to-be-done segmentation


Job-to-be-done segmentation in SaaS is the process of understanding customer needs, motivations, and pain points that drive a user to purchase or use a particular service. It seeks to uncover the user’s underlying “job” – why they need to complete this task with some service, be it for business or pleasure.

By assessing the job being done by customers, you can evaluate how successful your SaaS tool is in helping users achieve their desired outcomes.


6. Technographic segmentation


Technographic segmentation in SaaS is a way of classifying customers based on what type of technology or software they have adopted. It can provide meaningful insights into how they interact with SaaS tools.


7. Mature segmentation


Mature segmentation in SaaS involves grouping different customer segments based on their level of engagement and associated lifetime value. 

It can provide valuable insights into the health of a customer base, as well as inform strategies on how to increase adoption and customer loyalty.

By analyzing customer data, you can identify which segments are most active users of your SaaS tool, as well as those that are at risk of churning.


8. Firmographic segmentation


Firmographic segmentation in SaaS involves breaking down customers into distinct segments based on the size of their organization, industry they are in, and other characteristics. It helps you understand the customer landscape and tailor services to different size organizations.


9. Behavioral or usage-based segmentation


Behavioral or usage-based segmentation in SaaS involves grouping users based on certain behaviors such as what features the user utilizes, when they use the platform, or how often they interact with it. 

It can be used to identify customers who are most likely to churn, as well as those who are more engaged and could potentially become brand ambassadors.


10. Value-based segmentation


Value-based segmentation in SaaS is an approach to segment customers based on their unique value to the organization. 

This technique uses data from a customer base as well as from operational sources such as sales metrics, customer service feedback, and usage metrics, in order to identify high-value segments within the customer base.

Understanding the customers that are actually providing higher value and profits for the company over time, enables you to tailor your services accordingly in order to drive further customer success and optimization of resource allocation.


11. Needs-based segmentation


Needs-based segmentation in SaaS is a method to divide customers into groups based on their needs and preferences. This allows you to tailor your SaaS solution to best meet the demands of each customer segment. 

This can result in greater customer satisfaction, improved repeat sales, and closer relationships with existing customers. It also helps ensure that your SaaS tool addresses the real needs of your customers, rather than what might be perceived through traditional market segmentation methods.


The Most Common Customer Segments in SaaS


Below are the most common customer segments that SaaS companies use in order to better understand their customers and tailor their offerings accordingly.


1. Paying customers


Paying customers refers to users who have purchased a product or service from a SaaS provider. This type of customer is distinct from users who are accessing a limited-time free trial or subscribing to the service without having made any form of payment. Paying customers are often given access to more exclusive features and upgrades compared to users who haven’t yet paid for their subscriptions.


2. High-value/advanced customers


High-value/advanced customers are users who have purchased more expensive or advanced versions of a SaaS product. These customers usually require more support and resources, and are the most valuable customers for a SaaS company.

High-value/advanced customers have typically established organizations, usually with frequent purchasing habits, expansive networks, and a vested interest in leveraging technology for growth purposes.


3. Inactive users


Inactive users are customers who have been ushered into the SaaS ecosystem, signing up for a plan or a trial with the intention of benefiting from it, but they have yet to realize those benefits. Inactive users may not be utilizing their SaaS subscription or have stopped using it altogether – either way, you cannot afford to write them off and miss out on potential revenue.


4. User by persona


User by persona customer segmentation divides customers into distinct groups based on their behaviors and needs, allowing for more effective marketing strategies, analytics, and customer success goals. Persona-based segmentation starts by identifying the user’s goal and then creating personas that represent actual customers.

These personas are real-life representations of individuals or groups and can provide insight into their thoughts, behaviors, motivations, preferences, how they use software and what their potential pain points could be.


5. Accounts by value


Accounts by value categorizes customers by their level of spending. It is a practical approach to targeting customer segments that provide valuable information about each customer’s potential for making investments with the company.


6. Satisfied/dissatisfied users


Satisfied customers have a positive experience with the product or service, leaving them feeling content with their purchase. This can include things such as quickly finding what they need or being able to use the SaaS tool without difficulty.

Dissatisfied customers, on the other hand, don’t receive the same level of satisfaction when using the tool. Things like poor functionality, slow performance, and hard-to-use interfaces can lead to a negative user experience that can drive customers away.


How to Segment Your Customers Properly


Here are some steps for properly segmenting your SaaS customers:


1. Establish your SaaS customer segmentation goals


There are countless variables to consider when establishing your SaaS customer segmentation tools, from understanding the nuances of user behavior to developing an effective targeting strategy.

Common segmentation goals are:

  • To reduce initial churn
  • To improve customer experience
  • To increase referral traffic
  • To upsell


2. Gather necessary data for segmentation


One of the best ways to gather necessary data for SaaS customer segmentation is through surveys and questionnaires. Surveys allow companies to collect information on topics ranging from user preferences and need to budget constraints, in a way that can be easily stored and accessed. Plus, respondents can provide more detailed and accurate answers when unpressured by an online survey than they would during an in-person discussion.

Furthermore, these surveys can also be used to gain insight from a wider range of demographics to identify market trends or find out the number of people who use particular products or services.


Step 3: Test your hypothesis


When segmenting customers, it is important to test your hypothesis.

  • Start by understanding their needs, wants, and interests through surveys or interviews.
  • Next, use data such as purchase history and customer service calls to make sure that the customer segments are accurate representations of customer behaviors.
  • Finally, use marketing analysis to review the actions each segment takes with respect to pricing, promotions, and messaging campaigns to learn how various segments respond differently to different types of marketing strategies.


Step 4: Create an action plan depending on your goals


Once the customer segmentation is complete, it’s time to create an action plan. Depending on your goals, this could include anything from creating tailored content and offers, to offering discounts or special rewards to certain customer segments.

It’s also important to keep track of how customers are interacting with your product or service. This will help you tailor the action plan to align with customer needs and behaviors, as well as identify any potential issues that may arise.


Step 5: Execute your segmentation plan and analyze the results


The last step is to execute your customer segmentation plan. This involves creating the necessary campaigns and offers, as well as using analytics to track progress and measure success.

By continually monitoring customer segments, you can adjust your strategies as needed to better cater to customers and ensure that every segment

First, it’s important to look at metrics such as conversion rate, average order value, and session duration for each segment. Doing so will help identify changes or patterns that can give you insight into how successful the segmentation was.

It’s also essential to review the number of repeat customers and market share increase by segment in order to fully understand which segments were performing better than others after implementing the plan.

Leveraging analytics can also be used to get a deeper level of understanding when examining how successful your segmentation plan was. Analyzing user behavior and tracking journey maps will provide valuable information on how customers interact with your products and services allowing you to make data-driven decisions on future customer strategies.


How to Leverage SaaS Customer Segmentation


Below are some tips on how to use SaaS customer segmentation to improve your customer experience.


1. Offer bespoke and tailored user experiences


One of the biggest advantages of customer segmentation is being able to offer tailored experiences for each user. By understanding what your customers need or want, you can create user journeys that are tailored to their needs. This creates a better overall experience for the customer and helps increase engagement and loyalty. For example, you can create personalized onboarding experiences for new customers or suggest products and services based on their specific needs.


2. Create personalized email campaigns by leveraging in-app interactions


Using SaaS customer segmentation is a great way to create personalized email campaigns that focus on specific user interests. By leveraging in-app interactions and analytics, you can effectively sense what the user needs and desires and provide them with tailored content via email.

This can be extremely beneficial to the users, as they will feel like they are in control of their own experience instead of having irrelevant emails force-fed to them. Not only is this an efficient marketing strategy, but it also builds loyalty amongst customers since it shows that the company values their needs and preferences.

In addition, SaaS segmentation allows you to send out personalized emails at scale which saves time and resources.


3. Offer in-app upsell opportunities


Upselling opportunities within an app emerge when SaaS customer segmentation is leveraged. Through this segmentation, the app can take a deeper look into customer behaviors and interests in order to target specific offers or upgrades. These may include renewal options, additional services or features, and value-added plans to maximize the user experience. Leveraging segmentation in this way can be highly beneficial for an app as it allows for an improved ability to customize offerings to customers and keep their interests engaged.

Furthermore, it increases the chances of upsell success by delivering personalization, contextualization, and more relevant marketing messages – all essential elements for any encouraging upsell opportunity.


Final Thoughts


When it comes to driving ROI, in-depth customer segmentation is key. By understanding who your ideal customers are and what they need from your product, you can create a sales and marketing strategy that resonates and converts.

Remember, the key to any good customer segmentation strategy is to start with a broad understanding of your market and then continue to drill down into more specific segments. Once you have identified who your ideal customer is, you can create a personalized experience that will keep them coming back.

By leveraging SaaS customer segmentation and analytics, you can create a better customer experience and increase loyalty, engagement, and sales. So take the time to plan out your customer segmentation strategy and reap the rewards.

For more tips on growing your SaaS company, visit our blog. We’re here to help you every step of the way.


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Ken Moo