Why You Need Customer Segmentation Software in 2024

Customer segmentation software automates and streamlines the process of grouping customers into segments based on similar behaviors, demographics, or other characteristics to enable more precise targeting for products, services, and marketing strategies.

Every customer has distinct needs and pain points and experiences your product differently. The best way to address these differences is to categorize them into specific customer segments.

Customer segmentation allows you to:

• Design and implement highly personalized marketing strategies.
• Enhance your sales process.
• Design and build better products.
• Align your business strategy to your customer needs.

This article explores the value and benefits of customer segmentation software, how a solid segmentation strategy helps you better understand your customers and drive revenue, and what to look for when picking your customer segmentation tool.

User segmentation vs. customer segmentation

The terms user and customer are often used interchangeably, but they are distinct audiences. User refers to those who interact with your product or service, including free trial users who are not yet customers. Customer refers to the companies or individuals (buyers) who decide to buy the product in the first place.

Sometimes users and customers are indeed the same, most commonly in B2C SaaS companies. But in B2B SaaS, the customer is usually the organization that buys on behalf of the end-users. User and customer segmentation are critical to optimizing marketing and sales activities, and you can apply the principles covered in this blog to both.

Segmentation software is the key to good customer segmentation & analysis

Segmentation software equips you with rich data and automation to make better decisions and streamline processes. Without segmentation software, you have access to limited data, hindering your ability to take action and the results you can achieve.

Audience segmentation tools collect, analyze, and integrate customer data to give you a clear overview of your different customer segments. Tools like Amplitude Audiences:

• Define dynamic audience segments: Build audience lists using combinations of customer behaviors, product data, profile data, and more.
• Compute custom properties in real-time: Segment customers by properties such as the last item they viewed, their average order value, the number of videos completed, or any combination of behaviors and traits.
• Predict the best audience to target: Design highly-targeted marketing messages. For example, send reminders to high lifetime value customers, special offers to potential customers on the fence, and fresh engagement strategies to those least likely to convert.
• Centralize and standardize audiences: Create automated syncs for customer groups to any tool in your stack to ensure data reliability, consistency, and repeatability.

E-commerce companies are well-positioned for customer segmentation because they generate so much data through their online stores. Analytics tools help companies use this data to extract four main types of customer segmentation:

• Demographic segmentation refers to segmenting your audience based on their demographic information, including attributes like age, gender, education level, and household income.
• Geographic segmentation groups customers based on their physical location, like their zip code, city, or country.
• Behavioral segmentation groups customers based on the actions they take in your platform. Behavioral segmentation could involve collecting data about when or if customers click specific links, abandon their carts, or share a social media post.
• Psychographic segmentation segments audiences by the psychological traits that might influence their buying behavior, such as hobbies, political views, and social status.

Segmentation software and CRMs also use machine learning to optimize the segmentation process and make recommendations for optimizing sales and marketing campaigns. Without segmentation software, your team would have to sift through data manually to extrapolate insights to make decisions, but they’d be delayed and unoptimized.

Customer segmentation tools provide a complete understanding of your target audience(s)

One of the main benefits of customer segmentation is obtaining great insight into your customer base. When you analyze and split customer data into segments, you unearth valuable information that makes it easier to reach them using more personalized marketing efforts.

Research shows that 68% of customers expect personalized experiences, and 82% of consumers are willing to share basic personal information to achieve this.

Customer segmentation helps you understand the best channels and strategies for reaching different groups. For example, email marketing works best for one customer group, while social media or in-app push notifications are more successful for other groups.

Understanding target audience data also puts you in a better position to run experiments to optimize existing products and design new ones based on the experiences and expectations of your different customer profiles. Performing experiments containing customer segments can produce data-verified results you can trust, enabling you to make confident product decisions.

Ultimately, understanding your audiences allows you to provide a better customer experience, increasing customer loyalty and retention.

Accurate customer segmentation helps drive revenue

Personalized experiences and improved customer satisfaction result in more than just happy customers—it translates into more revenue for your company. According to the 2022 CX Trends report by Zendesk, 90% of customers will spend more with personalization.

Increasing existing customer loyalty and reducing churn requires less investment than new customer acquisition. Studies show that you are much more likely to sell to existing customers than new ones.

Different customer segments have different spending limits. Price optimization enables you to adjust your pricing based on your target segment, increasing the likelihood of sales.

The insight obtained from audience segmentation also helps you allocate budgets more aligned with your customers’ needs. Understanding your customers’ spending habits, including their peak spending periods, means you can optimize marketing strategies and production to avoid over-discounting or under- or over-producing.

How to choose the right customer segmentation software solution

There are several different apps, CRMs, and audience segmentation tools out there—the trick is finding the best to suit your needs. When searching for your ideal solution, there are three things to keep in mind:

Ease-of-use

Your solution should be intuitive and easy to use across your organization. Look for segmentation software that makes viewing and deriving insight from your data accessible and transparent. It should have an intuitive dashboard and effortless reporting features that enable team members to share insights across the organization.

Customer segmentation solutions that are complex and difficult to use require lengthier onboarding and training. And while this might not be a big deal for enterprise organizations, smaller companies don’t have the time or resources to conduct this level of activity. Your selected customer segmentation tool should fit your organization’s size and unique needs well.

Scalability

You don’t want to outgrow your segmentation tool as your company grows. When selecting your customer segmentation solution, consider your current and potential future needs. Is this solution going to grow with your organization?

A scalable solution will enable you to measure various metrics for any growth stage you’re in and could have features you turn on or off depending on your current needs.

Many customer segmentation tools come with different pricing plans. If you’re running a startup, you can opt for the basic option and upgrade as you grow and new needs arise.

Customizability

When starting your customer segmentation process, out-of-the-box functionality is likely good enough. However, you’ll want to customize your customer segmentation solution as you develop a clearer picture of your goals and needs.

For example, Amplitude Audiences lets you instantly compute custom properties, like segmenting customers by the last item they viewed, average order value, number of videos completed, or any combination of business-specific behaviors and traits you track. The User Profile API enables dynamic customization of these traits by pulling in user properties, computed properties, a list of cohort IDs, and recommendations from other solutions in your tech stack. Then, Amplitude Audiences uses AI-powered recommendations so you can easily target customers with personalized content customized to your business and their needs.

Start segmenting your customers in Amplitude

Customer segmentation is critical to driving effective marketing campaigns, delivering personalized experiences, and improving revenue—and customer segmentation software helps you take your segmentation to the next level.

If you’re looking for a customer segmentation solution that’s powerful yet easy to use, scalable, and easily customizable to your unique business needs, look no further.