Segmenting users based on similar characteristics can reveal ways to reduce churn, spark engagement, and spurn growth.
Separating darks from whites or heavies from lights extends the life of your clothing and better preserves their color. Setting loads of dirtier clothes to heavier settings gets them cleaner faster. A small amount of planning and effort ahead of starting the little-loved chore could save people the time and money required to frequently replace their ill-washed clothes.
Not every article of clothing responds well to the same washer settings, so why would different users all have the same experience with your product? Users of your product are at least slightly more complex than a polo shirt. A new user reacts differently to your in-app messaging than a seasoned vet. A customer who fully completed the appropriate onboarding tasks is less likely to churn than someone who ignored them completely.
User segmentation is the product management equivalent to sorting laundry. Grouping your users by shared characteristics reveals insights into how these segments are interacting with your product—and, most importantly, where your product can be improved to provide them with a better experience. Instead of treating a single user experience as ubiquitous, you should leverage user segmentation to identify and embrace the different ways customers use your product. By using segmentation to improve user experience, you extend lifetime values, reduce churn, and reveal hidden strengths and new directions for your product and company.
Delivers a more tailored experience
Segmentation helps focus messaging and workflows to provide your customers with the smoothest possible experience. Your product is being used to solve different problems for different customers. Users are signing in and then running in opposite directions from each other, with some using features that others are completely ignoring.
Grouping your users from the get-go sets them up for smoother onboarding. Instead of pushing everyone through the exact same workflow, you can create discrete workflows for segments requiring unique approaches. Creating separate workflows enables you to set up messaging, experiences, and incentives specific to each segment’s preferences.
For instance, pretend you manage a peer-to-peer payment app. Your analytics reveal that most users under the age of 40 will send or receive cash within 24 hours of signing up—an event that substantially increases the likelihood of continued usage. However, users over 40 often wait days or weeks before successfully sending money.
To make the second group more comfortable with your product, you set up 2 separate onboarding funnels: 1 with minimal tutorial interruption and 1 with a more in-depth, guided walkthrough of the payment features. Sending the over-40 group through the second funnel builds familiarity in the interface and boosts the chances that they’ll perform a transaction sooner.
There’s a second way to leverage segmentation into a more personal experience: messaging. At least 90% of American consumers find personalized marketing at least somewhat appealing, and as many as 80% of customers are more likely to do business with a company that provides a unique experience. With user segmentation, you don’t have to blast a message meant for 15% of your customers to your entire user base.
Let’s say you’ve adjusted how users view fluctuations in cryptocurrency rates in your hypothetical peer-to-peer payment app. About 95% of your users have never bought or sold crypto, so interrupting their sessions to discuss a feature they never use may not be viewed favorably. Instead, you could create a user segment and deliver in-app modals exclusively to your customers who are about to exchange crypto.
Identifies customer friction through churn analysis
Some degree of user churn is inevitable, but you don’t want a poor experience with your product to be the cause of it. Analyzing the causes of attrition across your entire customer base can produce cluttered, messy, or even conflicting results. Segmentation can help focus your efforts and identify critical points of friction within subsets—points you can then smooth out to boost retention.
Segmenting your users into smaller groups helps pinpoint why and how these groups churn. Running a churn analysis on your new user base might reveal that 10% of churn can be attributed to the “add a bank account” phase of onboarding. A segmented churn analysis might reveal that boomers churn at a disproportionately high rate compared to other age groups or that those working in tech barely churn at all. Valuable data can be gleaned from segments based on:
Demographic data (age, gender, geographic location)
Psychographic data (interests, activities, opinions)
Firmographic data (company attributes)
Behavioral data (events, usage, purchases)
Once churn factors are identified, you can strategize ways to lessen the friction and boost retention. You may discover that your workflow requires a touchup or that a certain feature needs a little love. In that case, segmentation enables you to test your changes before committing to them for a broader segment or your entire user base. You can build a segment consisting of users from your target demographic and funnel them through your experimental workflow. If post-test analysis confirms that your new workflow does improve your retention rate, you can move forward with broader adoption with confidence.
Segmentation works best when it’s not overwrought. You don’t want to start analyzing churn rates by creating a segment of “people who signed up between 4 pm and 5 pm on July 26th AND who work in a haberdashery AND who only use the app on Sundays.” Such a narrow pool of users doesn’t offer a sound basis for drawing conclusions from the data it provides.
Uses cues from your power users to build better journeys
On the flip side of the coin from churn, there’s a segment of your customers who absolutely love your product. Their experience has been spectacular, and they’re using your product to power their businesses. Studying the characteristics and behaviors of your most avid customers can grant you insights into how to convert pedestrian users into power users.
To discover the secrets of your power users, you need to identify them first. Are you most interested in high usage? Most purchases? Consistent downloads? (For your pretend payment app, it might be transaction volume and/or frequency.)
Once you identify these customers, create a segment and analyze how exactly they interact within your product. What similarities do your power users share behaviorally? Did they all complete 100% of their onboarding tasks? Do they all use your product at a certain time?
Don’t limit your analysis to behavioral similarities. Any shared characteristic—age, location, industry, interests—provides a window into the minds of your gold-level customers and provides the basis for innovation. If your power users love a specific feature, you might look into promoting said feature to its own button within your app. If your users ignore a specific feature you think they’d love, you might go back to the drawing board and redesign it for better performance.
Having power users is an accomplishment in itself, but creating new power users is the ultimate goal. Analyzing your segment of highest-value customers provides insight into how you might alter existing processes to flip Jim Casual User into James C. User, Brand Advocate. Future product updates and features can and should be ideated and implemented from conclusions drawn from analyzing the segmented data of your most valuable customers.
User segmentation builds a better experience—and a better product
Segmenting users is a time-consuming task. It takes dedication to pore over data and study customer journeys. It takes even more time to evaluate what you’ve learned and use your insights to improve the customer experience.
Which is exactly why you should be doing it. There will always be product managers who don’t value sorting their laundry. Using segmentation to improve your user experience is worth it in and of itself, but getting a leg up on the competition can’t hurt. Sorting laundry is great in theory, but do you actually do it? Only 46% of zoomers take the time to separate their clothes, perhaps finding the task unnecessarily time consuming or environmentally detrimental. Those using laundromats may balk at the logistics and cost of sifting through their mountain of dirty clothes and paying for extra loads. (It’s likely more than a few people just despise doing laundry.)