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Your marketing strategies are most effective when you use targeted messaging aimed at your specific customer base. But how do you know what that customer base wants?
Customer segmentation is a way to break up your current or prospective customers into groups. Baremetrics helps you define these subsets so you can successfully address each group's specific needs. Learn more about your customers by using the Baremetrics customer segmentation feature.
The criteria used to define each segment is the basis for customer segmentation models. They offer marketers a gateway into the development of key strategies to improve return on investment.
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What is Customer Segmentation?
One advantage of having a data set on your best customers is gaining an understanding of what draws them to your brand. Customer segmentation makes this data set even more powerful by diving a little deeper into customer data. Gain insight into the demographic data of your high-value customers or the psychographic data of those targeted by marketing campaigns that didn't quite connect.
In other words, customer segmentation groups your customers by a particular metric or group of metrics. That gives you an edge when you want to market to potential customers on social media, and you're at the mercy of an algorithm. Since you know which group is most valuable to your company, you can focus on marketing strategies that speak to that group. That means you avoid the less cost-effective "throw everything at the wall—or the LinkedIn feed—and see what sticks" strategy.
To get metrics segmented by the specific criteria that define your customer, use the Baremetrics customer segmentation feature here.
What are the Different Models of Customer Segmentation?
There are many models of customer segmentation. Let's start with the four most common:
- Demographic or Firmographic:These are the nuts and bolts of each customer grouping. For B2C companies, it's demographic groupings that are particularly important, such as age, income, job title, education, and similar statistics. For B2B companies, it's the firmographic groupings. That's the size of the company, annual revenue, number of employees, market share, etc.
- Geographic: Sometimes, this is a subset of the demographic segment. Other times it stands alone. It refers to where a customer group or firm group is located.
- Behavioral: Behavioral segmentation looks at how groups of customers interact with your brand. For example, you can group by customers who signed up for a free trial and then purchased a subscription versus those who purchased a subscription outright.
- Psychographic: In this age of social media marketing, psychographic data is in the spotlight. This segment is about individual values, opinions, and lifestyles. Psychographic segmentation groups people by how their individual views impact their purchasing decisions and brand loyalty.
While these four are the major groupings, others may also offer valuable insight. For example:
- Technographic: This group is defined by the type of technology it uses, such as mobile versus desktop or smartphone versus analog.
- Value-based: This segment is grouped by the economic value the group seeks.
- Needs-based: This grouping is defined by each segment's particular needs.
More sophisticated market segmentation strategies look at a combination of these models, or they mix and match criteria to come up with in-depth marketing insights.
As you define your customer, see how the Baremetrics customer segmentation feature can improve your metrics. You can put your segmentation models into action with a free trial.
What is the Recommended Use of These Types of Customer Segmentation?
There are two ways to think of customer segmentation analysis. First, it helps you group existing customers by common characteristics. This offers a chance at retrospective analysis to determine why specific groups chose your brand. It also lets you look at how you can keep them happy in the future, which reduces your churn rate. It allows you to exploit opportunities to upsell or cross-sell to these customers.
Second, this helps you create marketing messages and a customer experience that attracts new customers. These groups have distinct wants and needs that your brand must deliver to make the sale. Narrowing your focus from a large, unwieldy marketing segment to a smaller group helps you tailor new products so you can speak to this smaller group's use case.
Baremetrics is the most effective tool on the market for you to gain actionable insights from your existing data. Sign up for a free trial today!
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How Baremetrics Can Help
Whether you're a digital startup or moving from an offline business model to ecommerce, customer retention is essential. You want to attract and delight good customers with an excellent experience. Achieving that goal isn't just about the quality of your product—you have to know a little bit more about your target customers.
Baremetrics helps you do just that. Our lightweight tool makes use of the sales data you already have by translating it into customer segmentation insights you can track over time. Want to see how? Begin your free trial today!
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FAQ
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What is a customer segmentation model?
A customer segmentation model is a framework that groups customers into distinct subsets based on shared characteristics, such as demographics, behaviour, or the value they contribute to your business. Common models include demographic or firmographic segmentation, behavioural segmentation, psychographic segmentation, and geographic segmentation. For B2B SaaS companies, firmographic and behavioural models tend to deliver the most actionable insight, helping teams identify which customer groups drive the most MRR, which segments churn fastest, and where upsell or expansion revenue opportunities are concentrated. -
What are the different customer segmentation models and when should you use each?
The main customer segmentation models are firmographic, behavioural, psychographic, geographic, value-based, and needs-based. For SaaS businesses, firmographic segmentation works best when comparing customers by company size or pricing tier. Behavioural segmentation is most useful for analysing trial-to-paid conversion or identifying cohorts with high churn risk. Value-based segmentation helps prioritise retention spend by grouping customers according to LTV or MRR contribution. Using a combination of models gives growth teams a more complete picture than any single model alone. -
How do you build a customer segmentation model for a subscription business?
Building a customer segmentation model for a subscription business starts with choosing the criteria that map to a specific business goal: firmographics to understand who your best customers are, behaviour to understand how they engage, or revenue value to prioritise retention and expansion efforts. From there, you apply those criteria to your billing and product data to create defined customer groups. Platforms like Baremetrics let you segment your subscriber base directly from your Stripe, Braintree, or Recurly data, so you can track MRR, churn rate, and LTV by segment without building anything manually. -
How can I use customer segmentation analysis to reduce churn in a SaaS business?
Customer segmentation analysis reduces churn by helping you identify which customer groups are most likely to cancel and why. Grouping subscribers by behavioural data, such as login frequency or feature adoption, can surface early warning signs before a cancellation occurs. Grouping by firmographic data reveals whether churn is concentrated in a specific company size or pricing tier. Once you know which segments carry the highest churn risk, you can direct retention resources precisely at those groups rather than applying a blanket approach across your entire customer base. -
What is the difference between customer segmentation and market segmentation for B2B SaaS companies?
Market segmentation divides a broad target market into categories, giving a general view of where potential customers exist. Customer segmentation goes deeper, grouping your actual subscribers by specific metrics like purchasing behaviour, LTV, or MRR contribution. For SaaS companies, market segmentation is most useful when entering a new market or planning a positioning strategy. Customer segmentation is more valuable day-to-day because it directly informs retention, upsell, and acquisition decisions based on real subscriber data rather than assumed characteristics of a wider audience.
