Product Management 101: User Segmentation

While no two users (or customers) are exactly alike, they almost certainly share specific attributes. So, how do you categorize your users? And which categories are the most important to your overall product strategy?

What is user segmentation?

User segmentation is the process of separating users into distinct groups, or segments, based on shared characteristics. A company might segment users based on language preferences, product version, geographical region, or user persona. With thoughtful user segmentation, product teams can study how user behaviors vary between segments, then design personalized experiences for each segment.

Why does user segmentation matter?

User segmentation helps organizations understand their user base. While no two users may be alike, cohorting groups of similar users can expose the attributes common to a company’s most successful customers. For example, if one were to create user segments for trial users who convert vs. those who churn, the go-to-market team could learn how each segment uses the product differently, and then determine which marketing channels are more likely to attract those who tend to convert to paid users. Segmentation can also help product teams design different experiences for different types of users, with an eye toward increasing engagement, satisfaction, renewal, and expansion.

What are the most common types of user segments?

While each company may prioritize different user segments, there are several segments common to most organizations. This list includes:

Demographic: Information about the individual user, such as their age, location, language preferences, title, or role.

Firmographic: Information about the user’s organization, like industry, revenue, employee count, or business model.

Technographic: Information on the other technologies the user’s organization uses, including CRM provider, marketing automation tools, back-office systems, or databases.

Customer data: Information stored in a CRM about the customer’s relationship with the company, such as plan type, customer journey stage, annual revenue, account owner, or renewal date.

Behavioral: Information about how the individual user has interacted with the product, including number of logins, pages viewed, features clicked, support tickets created, and time on site.

Psychographic: Information on a user’s likes and dislikes, including product sentiment. This data can be captured with measures like Customer Satisfaction (CSAT) or Net Promoter Score (NPS).

How do I implement user segmentation?

Companies can begin implementing user segmentation by following a short list of steps.

Track individual behavior and sentiment

While some of the data required for segmentation will live in the company’s CRM system, product teams will also need to add information about product usage and sentiment with a product analytics tool. A key outcome from a user segmentation exercise is to understand how different groups use the product differently, so capturing product usage data is critical.

Define user groups

Product and go-to-market teams should determine user groups based on the organization’s business objectives at the time. If the company is focused on new logo acquisition, for example, the teams might create segments for trial users who converted to paid vs. those who didn’t.

Compare activity between segments

User segmentation is valuable because it allows companies to compare and contrast different types of users. Comparing segments can help product and go-to-market teams understand how to turn happy customers into promoters, increase engagement levels for stalled users, or even shift resources away from certain segments entirely.

Experiment and measure impact on segments

Through experimentation and measurement, companies can learn which levers they can pull to affect change in a segment’s behavior, experience, or sentiment. And they can learn if those changes contribute to desired business outcomes.

Recommended reading

Why Product Managers Should Perform User Segmentation” by Winston Christie-Blick

Don’t fall for the “average user” myth! Your product needs to meet the needs of at least one specific segment of users. Article author Winston Christie-Blick of Productplan illustrates this using a community pool example.

The Pillars of Product-Led Customer Success” by Aazar Ali Shad

One of the pillars of product-led customer success is the ability to create both in-app and account-based user segments. In this article, Aazar Ali Shad of Userpilot explains how his team uses segmentation to build effective onboarding flows.

How to Build a Customer Health Score” by Kristen Miller

Customer health scores can provide a useful basis for segmentation. However, building a customer health score takes time, forethought, and a lot of collaboration. Read this article to learn how the team at Rapid7 did it