## Client Segmentation: A Strategy for Startup Success

Co-Founder Ai – Empowering startups with data-driven insights.

# Introduction

Marketers and Sales Managers: “Wouldn’t it be great if customers would just buy everything without needing extra explanations!”

Customers: “I wish someone would immediately offer me what suits me! It’s so lazy to think and figure everything out!”

These are the kinds of thoughts and desires from both sides of the product interaction.

Meeting these desires is made possible through client segmentation. It allows for personalized communication—offering customers what they want. Client segmentation also aids sales managers—they know clients’ needs in advance and don’t waste time explaining irrelevant information.

In this article, we will explore:

• What client segmentation is and why it’s needed;
• The types of segmentation;
• How startups and online services can segment their client base;
• General methods of client segmentation;
• Which service helps segment clients and establish communication with each group.

# What is Client Segmentation and Why is it Needed

Client segmentation is the process of dividing your customers into groups based on certain characteristics or criteria: their geographic location, age, needs, website activities, and more.

With segmentation, you can devise unique approaches for each client group so that each feels that your offer is personally addressed to them.

Client segmentation allows you to:

• Better understand customer needs;
• Increase customer loyalty;
• Retain them;
• Boost repeat sales and profit from each customer—LTV;
• Reduce marketing budget.

# Types of Client Base Segmentation

## Basic Types of Client Segmentation

1. Geographic Segmentation: Dividing clients based on their location.
2. Socio-Demographic Segmentation: Segmenting by gender, age, education level, job position, industry, etc.

Often, such superficial segmentation proves to be insufficient. Therefore, more in-depth client segmentation is used.

## Advanced Types of Segmentation

1. Psychographic Segmentation: Considers clients’ hobbies, lifestyle, values, goals, and inner world.
2. Behavioral Segmentation: Based on users’ interactions with your product—actual or potential.

## Additional Types of Segmentation

1. Technographic Segmentation: Segmentation based on devices and brands.
2. Segmentation Based on Website Activity: Dividing clients based on their activity on your website.

### Geographic Segmentation

This involves dividing clients into groups based on their place of residence, study, work, or leisure. This classification may be sufficient if geographic location is a determining factor in sales.

Example: A burger shop’s website should primarily target residents of the city where it is located.

### Socio-Demographic Segmentation

This involves segmenting clients by gender, age, education level, job position, industry, etc.

### Psychographic Segmentation

This takes into account clients’ hobbies, lifestyle, values, goals, and inner world. It requires detailed work as lifestyle consists of numerous factors—how often and where a person travels, which TV series they watch, whether they participate in eco-protests, play games like CS or “The Witcher”. With social networks, such things have become much easier to track. Sometimes, enough information is available openly in the client’s profile.

Example: A travel agency can send tailored tour packages to fans of Nordic or Southern destinations.

### Behavioral Segmentation

This is the most advanced method of segmenting a client base. It is based on users’ interactions with your product—actual or potential. This includes:

• Where the user came from to your site;
• Which pages they viewed;
• When and which products they were interested in;
• Which company messages they read and when;
• What questions they asked in support;
• What they bought, how many times, and for what amount;
• Which banners they clicked, etc.

### Technographic Segmentation

This involves segmenting clients based on their devices and brands. For example, users might find it inconvenient to register and order from a computer—it’s easier to do it from a phone that’s always at hand.

By segmenting your client base based on devices, you can compare conversion rates for different groups and see what difficulties they encounter.

Example: If smartphone users have a lower registration conversion rate, it might be worth simplifying the registration form or better optimizing it for mobile.

You can also personalize offers for different segments.

Example: For mobile users, you can highlight how convenient it is to use your service from a smartphone and inform them about your mobile app.

### Segmentation Based on Website Activity

Clients can be:

• Active — they engage and interact with every your offer, product;
• Semi-active — they explore offers, products but don’t make purchases;
• Passive — they don’t unsubscribe from newsletters but don’t read, click, or follow links.

Remember, passive clients shouldn’t be left idle—they create the illusion of a large client base but don’t generate profit. It’s crucial to work with them, remind them of your presence, and increase the likelihood they’ll return for a purchase.

# How to Segment Clients

Every business seeks a client segmentation method that suits them. It’s not necessary to limit to one type of segmentation; they can be combined.

## Segmentation Methods for Different Industries

• Online Services: Usually divide clients based on the funnel stage:

  • Trial Users
  • Paying Customers
  • Churned Clients

  And also by rates or business sphere if it’s a B2B service.

• Online Stores: Typically use RFM Analysis to segment clients based on:

  • Number of purchases,
  • Average purchase value,
  • Date of the last purchase.

  Additionally, online stores often segment client base by gender and business type—B2C or B2B.

## Advanced Segmentation Methods

If the above methods are not suitable, here are four main segmentation methods:

1. RFM Analysis: Segmentation based on the recency of purchases, their frequency, and amount.
2. LTV Method: Segmentation based on the potential profit from clients over their entire interaction period.
3. BCG Matrix: Segmentation based on revenue volume and growth rates.
4. ABC XYZ Analysis: Segmentation based on the degree of value clients received from the product.

RFM Analysis is the most popular. When segmenting by this method, it’s first easier to divide clients by purchase dates and frequency, and then add segmentation based on average purchase amounts if necessary. To simplify client segmentation based on purchase dates and frequency, you can use our RFM Segmentation Template offered by Co-Founder Ai.

However, all four listed segmentation methods are quite complex and laborious, so we recommend starting with a more generalized approach.

## General Approach to Client Segmentation

Consider the following criteria to divide current and potential buyers who bring you:

• High Profit in a Short Time;
• Low Profit in a Short Time;
• High Profit Over a Long Period;
• Low Profit Over a Long Period.

Consider the time from the first site visit to payment. Describe the characteristics for all types of segmentation here. Think about why some buy often, a lot, and make purchase decisions quickly, while others buy rarely, little, and think for a long time.

From the list of criteria, highlight those that most clearly differentiate the groups from each other.

In the end, you’ll have four key segments with distinct characteristics. You can then build personalized communications for each group.

• Highly Profitable Clients: Actively work with them; they can be directly guided to purchase. These are your loyal regular customers and your most priority segment.
• Infrequently Profitable Clients: These are also important; they can be directly guided to purchase.
• Clients with Potential for Long-Term High Profits: Need nurturing. You can send them useful materials about your product and how to tailor it to their needs. These users are not ready to purchase immediately, so don’t push them.
• Clients with Low Long-Term Profits: It’s likely not worth spending efforts on them. It’s important to identify such a group to avoid wasting time and money.

## Best Practices for Effective Segmentation

• Clear Description: You should be able to clearly describe clients of each segment—who they are, what they are like, what they want.
• Sufficient Segment Size: Each client segment should have a sufficiently large number of clients—otherwise, marketing expenses and individualized approaches might become unjustifiably high.

# Conclusion

Effective client segmentation is a cornerstone of startup success. By understanding and categorizing your clients, you can tailor your marketing strategies to meet their specific needs, enhance loyalty, and drive growth. Co-Founder Ai provides innovative solutions to streamline this process, helping startups thrive in competitive markets.

Ready to enhance your client segmentation strategy? Discover how Co-Founder Ai can revolutionize your approach to understanding and engaging with your customers. Get Started Today!

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