Congratulations—you did it! You launched your flagship product, and it is doing well. However, you aren’t entirely satisfied, knowing there’s always room for improvement and things you can do to tweak your product. You want to make it even better and reach a wider audience.
Whether you’re a startup launching your first product or an established brand looking to refine your strategy, mastering product segmentation is key to sustained success. Being able to narrow down your target audience into more manageable groups offers more in-depth insight into your customers and potential customers and drives your decision-making in a positive direction.
In this article, we’ll explore the importance of product segmentation, the different methods used to segment products, and how your company can leverage it to gain a competitive edge in your space, increase profits, and elevate your overall success.
Table of Contents
- What Is Product Segmentation?
- 7 Benefits of Using Product Segmentation in Marketing
- Various Approaches to Product Segmentation
- AnnounceKit Can Help You Collect the Data You Need for Optimal Product Segmentation
What Is Product Segmentation?
The power of understanding and utilizing product segmentation is a priceless tool to have in your arsenal when it comes to developing and launching your product. Whether it’s software, a consumer good, or a service, knowing your audience’s demographics will allow you to provide different variations of your product to gain as many customers or clients as possible.
Product segmentation revolves around understanding the wants, needs, and demographics of your consumer base and tailoring your product through small changes to draw in as many people as possible. Sometimes, this looks like tweaking your product and releasing it entirely under another name or taking your product and offering different versions that cater to the needs of each demographic.
For example, Apple offers various versions of its product each time they launch an upgraded version. They provide a budget-friendly version, a standard model for most users, and a pro version for tech enthusiasts who value performance over cost.
7 Benefits of Using Product Segmentation in Marketing
Dividing your target audience into specific groups based on set criteria such as demographics, behavior, needs, and price sensitivity can give you a leg up when developing your product or service. Having intimate knowledge of what motivates your potential customers can help you tailor your marketing campaigns specifically to each group so they are more likely to engage with and use your product.
#1: Identify Growth Opportunities
There’s always room for improvement, but product segmentation can help you improve your product or service efficiently and cost-effectively. Look at the data for your active, frequent users. Look at what is working within that group and compare it to groups who may not be using your product to its fullest.
In-app suggestions and recommendations, such as the one provided by AnnounceKit can reach consumers who may not be aware of the full value of your product or may not be aware of how features of your product can specifically benefit them.
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#2: Cater to Various Customer Groups
Look at patterns within your data to determine which customers are power users, occasional users, and inactive users. Examine characteristics such as usage frequency, feature adoption, and engagement levels and group your consumers into these categories.
Then, determine the specific wants and needs of each group and tailor your marketing strategy to specifically try to convert them based on those unique characteristics and motivations.
When using product segmentation in marketing, intentionally offering targeted offers, promotions, and incentives can yield massive rewards.
#3: Determine Your Best Pricing Strategy
Product segmentation relies on the understanding that all consumers are not created equal. In addition to having different priorities and needs, they will also have various budgetary limitations.
Take into account the anticipated budgets of your segmented audience groups and offer variations of your product or service that will best fit the needs of most people within that group.
#4: Segment Willingness To Pay Data
Willingness To Pay (WTP) refers to the maximum a person is willing to pay for a product or service. WTP is usually represented as a price range since various factors influence the dollar amount someone is willing to pay and can fluctuate over time.
Understanding the WTP of your segmented groups will allow you to market your product to specific demographics. It also helps when determining a pricing strategy to maximize both consumers and profit.
#5: Monitor Product Performance
When it comes to product segmentation, data is your best friend. Understanding how well your product or service is performing is essential to prevent churn and when planning new features to accommodate your different demographic groups.
Even more importantly, having an organized, seamless way to keep up with this data will make monitoring product performance even more effective.
AnnounceKit offers a product changelog that integrates with product segmentation by allowing you to target the data of specific groups or segments.
Aligning your product with different audience segments makes it easier to have precise monitoring and a deep understanding of your product’s performance rather than monitoring a single, generalized product.
#6: Turn Trial Users Into Paying Customers
Throughout your product development journey, you’ll be reminded that customer retention is a valuable metric, and you should be tracking retention as a means to monitor the success of your product. However, before this can even happen, you need to find ways to convert trial users into paying customers.
Keeping your trial customers up to date on improvements, showing them the long-term benefits of your product, and providing targeted communication to each segment based on their motivations can help you convert your trial users into paying customers.
#7: Improve Customer Satisfaction
Once you’ve successfully converted trial users into paying customers, you need to focus on how to keep them as paying customers. Look into customer satisfaction data to figure out which aspects of your product they like and where there is room for improvement.
Provide your paying customers with usage-based incentives to drive continued engagement with your product. Also, make sure you’re continuously providing them with the comprehensive educational resources of your product so they’re getting the most value from your product, which will increase the likelihood they will continue to use your product or service.
Various Approaches to Product Segmentation
Product segmentation allows you to take a broad customer base and divide it into smaller, more manageable groups based on shared characteristics or goals.
There are various ways to utilize product segmentation and the approach you should use will be dependent on your market, customer base, and product type/service offering.
Segment Based on Collected Feedback
How your customers feel about your product or service is an integral part of determining how to group them so you can refine your product to target the right audience. Some tools you can use to collect feedback data are:
- Surveys and questionnaires
- Social media comments
- Customer reviews and ratings
- Customer support interactions
- Focus groups
- Behavior tracking
- And more
Whichever methods you use to collect feedback, tracking the data helps determine which changes to make to effectively increase engagement and user experience.
Segment Based on In-App Engagement
In-app engagement is a crucial indicator of how customers are interacting with your product. Analyzing in-app user behavior can help you get deeper insights into how your users are interacting with your product. This allows you to segment customers so you can specifically tailor your product and marketing. The end goal is to increase conversion and retention by enhancing their user experience.
Segment Based on User Journey
One of the most basic yet effective ways to segment users is based on how familiar they are with your product or service. The user journey refers to the different steps your customer will take, from initially discovering your product to becoming a loyal user or even a brand ambassador if your business offers.
Typically, the journey will look like:
- Awareness (new users)
- Consideration (explorers)
- Onboarding (first-time users)
- Engagement (active users)
- Conversion (paying users)
- Retention (loyal users)
- Advocacy (brand ambassadors)
Within each stage, you can tweak your marketing and communication to specifically encourage the user to make their way to the next step towards being a loyal, retentive user.
Segment Based on Price
Segmenting your product or service based on price requires you to offer different price tiers to cater to different customer segments. You want to convert as many users as possible, but not all users will have the same WTP or financial situation. Learning the purchasing power, value perceptions, and preferences of each audience segment will help you determine the best pricing strategy for each pricing tier.
Segment Based on Market Research
Data and research are powerful tools to help you develop your product. Use the insights from market research to work for you to create targeted product segments to meet the needs of your customer groups.
Consider the following segmentations to help drive your decision-making:
- Demographic
- Geographic
- Psychographic
- Behavioral
- Needs-based
- Occasion-based
- Benefit
- Competitor-based
Each has its own pros and cons and will benefit you in different ways depending on your specific goals and product offerings.
Overall, there’s no right or wrong way to segment your customer base, it is all dependent on your unique business. The important takeaway is that understanding the motivations behind how consumers interact with your product will help increase your success.
AnnounceKit Can Help You Collect the Data You Need for Optimal Product Segmentation
Tracking the data for your product usage is a critical tool to help you make informed decisions about product development. Monitoring the usage of one overarching product will not give you the specific information needed to improve marketing or user experience.
You will maximize your time and effort by segmenting your audience to provide different versions of your product, each tailored specifically to the unique needs of your clientele. It also allows you to target marketing specifically to a variety of customer groups to increase the number of paying customers.
AnnounceKit offers monitoring and communication features to help you use your specific data to effectively communicate with your customers and provide them with the products and services they need.
Contact us to see how we can help support your business today.
Manage Product Release For Your Brand:
Quick Setup, Easy To Use
Release notes, changelog, and other product announcement
tools and features from a single place.
