Segmentation is dividing customers into different groups based on shared characteristics — typically current state of attributes.
Why it matters: Any successful large business has many customers, each with different needs and interests. Never analyze them in aggregate.
How to create segments?
You can create segments by a variety of factors:
- Who they are: These traits capture some aspect of why customers behave the way they do and can help predict future behavior.
- Segment by location or demographics or interests.
- What they do: These traits are a result of customer behavior, and are likely an artifact of either how your product operates or how customers perceive your company.
- How often: Google Analytics naively segments users into New Users and Returning Users. Beyond that, segment users by activity into DAU, WAU, and MAU.
- Where: Segment users by the Channels they came from.
- How well: A better segment is by Customer Lifecycle. To enable this transition, actively use onboarding. Such segmentation can help with pricing tiers..
- Why: Cohort users by why they are using your product. For example, Google Maps could bucket users by whether they are daily commuters, tourists in a new city, taxi driver or delivery agent, etc.
- Happiness: You can segment by Net Promoter Score and see which segment is using which features.
If you bucket users based on dynamic attributes then you are building cohorts. If you create a fictional user to drive empathy, you are creating a persona. Finally, if you automate the process, then you are clustering.