Life is easy when you only have a few customers. You know every customer situation very well and can react quickly whenever any customer needs your attention.
But what happens when you have hundreds? Or thousands? Or millions? Once you reach a certain threshold of customers, it becomes unrealistic for your customer success managers (CSMs) to monitor every event for every customer and keep every business outcome positive, manually. One important way to manage customers at scale is to use customer segmentation.
What is Customer Segmentation?
In the simplest terms, customer segmentation is the practice of dividing your customer base into groups based on similar characteristics. You might segment your customers by company size, creating groups for small, medium, and large customers. You might also segment customers by industry, creating groups for different industries like software and transportation.
The more data you collect about your customers, the more segments you can make. Equally important, having more customer data means your customer segments become more specific and lead to better insights. For example, if you know both company size and industry, you can compare small software customers to large transportation customers very easily.
Why is Segmentation Important?
Segments can be very useful in two ways: tailored messaging and customer prioritization. Going back to our previous example, let’s say you find out that when small software customers activate a certain feature, they see incredible results that lead to growing their license with your product. This specific segment of customers also spends much more than even your largest transportation customer.
All of the sudden, you have two vital new insights. First, creating engagements that encourage small software companies to activate that certain feature is a great revenue opportunity. Second, you realize that it is more profitable to focus on small software customers with big spend over large transportation customers. It is also easier to scale your communications by targeting the entire segment rather than trying to send a personalized engagement to every single customer.
How Do I Segment My Customers?
As mentioned above, there are as many segments as there are customer data points. If your team is just starting out, we recommend getting to the point where you can segment based on the value derived by the customer. This is a unique combination of product consumption, feature activation, and business outcomes that form one part of your customer health score.
If you’re able to measure customer health, you can segment your customers into the following four groups: Key Accounts, Highest Potential Accounts, Low Value Accounts, and Accounts at Risk.
This is just one of several ways that you can segment customers. Building segments for customers 90-days from renewal, onboarding customers, or potential upsell accounts can provide equally useful insights for your team. Focus on connecting the right customer data first and the sky is truly the limit!
What Do I Do With My Segments?
Even the basic segmentation presented in this article offers huge opportunities for your customer success teams. Knowing which customers belong to each group means you can target Highest Potential Accounts with upsell offers and Accounts at Risk with intervention programs. You can also try to understand what makes a customer a Key Account and try to replicate the success across the other segments.
Finally, you can shift your focus towards the biggest revenue opportunities and build a low touch engagement model for Low Value Accounts that might not be worth the effort for 1:1 management. With customer segmentation, you can build a focused and prioritized customer success program that can manage customers at any scale.
Building Segments Efficiently
Connecting and managing all your customer data might seem complex and resource-intensive. However, Totango makes it easy to make your data actionable. Our platform helps companies connect every source of customer data, from CRM to help desk tools, to build out segments of customers easily.
Sample Segment in Totango
Going one step further, has your team ever wanted to send behavior-based emails to your users? With Totango Segments, you can build segments based on the way your customers use your product and send personalized communications all from the same platform. To learn more, make sure to request a demo of Totango today!