October 8 2020

The app market includes groups of people who react differently to your app due to their individual needs and differences in lifestyle, age, gender, income level, knowledge, etc. To effectively engage different groups of users you should make sure you apply user segmentation when building your app marketing campaigns. 

A user segment is a certain group of potential or real buyers with the same type of requests and reactions to the product. User segments allow you to define unique approaches to each group of users so that the group members feel that you address them personally. The grouping can be very diverse and depends on the segmentation criteria. You can divide users into large groups, or, vice versa, find small, promising niches for subsequent market coverage. Moreover, this process is dynamic. It means that you need to regularly change the existing segmentation and timely add new users to specific groups.

Why segment users? Segmentation is the most important step in the development of advertising campaigns, email newsletters, and marketing strategy in general. In today’s reality, it is not enough to have just a good app. It is crucial to know your users and build communication with them, taking into account their needs, benefits, and priorities.

With segmentation, you will be able to:

  • Accurately define the key user groups, their needs and interests.
  • Deliver personalized messages to your target audience.
  • Identify priority user groups in terms of maximum return on effort.
  • Automate your marketing for better user engagement.
  • Evaluate the capacity of the market in which your app operates, identify the most dynamically growing and profitable markets.
  • Improve communication with users.
  • Improve your product and value proposition according to the real needs of your target audience.
  • Increase conversion and sales.
  • Re-engage active users and acquire new ones with improved retargeting.

Imagine that you use an airline app while at the airport. Which action resonates more with you? A common, standard landing page will hardly interest you. But what if you get information about how long to wait for boarding, what kind of weather will be there, what gate do you need? This will definitely be much better.

User Segmentation Methods

The methods of user segmentation can range from superficial, elementary, to deep, based on a careful study of the needs, purposes, and behavior of your audience.

Simple segmentation methods include geographic and socio-demographic segmentation.

  • Geographic segmentation assumes that people living in different countries, regions, cities, and districts have different needs and reactions to the product due to the distinctive climate conditions, lifestyle, and cultural characteristics.
  • Socio-demographic segmentation divides people based on indicators such as gender, age, marital status, education, income level, occupation, etc., which have a direct impact on the formation of consumer needs. This is the most commonly used method.

However, such superficial segmentation is often not enough. And then we can talk about two more methods of segmentation: psychographic, cultural, and behavioral.

  • Psychographic segmentation considers not only the type of activity of users, but also their hobbies, lifestyle, values, goals, inner world, and emotions. This is a fine work because the lifestyle is made up of many components – how often and where a person travels, whether they watch TV shows or videos with kittens, whether they are environmentally aware or which computer games they play. But in the era of social media, it is much easier to track down such things: sometimes, open information in a client’s profile is enough. This method is considered the most difficult to measure because it describes the inner experiences and emotions of a person.
  • Cultural segmentation is based on the idea that individuals who differ greatly in socio-demographic terms can exhibit very similar behavior and vice versa. The challenge is to create a more human image of buyers, which is not only limited by their socio-demographic profile but also carries information about their value system, activity, interests, and opinions.
  • Behavioral segmentation complements and enhances other methods of segmentation. It is based on the actual or potential behavior of users inside your app: their motivation, perception of your brand, and information about how long it takes them to make a purchase decision. This is the most effective segmentation method as it is measurable. 

Behavioral segmentation can be divided into the following subtypes:

  • According to the circumstances of use, e.g. the idea of ​​making a purchase and using the app.
  • Based on the benefits that the user is looking for in the app.
  • Based on the intensity of use – active, moderate, and passive buyers.
  • Considering the degree of loyalty to the brand.
  • By customer status – former, potential, newbie, regular, etc.
  • According to the stage of consumer readiness – uninformed, knowledgeable, disinterested, interested.

Specialized tools, such as GetSocial Smart Targeting can help you track such behavior and create user segments based on in-app events. You can then deliver targeted push notifications to each user segment. 

Which User Segmentation Method to Choose?

Sometimes you will need to ask yourself dozens of specific questions in order to effectively segment customers. One of the most obvious decisions is to ask the users themselves. You can do it by using an email newsletter or a survey in the app. It is important to make this survey simple and quick to fill, without any open-ended questions. Push notifications can also help collect data for user segmentation.

Here’s what you need to consider before choosing the segmentation method:

  • The segment identification should be based on different consumer behavior when choosing a product. For example, a high level of income explains the likelihood of purchasing a premium product or service.
  • The selected criteria should correlate with the sales and income of the company. For example, if your product is aimed exclusively at men, then gender division is important because men will bring you income.

The following checklist can help you check if you have correctly segmented your users:

  • All users that you have assigned to the same user segment react to your offers in the same way.
  • You can clearly and distinctly describe the users of the same segment – who they are, what they are, and what they want.
  • Each segment contains quite a large number of users (otherwise, the costs of marketing and “individual approach” may turn out to be unreasonably high).
  • You can control the behavior of users from the same segment with ads.

How to Segment Users

Let’s take a look at three popular methods of user segmentation.

5W Model

The name of the method comes from five questions:

  • What? – What products do you offer to the market?
  • Who? – To whom do you offer them, who will purchase each of your products?
  • Why? – Why will the consumers buy your products, what problems will they be able to solve with your help, what are the reasons for buying?
  • When? – When the consumers will want to buy your product, in what situations?
  • Where? – At which point will the user make a purchase decision?

Khramatrix

Khramatrix is an extended 5W model that allows you to better understand your customers and sometimes find new target groups.

User segmentation with this method differs from the 5W model in just four ways:

  • Description of the target audience by geographic and demographic criteria;
  • Behavioral features of the target audience;
  • Willingness to buy: ready to buy, collects information, compares options, wants to try;
  • Action to which you should push the target audience.

LTV Method

As the name suggests, this is the indicator of the customer’s lifetime value. In other words, how much money they will bring you for the entire time of cooperation. According to this method, segmentation of the client base is typically divided into VIP, standard, and economy. It takes into account the client’s budget, purchase volumes, the degree of loyalty to your company, and brand loyalty.

The LTV method allows you to plan the advertising budget. That is, you look at how much money the clients bring to your company and plan the advertising budget based on this amount. For example, you will definitely need a larger budget to attract the VIP segment.

The LTV indicator is calculated by using three formulas:

  • LTV = (revenue per year – advertising costs) / number of customers
  • LTV = average bill * number of purchases over a period of time * profit from purchase * average “life” of a client together with the company
  • LTV = average bill * number of sales to a customer per month * customer retention time in months

Steps to Implement User Segmentation

  1. Determine the purpose of segmentation. The goals may be different, it all depends on your niche and the current business situation. But here are some of them: improving the app, selecting suitable advertising media, forming an advertising message, forming a price offer, etc.
  2. Select the most suitable criteria – social, demographic, geographic, psychographic, behavioral, etc. 
  3. Search for market niches:
  • identify consumers/non-consumers of goods;
  • analyze the key competitors in the market;
  • identify how your app differs from the competitor apps and what common features it has with those apps.
  1. Describe all segments:
  • specify the characteristics of the audience for each criterion;
  • indicate the number of competitors in the niche;
  • describe the consumer behavior model when choosing, buying, and using a product;
  • determine price sensitivity;
  • analyze product satisfaction.
  1. Estimate the size of each segment – determine the potential, available, and actual capacity of user groups.
  2. Estimate the expectations from the product for each segment. The more expensive the product, the higher expectations the audience has.
  3. Define “obstacles” for the segments – the reasons why a segment representative may refuse to buy a product. There can be the following obstacles:
  • the client does not need the advantage that the brand offers;
  • the client has already received the proposed advantage from another brand;
  • the client does not believe in the advantage of the brand;
  • it is difficult for the client to switch to a service or product of another company;
  • it is difficult or unclear for the client how to use the service or product.
  1. Identify target segments – select priority groups that can bring maximum profit to the company. These groups can have the following characteristics:
  • required capacity: the maximum income that you can get for the target segment;
  • prospects – forecast of future purchasing power;
  • return on investment;
  • acceptable level of competition, which will allow counting on growth in the target segment;
  • compliance of the selected segment with the strategic goals of the business.
  1. Develop the product positioning strategy – identify benefits for buyers.
  2. Develop a customer journey map – a template for how a representative of the target segment (persona) interacts with the brand at different points of contact with the product (from complete ignorance to loyalty). Depending on the stage, select tools for advertising communication and messages.
  3. Draw up a marketing plan for each target segment – a step by step market coverage program that meets business objectives.

The Bottom Line

Segmentation gives an idea of the number of potential buyers, market capacity (the number of competitors), and, in general, the demand for the product. Correct user segmentation will allow you to automate communication with each group of users as much as possible, so you do not have to puzzle over how to convey your proposal to them. It is better to spend more time, effort, and money on user segmentation, but get an automated system of interaction only with the most profitable customers. There are the following methods of segmentation: geographic, socio-demographic, cultural, psychographic, and behavioral. The geographic and socio-demographic methods are the simplest and used most often whereas the behavioral method is most helpful as it is measurable. When choosing the segmentation method, pay attention to your market niche, target audience, and other important factors.
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