What is a successful SaaS business if not servicing a bunch of happy customers? Customers who use your product to succeed in SaaS, customers who enjoy your product and are happy with it, are the ones who will continue using your product or service, opt for upsells and if their experience is fabulous, they may even turn advocates and recommend your product to other people. In short, customer success is the key to finding SaaS success – from growth to revenue generation.
Which means you need to funnel your focus to customer needs, wants, buying and using behaviour… basically you need to know your customer better than you know yourself. Now, if you are a fledgling company, or have only a few customers, keeping them slotted and organized is easy. So, you’d be tuned in to their individual needs, you will react quickly to their problems, and will be on a speed dial with them all the time. But when your customer list grows, this becomes a challenging task for a customer success manager (CSM).
But the fact remains that each customer can still make or break your business – so, how to understand the issues and needs of every customer? How to create a positive experience for each one of them? You can do it through effective customer segmentation.
What is customer segmentation?
It is the art of dividing your customer lists into segments or groups based on certain characteristics. In accordance with the customers at scale, you can be as broad or as specific as you want to be in the division. For instance, you can segment them by
- The industry they belong to
- Their usage pattern of your application
- The revenue they bring you (prime, pro, etc)
- The place they belong to
- Size of their business
The variables are countless – it depends on your needs and desired outcome goals, and you can even change them as and when needed. In the long run, you will collect data that will create insightful segments that will help you pull out detailed lists to understand customer demands better, and offer them right services at the right time.
Customer segmentation to Succeed in SaaS
Segmentation helps SaaS businesses in many ways – each time you’re able to come up with a list of customers that is ready for an upsell, or to trial your new product, or to expand your business, you’ll be better able to succeed with that initiative. However, there are two main reasons for creating customer segments
- Identify and prioritize premium accounts: Let’s face it – not all your customers are equal, and so, they should be given equal resources, either. Based on the value they bring to your company; some account will demand more of your time and attention than others. Segmenting the customers will help you zero in on those who would find more success using your platform and resources. So, you need to invest more in them.
- Plan strategies to optimise customers success: Just as all customers are not equal, they definitely aren’t the same, either. By segmenting them, you can offer tailor-made services to each category. This way, you won’t waste time selling or trying to expand the service of a customer who cannot afford it, or selling the wrong service to the wrong set of companies. So, segmenting will help you pin point your efforts.
Understand your customer type, by segmenting them
There is a deep co-relation between a good customer segmentation and understanding customer type. Both these tools together, when used effectively, will help a SaaS business get into the mind of the customer and read them correctly, anticipating their every need, and thereby, weaving a fabulous customer experience net around them. Every customer is conditioned to work in a certain style based on a few universal parameters – starting with where he comes from, his financial capacity, socio-cultural milieu, and his peers. If you can collect data about these things, you’ll have a finger on the pulse of his needs and demands.
This is why CSMs, who interact with the customers, are best placed to develop customer segments. Thy are the ones with the information needed to categorize your customer base. Here are a few typical customer segmentation categories
- Demographics. Basic info such as company size, industry, number of employees, revenue, etc
- Segmentation based on customers’ needs: Get to know their future plans, goals, budgets, customers who are looking to grow, or looking to automate… dig deep as per your company’s needs.
- Prioritise the segments: Which are the segments that are most likely to aid your growth and revenue generation? Allocate resources accordingly.
- Segment by lifecycle stage: Onboarding, renewal, upselling… this segment is often of critical importance for SaaS businesses running on subscription models.
Why customer type is crucial to Succeed in SaaS
So, you have consumers of your software or service. But do you know why they are? What they like and dislike? How do they think? What are their needs? What do they buy? What’s on their mind? How do you get into the mind of a SaaS customer? Just as every SaaS is different, every customer is also different. He has his own quirks and behaviour.
But while it’s not really possible to read the mind of every single customer you have; you can identify patterns and trends if you segment them properly. These are your hints, your actionable points that will enable you to grow your business and create a customer persona that helps you to understand who exactly are your customers and how best to reach out to them to sell your services. Something on the lines of the market tested The Eisenberg Customer Modality.
Knowing your customer’s buying modality is a good way to gain insight into how a customer makes his buying decision. This model, developed by Bryan and Jeff Eisenberg, and described in their book, Waiting for Your Cat to Bark, consists of four quadrants — Competitive, Spontaneous, Methodical, and Humanistic. They are plotted against a decision speed axis and a logic/emotion axis.
When you’re trying to understand your customer type, this is a good starting point as it will impact your marketing approach as well as your conversion optimization processes, based on the business you are in.
Review and restructure regularly for optimal results
Review your customer segmentation parameters regularly to be at par with your customer type. As you’d heard a million times by now, there’s no such thing as too much information in SaaS business. Data collation – be it via analytical tools or direct interactions, should be an ongoing process to help your customer success team improve its performance and keep giving the customer continuing value. Look for key factors such as: Is your segmentation structure still valid? Does it fit the market as well as your company’s requirements? Has it factored in product changes, if you’ve made any? Has it kept pace with your changing goals?
Regular restructuring of the segmentation will lead to newer insights into customer behaviour, thereby helping you customise customer experience. This, in turn, will help you provide each of your customer multiple success journeys with your service. 14
As a last word, remember all the segmentation and insight into customer behaviour won’t be of any help unless you use it to add business value to succeed in SaaS. All data collation should be backed up with quick and effective action. For example, if you chose to prioritise customers with the potential to expand their accounts, did you manage to do that? If the answer is no, go back to the drawing board, and draw up a plan of action to stop the churn, right now!
Anshi has over 12 years of experience in demand generation, digital marketing, and managing global teams. In her prior role as head of marketing operations for a high growth US healthcare tech organization she transformed marketing from cost to revenue center.
Published June 23, 2020, Updated June 23, 2020