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Driving Revenue through Customer Segmentation

Customer Segmentation
Customer Segmentation

As a world class athlete and national record holder (Act I of my life), I was trained very specifically for my sport, my events, my level and my physiology.

Elite Athlete. Swimmer. Backstroke & IM. Middle Distance. Female.  

I was segmented.

Based on these attributes, coaches, doctors and kinesiologists trained and assessed me specifically so I could reach my full potential. I didn’t do the same weight lifting program as the NHL hockey players that my weight coach was training, or the same dryland training as track athletes. Even in the water, I would not be doing the same sets as other swimmers. All my training was specific to my event and physiology for maximum performance.

The same concept applies to a SaaS company’s customers. You want to identify the goals and corresponding needs of your customers to help them succeed.

When customers reach their goals using your product, they are being successful and, as important, they are seeing such a good return on investment they want to to do more with it.   

This is key to customer expansion: getting customers to do more.

This is why understanding customer attributes and their full potential is so important, and makes customer segmentation such a necessity.

Customer segmentation is the grouping of customers who are similar in specific ways. From a customer success standpoint, grouping customers with the same potential and needs helps Customer Success develop a more focused and efficient approach in guiding the customer through their journey.

I often use the analogy of working out to illustrate this point. Some people train to be world class athletes so they need to do a lot of training. Some athletes want to be healthy so they only need to work out a couple of times a week. Depending on the athlete, a coach will train them differently.  

It is the same thing with customers. In marketing automation, for example, a small SMB may have a single person who handles all their marketing. A large, global enterprise will have various departments within marketing and regional marketing areas with people across the globe.  

The performance required by these customers from their marketing automation tool will differ. This knowledge helps a Customer Success organization determine the skill sets that each customer needs to develop along their journey and how to guide customers to reach their different objectives.

In other words, what your CSMs do and their skill sets and responsibilities will vary based on how your customers are segmented.

There is a lot of information that explains how to segment customers so I will not go into the details. I will, however, highlight three key points for Customer Success teams to consider when looking at segmenting their customer base as part of their customer expansion strategy:

Maturity model Assess how business maturity plays into the adoption of your product. If your product is self explanatory and easy to use, this will not factor significantly into your segmentation model. If, however, you have a complex product that requires Customer Success teams to provide a lot of training or guidance, you will likely want to use business maturity as a segmentation criteria.

Revenue potential

If you want to expand an account, there has to be the potential to do so. Look at whether your customers will buy more of your product. If they have bought everything they can, the potential to spend is zero, even if they are a large customer.  You will want to retain these customers but you won’t spend much time selling them more.

Conversely, new customers offer opportunities to sell them more licenses or move into new functional areas of the organization. Given the high sales potential, you should look at how to incorporate opportunities for customer service teams to build a roadmap for expansion that ties into the customer’s business objectives.

ARR & Company Revenue/Size

Don’t fall into the trap of believing there is a lot of expansion potential with a customer due to the company’s revenues or size, or because they are currently large spenders with you. You may have mid-sized companies with more expansion potential than larger companies due to corporate initiatives.  As I mentioned before, it is important to know why your customer purchased your product and what they want to to achieve within their organization. You need to understand their long term goals and determine how your product grows with them.

Bottom line

Customer segmentation plays a key part in determining how and with which customers you expand.  Understanding key attributes specific to your product and the industries you serve will help to form the basis for segmentation. Customer success teams can use this knowledge to determine the best way to move customers forward on their journey, while continually maturing their use of your product.

Don’t let revenue dry up like a fish out of water.  Build a segmentation model that lets you swimmingly service all customers to their full potential while driving your revenue to its full potential!

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