User segmentation divides your customer base into categories or segments based on shared characteristics, like behavior, demographics, and buyer personas. User status segmentation splits users into different groups based on their status as users of your product or service.
User status segmentation sheds light on users’ different behavioral traits so you can make necessary adjustments to your product or marketing strategy. These adjustments can help you create better user experiences to boost customer retention and loyalty, reduce churn, and increase customer lifetime value.
- In user status segmentation, customers are grouped based on their user type with your product or service.
- User status segmentation enables marketers to implement highly targeted and personalized marketing campaigns.
- Typical software-as-a-service (SaaS) user segments include attributes like new, inactive, loyal, persona, whether they’ve used a core feature, subscription status (free vs. premium), and average monthly recurring revenue (MRR).
- User status behavioral segmentation requires tracking user engagement with analytics tools like Amplitude, splitting your users into user status segments, extracting and analyzing reports to gain more insight into these segments, and creating your segmentation strategy.
- Several metrics will help you identify valuable user segments, including:
- Customer lifetime value
- Purchase frequency
- Average order value
- Price sensitivity
What is user status segmentation?
User status segmentation is grouping customers by their status within your user base. User segmentation is critical in the SaaS industry, where business models are based on users occupying a specific status within a product.
Analytics software like Amplitude or tools embedded in leading CRMs make user data readily available to product managers, marketers, and sales teams. Grouping individual users into segments based on their status allows for highly targeted and personalized marketing campaigns. According to McKinsey, 71% of customers expect personalized marketing messaging.
Examples of personalized marketing messaging based on user status segmentation include:
- Upsell messages targeted at low recurring revenue users, such as: “Upgrade to the Ultra Package for just an additional $5 per month”
- Onboarding messaging to new users prompting them to carry out actions you want them to, including: “Have you tried our XXX feature yet? Click here to find out more.”
- Affiliate marketing campaigns to loyal users, rewarding them for bringing in new customers, such as: “Refer a friend and earn $50 off your next order”
Such marketing efforts help SaaS companies extract the most value from their users, but they can also create much better customer experiences.
Most common user segments for SaaS
SaaS companies often look at how customer and user groups interact with the product and their stage in the customer journey. Below are seven of the most common types of end-user segmentation.
A new user began engaging with the product recently, but the specific time period for which they are considered new is based on the individual company. For example, you could define a new user as someone who signed up for your product less than five days ago. Our study of mobile apps with 500 million mobile devices found that only 14% of new users return on day seven after installation.
Identifying your new users allows you to target them with onboarding messaging to ensure they stick around. Clearly and quickly communicating the value of your product will help with retention. You should prompt new users to try your core features and highlight their benefits.
Inactive users do not use your product for a period of time you define. Once this period elapses they are considered churned customers. Inactivity can have many causes, including:
- Dissatisfaction with your product
- A negative customer support experience
- Their payment failed, and they haven’t updated their card details
- They started using a competitor’s product
Identifying inactive users early allows you to send targeted messages encouraging reactivation. You can highlight product benefits they might have missed or even offer discount codes.
Since inactive users are not using your product, in-app or in-platform communication is unfruitful. Instead, reach inactive users via different marketing channels, such as email, push notifications, or retargeting ads.
Customer loyalty is unique from company to company, but there are common metrics used to measure it. As a general rule, a loyal customer is someone who:
- Uses your product regularly
- Has a high customer lifetime value (CLV)
- Is likely to recommend your product to others
Your communication with loyal customers should focus on collecting valuable information and encouraging them to become brand ambassadors—for example, asking them to fill out product reviews or offering referral awards.
Users by persona
You likely defined your company’s ideal customer persona (ICP) during the go-to-market stage, but you might find large segments of people using your product that aren’t included in your ICP.
You can use customer personas to segment users, like demographic data, education levels, location, spending habits, needs, pain points, etc. This information should provide enough data to create hyper-personalized campaigns to reach these different personas effectively.
Users who haven’t used a core feature
You likely have users who signed up but haven’t used some of the features you’d like them to. The definition of a core feature varies between companies but could include anything from signing up for a paid subscription to downloading an ebook or simply activating their account.
Identifying these users helps you target messaging to communicate the benefits of your core features and encourage their use.
Subscription status, like free vs. premium users
If you offer both a free and a premium subscription, you can segment users based on their status as free or paid users. Both segments have distinct needs and desires from your product, and targeting them differently is vital to ensuring effective messaging.
Targeted messaging can help cement your premium users’ loyalty and increase the likelihood of converting free users into paid ones. You can encourage free users to sign up for a paid subscription by clearly highlighting the benefits of doing so.
But even without paying, free users can act as brand ambassadors and bring value to your organization. Think about the success of companies like Zoom and Slack, mainly due to the referrals generated from freemium users.
Users by average monthly recurring revenue (MRR)
If you have a tiered paid subscription service, segmenting your customers by average MRR helps you better target marketing strategies and promotions. Customers on your least expensive plan are considered low monthly recurring revenue (MRR) users. You can use target messaging to upsell better packages to help you grow revenue while meeting their needs.
You can approach low MRR users the same way you approach your free users, but you will need a better understanding of why they’ve currently chosen the lowest-priced option. For example, did they miss the benefits of the higher packages during the onboarding process, or is there an external financial factor involved?
Most valuable user status segments
We’ve covered different user segments, but you want to know which are most valuable and worth your investment. There are several metrics you can look at to help you identify the best user status segments for your business.
Customer lifetime value
Customer lifetime value refers to the monetary value of a customer for the length of their patronage. Customers bringing in more revenue to your business are an essential user status segment to evaluate.
For SaaS businesses that require regular client purchases, purchase frequency is an important metric for determining valuable user segments. If you take the Pareto Principle into account, 20% of repeat purchasers will account for 80% of your revenue.
Customers who are repeat purchasers bring more revenue to your business and are likely to be more loyal.
Average order value
In some cases, the amount a customer spends is more valuable than how often. If two customers have the same purchase frequency, but one’s average transaction spend is $50 while the other’s is $25, the former brings more value to your business and you should target them differently.
Each customer has unique decision criteria for purchasing your product or not. For many, price is a top priority. Price-sensitive customers can provide valuable insight into customer spending patterns or can be with promotions and special offers.
Customers with more spending power can be valuable to your business. The trick is to identify and target them with messaging that encourages upselling or repurchases.
Some demographic or even geographic segmentation can be a good indicator of affluence. You can target users with specific levels of occupational seniority, look at tell-tale spending habits, or identify them by cities or neighborhoods with high property values.
Five ways to leverage user status segmentation data to target audiences
You can use the insights gained from user status segmentation in five main ways.
1. Track user engagement
Analytics tools like Amplitude Audiences gather and analyze customer usage data and uncover behavioral trends to create user segments for more targeted engagement. You can also use cohorts in Amplitude Analytics to define a group of users based on specific actions and attributes they’ve performed in your product and target them accordingly.
2. Split into segments based on your business priorities
You can identify many different segments, but you should focus on the ones that directly link to your business priorities and KPIs. But before you choose the segmentation process, you should understand what it is you want users to do.
For example, if you want more people to sign up for your premium subscription, focus on your free user segment or those who have yet to engage with one of your core features.
3. Generate reports based on customer data
You should be able to use your product analytics tool to create reports for your different segments to:
- Make comparisons between different segments, such as your premium and free users, to identify differences in behavioral traits and needs.
- Measure the customer lifetime value of users obtained from different sources. For example, users obtained via referrals may be more likely to sign up for paid subscriptions than those obtained via social media ads.
- Identify product upgrades or causes of churn to optimize the customer journey by removing pain points and adding value.
4. Create a segmentation strategy
Once you’ve performed your customer segmentation analytics and split customers into the most valuable segments for your business, you should analyze and compare the data across your different segments. This analysis will enable you to create a segmentation strategy to implement personalized user status marketing.
5. Test and experiment with your audience
You can use your user status segments to test and experiment with Amplitude Experiment. Experiment helps you identify what attracts and influences your customers to choose your product. You can directly tie your experiments to your KPIs and focus on the user status segments you care about - whether those are highly engaged users or new users who have yet to explore core features.
Leverage user status segmentation with Amplitude
Your user status data contains a wealth of insights that can be used to better segment your customers and fuel more targeted marketing efforts. With Amplitude’s Segmentation Module, you can quickly and easily create groups of users to analyze based on your user status or any other highly specific set of user properties.
Try Amplitude’s customer segmentation capabilities free in our self-service demo today!