The Ultimate Guide to Customer Segmentation for SaaS & B2B Businesses

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Marketing is not an exact science. Because there are many parameters that you can not control. Plus, marketing strategies do not play out exactly how you want them to. There are many aspects of creating a marketing strategy that impacts its success. A few are research, creatives, visuals, copy, content, target demographic, etc. Additionally, in the SaaS industry, it is imperative to have the correct target demographic. The target demographic you decide on will dictate your ad creation, copy, and campaign structure. Plus, every customer journey is unique, and it is constantly changing. Therefore, your marketing strategy should reflect these changes. You can target your audience better when you know them. Therefore, customer segmentation is crucial.

What is customer segmentation?

Customer segmentation refers to categorizing your audience based on demographic and psychographic parameters. These parameters can range from basic parameters like hobbies, interests, location, education, age, gender, etc. to nuances like web activities (e.g. time of site visit), company head count, emails engaged with, etc. Once you separate your customers into groups, you can create a unique customer persona for them. It may look like this:

Parameters	Persona 1	Persona 2
Age	20-30	20-30
Sex	All	All
Location	Brooklyn	Brooklyn
Education	Bachelors	Bachelors
Job	Jr. software engineer	Sr. software engineer
Annual salary ($)	60,000 to 70,000	80,000 to 90,000

Having hyper-specific customer persons helps you target your campaigns better. Since each customer journey is different, you need to make sure that you are creating ads to target them with unique pitches. It will help you align your campaign strategy with a specific target demographic. Most businesses have several customer personas. Such personas aid them in targeted ad creation. Plus, it helps distinguish similar customers so that you can market better.

Using customer segmentation for SaaS Marketing

1. Develop and align marketing strategy.

Your marketing strategy should constantly adapt to its customer base. Static marketing strategies do not account for evolving customers. And that is why they fail. Adaptable and dynamic marketing strategies have a better chance of succeeding. Since they account for changes in the market, customers, and products. And this is where customer segmentation can help you. By dividing your customer audiences into hyper-specific groups, you can easily create ads that target them. Plus, this adds a certain degree of personalization, as hyper-specific demographics are small. Moreover, customer data is easier to handle when you group them with similar traits.

2. Select marketing channels

The marketing channels you choose will depend on who your target demographic is. If you are marketing a B2B SaaS product, then LinkedIn is perfect. If you are a B2C, then you want to use platforms such as Instagram and Facebook. However, there are many platforms that you can use, such as YouTube, Reddit, Quora, etc. if you are marketing to audiences between the ages of 13 to 30, Instagram and YouTube are popular options. If you are marketing to demographics between 30-60, then Facebook is a great option. If you know your audience prefers to ask questions, then Reddit and Quora are useful sites. Determining your target demographic helps you choose your marketing channel. And your marketing channel determines your strategy.

3. Optimization of marketing budget

The key to optimizing your marketing budget is to narrow down your target audience. Each campaign should have an objective. This objective will help you structure your ads in the campaign. You cannot reach/convert your entire target demographic. Because different customers will be in different stages of their journey and different persona categories. Choosing an objective will help you narrow down your audience. By narrowing down your audience, you are targeting people who are most likely to perform your CTA. This brings down the cost per action and significantly optimizes your marketing budget.

4. Create content according to your demographic

One of the first things a marketer learns is to create content that caters to an audience. And you need to create content with a demographic in mind. This leads us back to the same point: you need to know who your audience is and what they need. Most content creation involves predicting the information audiences are looking for. And you can only predict what your audience wants when you know them very well.

For example, you have a marketing analysis SaaS product. Two of your customer personas have the same age, salary, and hobbies and live in the same place. The only difference between the two is their job title. One person works in the marketing department and the other is an entrepreneur. Therefore, your content will be different for both personas. Even though there is only one different parameter.

5. Set pricing and offers

Once you have segmented your customers, you will know what the average cost of that segment is. Customer segmentation is an underrated tool when it comes to pricing SaaS products. Prices of products and services fluctuate with the market and customer demand. Why? Because the pricing depends on the perceived value of the product. Moreover, it’s the customer who decides how much they are willing to pay. This is where price segmentation comes in. Price segmentation is the grouping of a set of prices for a product based on willingness to pay. and price segmentation depends on customer segmentation (their income/revenue).

Parameters to add to your customer segmentation.

You should categorize your demographic based on three things. Who they are, what they like, and what they want. A part of the equality is intuition with predictive analysis. Therefore, data is very important.

Who are they?

Age
Location/geography
Income
Relationship status (single, dating, married, divorced, etc.)
Number of children (if any)
Job title and type
Industry

What do they like?

Average purchase size
Most bought products
Average lifetime
LTV (lifetime value)

What do they want?

You should use past and present customer data to predict what your customer wants. And you can only do that when you can separate them into groups of similar behavior. Because it is almost impossible to analyze individual customers. By grouping them, it becomes easier to trace journeys through the sales funnel. And by doing so, you generate customer data from marketing trends and sales. You can later use the data to create a predictive model.

Difference between market segmentation and customer segmentation.

There is a single key difference and a big one. And the key difference is in the name. Market segmentation refers to categorizing the entire market (of your industry). This included every buyer in the market, yours and other companies. In market segmentation, you are driving the market into smaller defined groups. You can define the groups by location, characteristics, etc. Whereas customer segmentation refers to the categorization of your customer audience. In customer segmentation, you only factor in your buyers (or leads) and no one else.

We limit customer segmentation to a company and its buyers. It is an analysis of the potential customer base of a product. Moreover, it brings more information on your customer’s behaviors. Hence, it is a much narrower analysis. With this data, you can create customer personas that will help in marketing efforts. On the other hand, market segmentation is a much broader analysis. Therefore, it gives you an overview of the market and where you are in it.