As a customer success pro, customer segmentation is a powerful tool in your arsenal. By organizing your customers into distinct groups based upon shared characteristics, you can gauge and respond to their needs in strategic ways that help them get the most out of your product and best meet their needs.
Done right, segmentation informs your processes, team structure, tech stack builds, and customer engagement strategies so you can optimize your customers’ experience and get the most out of your systems. After all, you can’t build systems if you don’t know your customers. Done wrong or not at all can at worst, cause churn, and at least, waste resources.
While no organization’s customer growth is linear or rhythmic, having a segmentation strategy in place that can both flex and scale with your customer base will save you from inefficiencies that can both cost you revenue and squander your infrastructure investments. A proactive segmentation strategy can benefit your customers, your team, and your bottom line.
Why Is Customer Segmentation Important for Customer Success?
An intentional customer segmentation strategy is critical to the health of your customer success program. With the average B2B customer today using 10 channels to communicate, the customer journey can be complex. Because no two customers are alike, segmenting gives you an acute understanding of each customer’s needs and pain points so you can deliver relevant, personalized experiences through their preferred channels at every touchpoint.
Benefits of Segmentation
- Strengthens your relationship with every customer—at scale
Strong customer relationships is one of the four pillars of customer success. In any relationship, feeling valued and heard are essential for it to work. In the era of hyper-personalization, segmenting your customers allows you to deliver more value to them—just with a lighter touch. Customer segmentation also gives you insight into common customer pain points, which enables you to optimize and personalize your touches according to each customer’s preference—at scale. Your strategy will be universal, but segmenting enables you to personalize the way—the content and delivery method—you connect with each one.
- Reduces churn
Every brand is different, but customer needs are universal. Every customer wants to feel heard and empowered, see a return on their investment, and experience loyalty from brands they choose to do business with. Are you making your customers feel wanted, understood, valued, and connected to your brand? If you’re not, they’ll surely find someone that will.
Customer segmentation offers unique insights into what your customers value, enabling you to quickly identify and address potential roadblocks and challenges to their experience. This allows you to become their trusted advisor, to identify potential land mines—the “gotchas”—before they come at you and cause a customer to bounce. It also helps you to continue to demonstrate the value of your customers’ purchase at every turn. When your customers feel understood and know you’re going to bat for them throughout their journey with you, they’re more likely to stick around for the long haul.
For more churn-reducing strategies, read our blog, 11 Strategies to Reduce Churn Now.
- Creates consistency and efficiency across your operations.
Segmenting creates consistency and efficiency within your customer success team, preventing you from wasting valuable resources. After all, you can’t assess your staffing needs until you’ve segmented your customers. You’ll need to align your team’s roles, skillsets, and experience levels according to each segment’s needs. You may want to consider aligning your more senior team members with more important segments. Segmenting gives your employees a better experience and sets them up for success because they know their focus, roles, and responsibilities. As your customer success practice matures, you’ll get to a point where you need to further divvy up the actions of your customer-facing teams and to create new positions to accommodate emerging segment needs. An effective segmentation strategy will be your roadmap to growing your team effectively and efficiently.
Building a Customer Journey Map
Segmenting will show you where your customers are coming from and where they’re going, but only if you understand your typical customer journey. This is where a customer journey map, a visual representation of your customers’ journey and where and how they engage with you, comes in.
No matter how your customers interact with you (social media, email, live chat, or other channels), a customer journey map helps tell the whole story of your customers’ experience with and expectations of you. Understanding where your customers are at any given time is crucial to optimizing their experience and to ensuring none of them slip through the cracks.
Involve every function in mapping the customer journey, including marketing, L&D, sales, revenue, etc. Gather these departmental stakeholders in a room, and whiteboard what it’s like to be your customer—from soup to nuts. Be sure not to omit any interactions or channels and recognize that the journey will not be linear.
Your map should include:
- Stages of the buying process
- Target customer personas
- User actions and touchpoints (website, social channels, live chat, etc.)
- Emotional milestones
- Obstacles and pain points
“You can’t help a single customer until you know where they’ve come from and where they want to go.”
– Jeff Heckler, Director of Customer Success, MarketSource
Map out the typical stages your buyers go through. Identify your target customer personas. From there, lay out every possible customer interaction for each persona. Then, capture the customer experience at each touchpoint, including what actions fall to the user and how your company responds. Take note of typical emotional milestones and obstacles or pain points customers experience when engaging with you and your product. Look for patterns, making note of what triggers customers to move to the next stage in the journey. This is your map.
After mapping, you’ll be able to see where all your customers are in the lifecycle and assess their level of engagement and product usage at each stage. Once you have enough data, you can then decide how to escort them to the next phase of their journey. You’ll also discover how to operationalize the ways you can support them better and optimize their experience with you.
The Five Types of B2B Customer Segments
These are the main B2B customer segment qualifiers you’ll want to start with:
- Firmographic – Profiles the company by industry, annual revenue, company size, geography, buyer’s journey stage, subscription status, legal status, churn history, and product usage
- Technographic – Technology use and platform preferences (I.e., are they early adopters or not?)
- Intent – What use cases are they looking to solve? What value are they trying to obtain from your product?
- Journey stage
Of the main five, the journey stage qualifier is the most important, as it gives you the best insight into how engaged your customers are with you. Look for whether a customer is logging into your product frequently and has integrated with other applications and 3rd party products. If so, these signal that they’ve experienced a Moment of Value. These are the sparking moments when your customers realize they’re getting emotional returns on their investment in your product; that your product is not only doing what they bought it for—it’s doing more. It’s exceeded their expectations, they’re thankful they’ve invested in it, and they’ve fallen in love with it. They often glean their all-important total cost of ownership from these Moments of Value.
For the rest of your customers, you can refine the segmentation by identifying where customers are in their journey and the sales lifecycle. Criteria such as new versus existing customers—whether they are onboarding or terminating—may be a valuable segmentation that would create alignment with the ways in which you’ll treat each segment. If you have a high-volume customer base, evaluating customer revenue size and headcounts may reveal other segmentation opportunities.
Consider also building a segment of customers who aren’t a good fit. You can do this whether your customer success practice is nascent or mature, and no matter where they are in their journey with you. This segment can be really revealing. It can show you who’s taking up more resources than they’re paying you for. If you find they’re a drain on your tech resources, it’s likely because their use cases have changed beyond their initial purchase.
Once you’ve completed your segmentation, look for behavioral characteristics that are common to each segment and that might reveal the need for proactive—or corrective—actions. For example, are customers bogged down by a single issue associated with a product that is strangling potential new revenue? The visibility the customer success team has into account behavior enables it to identify issues like this and find solutions long before they become systemic problems.
Now you’re ready to proceed to a cohort analysis, which simply means you’re reviewing segmentation data for a specific, bound period of time. For example, you can segment customers with over 5,000 employees who have been with you for a certain length of time, and that ask similar questions, or take a certain similar action at specified points in time. This can provide meaningful, specific information about gaps in your current team, processes, and technology.
Segments aren’t linear or vertical—they’re more of a matrix, and they’re predictably fluid. Customers may move between segments while they’re using your product. And they may change how much they spend with you over time, put their subscription on hold, or abandon your product for a period of time. Segmenting your customers, mapping out, and embracing the fluid nature of the customer journey positions you to optimize it.