User Segmentation for Product Development

User segmentation is a term that is frequently used by product development teams, but the meaning can be unclear to those unfamiliar with it. In this article, we’ll give a brief primer on user segmentation and its importance to product development, and provide examples of how user segmentation can reveal valuable information about users. 

What is user segmentation?

User segmentation involves analyzing your user base and segmenting it into categories based on user characteristics you can group together, like geographic location, type and duration of product engagement, and demographic information. After segmentation, you can take these groups (or even subgroups) and analyze them further. This will allow you to identify spaces to improve your product or tailor different product experiences to other groups. 

For example, a global subscription streaming company such as Netflix segments their users like:

  • Users in Mexico
  • Users who subscribe to the Premium plan
  • Users who stream on mobile

By analyzing these segments and understanding how they differ and overlap, Netflix can build products and offer services that better meet each segment’s needs.

Why is user segmentation important?

To serve and better target your users, you need to understand them in as much detail as possible. If you don’t conduct user segmentation, you can only understand your users at the individual level or in totality. Gathering information at the individual level is too granular and almost impossible as your user base grows. Trying to figure out information at the global level is too broad, as it forces you to analyze the average of your user base, making it difficult to make any detailed analysis of user behavior and even potentially distorting your data. 

For example, imagine that a company has twenty customers. Fourteen of these customers are aged between 18-24, four are between 30-39, and the remaining two are aged between 70-79. Segmenting users by age makes it apparent that the company is the most successful, with users between 18-24 years of age. However, examining the user base globally would suggest that the average age of a customer is much higher, which would cloak the company’s popularity with younger users.

User segmentation enables you to target smaller groups, which provides you with more accurate information to serve user needs better.

What is user segmentation used for?

User segmentation is used, as mentioned previously, for product development and targeting, by tailoring product experience and services to users. For example, recommending products based on segmented user behavior can lead to higher engagement with the product or service. However, user segmentation can also be used for:

Marketing: Using user segmentation, you can craft messaging and information that is relevant and interesting to your users. Returning to the Netflix example, marketing a premium plan to users using only one screen is unlikely to lead to high conversion rates.

Prioritization: Using user segmentation, you can troubleshoot and solve specific problems for certain user segments that need it rather than attempting to target all users. For example, Netflix offering lower quality aspect ratios is relevant for users with slower Wi-Fi, but it may not apply to everyone. 

Four Types of User Segmentation

There are multiple ways to segment users, but the following four ways are an excellent place to start:

Demographic: Examining identity or characteristic attributes of the user, such as age, income level, or gender
Geographic: Examining where the user is originally from or currently living/engaging with the product
Behavioral: Examining how the user engages with the product, such as frequency of use, duration of use, or average amount of purchase
Technographic: Examining what platform(s) the user uses to engage with the product, such as mobile or desktop

Users can frequently overlap, and it may be necessary to consider these overlaps when analyzing user segments. For example, Netflix may want to examine mobile users in France or premium plan subscribers who are women between the ages of 40-49.

This article is meant to be a basic introduction to the world of user segmentation and give you a foundation to begin your journey into analyzing your user base. User segmentation is a crucial analytic tool for anyone wanting to learn more about their user base and use this data to improve their products and services.