3 Audience Segmentation Strategies for Your SaaS Startup
Easy access to rating information on the web has fundamentally changed the way consumers make purchases. They’re no longer a passive group and in many cases, they make a concerted effort to conduct research before making a purchase decision. A product or service must be absolutely perfect for their situation in order for them to buy.
The same could be said of brands that engage in real-time social conversations with their customers. They know what they need to market to different audience segments, and they want solutions that are customized for their situation.
“Most businesses, whether B2B or B2C, don't cater to just one type of customer, even if they do only sell one product or service,” writes Pamela Vaughan of HubSpot. “There is no one-size-fits-all customer, and there are usually several ideal customers for any given business.”
Without audience segmentation, you’re painting in broad, abstract strokes to attempt to please everyone rather than creating individual portraits of the people you’re trying to engage. That kills engagement, limits conversions, and it just won’t turn enough heads.
Benefits of Segmentation
“If you’re like me, you’ve learned by now that holding up a mirror to people’s dreams, values, and desires is the one thing that will have people flocking to you a la the Pied Piper,” writes Neil Patel, co-founder of KISSMetrics and Quick Sprout. “That being said, I see a lot of marketers throw everything and the kitchen sink at the wall in the hopes that something will stick. That approach not only wastes time, but it wastes resources that could be used in more profitable ways.”
Audience segmentation isn’t a new concept. A lot of major brands have it down to a science, but it can be a foreign concept to startups. When done right, there are tremendous benefits to be had. Here are some key benefits.
Focused Messaging
Not all customers want the same things. Segment your audiences to craft more compelling content, zeroing in on exactly what each segment needs.
Stronger Relationships
Treat segmentation like that friend who knows you really well. They always seem to give the best gifts during the holidays and they don’t make restaurant suggestions based on what they like, they suggest places with food they know you’ll like. Because of that, you value the relationship with them so much more.
Reduction in Cost
Rather than trying to throw everything out there to see what sticks, you should target only certain groups with specific messaging. This focuses your content marketing efforts and greatly reduces your ad spend.
At the end of the day, the right messaging delivered to a specific audience segment will see more engagement. That segment is far more likely to convert than they would with generalized efforts for faceless masses.
Strategies to Improve Your Segmentation
Segmentation requires careful planning. If you create segments that are too broad, then you miss the opportunities that come from closely targeting the right group.
But if you go too narrow, you reduce profit potential.
Here are three strategies you can use to create highly-targeted audience segments for your SaaS startup.
1. Gather Data on Sign Up
Conversion optimization best practices assert that you should minimize the amount of information you collect during sign up to avoid abandonment. I agree, so I suggest you keep the data gathering to a minimum when customers are signing up for your SaaS.
You’ll have an opportunity to collect a lot of great data for audience segmentation after the signup takes place. This is especially important for SaaS trials because as many as 60% of users may use your application once and never return.
Gather as much information as possible to craft custom messaging and create personalized outreach to fit their needs. Depending on your model, this could include:
2. Track Audience Behavior Early On
If you begin to monitor the behavior of an audience when they sign up, you can segment based on both positive and negative signals. It’s particularly important to weed out high-risk users that are likely to churn so you can adapt your messaging and engagement appropriately.
Groove, a SaaS help desk platform, had a problem with customer churn but hadn’t been able to determine the cause. It researched the behavior of its audience and established a number of red flag metrics that singled out users at risk of churning, such as length of sessions and frequency of logins.
As a result of the segmentation, it created emails for one segmented group of users that offered to help them through the setup process. This resulted in a 26% response rate. Groove was so happy with the reduction in churn that it became a permanent part of its onboarding process.
3. Segment by Customer Health
There are a lot of ways to segment your audience, but one of the most effective ways is to monitor the health of your audience to customize engagement. Rather than segmenting once and letting it ride, your user segments should change based on the health of the individual or the team.
HubSpot uses a Customer Happiness Index (CHI) to segment audiences and improve engagement with customers. According to Jonah Lopin, Vice President of Customer Success at HubSpot, the Customer Happiness Index is “a measure of the degree to which a customer is practicing inbound marketing in a way that is likely to lead to long-term success.”
Tracking CHI scores not only helped Hubspot reduce churn and retain 33% of previously unhappy customers, the company was also able to implement campaigns and materials that helped customers with their own inbound marketing strategies.
You can take the same approach. Identify audience segments with the highest success based on satisfaction, use, and engagement. Find out what factors contributed to their success, and use this information to provide guidance to segments that were less successful to improve the overall health across those segments.