## Three Types of Customer Segmentation in a Startup: How to Make Communication with Users More Effective

Based on our experience, we describe how to combine three segmentation frameworks—ABCDX segmentation, JTBD theory, and User Journey—to gather valuable insights about customers: their problems, motivations, limitations, and opportunities. This approach will help you sell better and avoid wasting resources.

# Why Segmentation is Needed

Simple segmentation based on demographic characteristics in B2C or firmographic data in B2B is no longer sufficient. Even behavioral segmentation is insufficient if user action data isn’t complemented with information about the context in which they operate. Research by Altimeter confirms that traditional segmentation methods are being replaced by mixed approaches that consider customer motivations and their context, online behavior, and data on previous purchases.

Segmenting based on gender, age, and geolocation isn’t enough. Knowing that your product is purchased by “Maria, 25 years old,” doesn’t help improve it or make it more effective to sell. Maria could be an active entrepreneur or an aspiring startup founder in the idea discovery phase. In the first case, she’s interested in task trackers and scaling her startup to a new level or expanding existing directions with the help of our AI service. In the second case—AI validation of business ideas and pro-reports with deep analytics on her ideas.

How many Marias need AI validation of business ideas, and how many need an AI task tracker? How much revenue does each segment bring, and how long do they stay? To know all this, develop your service and optimize sales channels, you need to conduct qualitative research on your target audience, combine different types of segmentation and frameworks. The data obtained from qualitative studies should be supported by quantitative metrics correlating with each funnel stage and within the product.

We will share three methods through which we segmented our clients: ABCDX segmentation, JTBD theory, and User Journey. Using these frameworks, we gathered a vast array of qualitative insights about our users, and based on them, built a communication and sales strategy.

Co-Founder Ai is used by small budding entrepreneurs, startup founders, development studios, and even experienced businesspeople and large companies. Depending on the tasks different teams and individuals within these companies face, they form overlapping segments interested in various tools, solutions, and approaches. We formulated our approach to user interaction using three-stage segmentation, creating buyer persona profiles based on the obtained data, and further developing high-, mid-, and low-touch funnels for each segment. This is the first part of the story; in the second part, we will elaborate on creating buyer personas and designing funnels for each of them.

# Why Segmentation is Important

Potential customers are not a homogeneous group—they differ not only by gender, age, and geography in B2C, or by business segment, company size, website traffic, and profit in B2B, but more fundamentally by:

• Problems they want to solve with your product
• The context in which they are
• What prompted them to seek a solution
• Purchasing power
• The amount of time you will need to spend working with them

Communicating identically with everyone is ineffective. Each user has their own characteristics and problems. Customer segmentation allows you to identify similar traits, group users into clusters, and personalize communication.

You should know that your competitors are already using user segmentation. According to Altimeter research, only 2% of businesses do not apply segmentation.

# How to Segment Customers

The most crucial part of any research is defining goals and objectives. The results of segmentation research will be used by different teams—marketing, sales, product development. Agree with each involved party on what they expect, in what format the research results are needed, and how these results will be used in their work.

Here are three key stages we identified:

1. Segmentation. If you work in B2B, your clients are companies. In eCommerce, for example, RFM analysis data is often used for segmentation.

2. Creating Buyer Personas based on Segmentation and Additional Interviews. Buyer personas in this case will be company employees with specific roles and work tasks.

3. Designing Sales Funnels for each Persona. The three approaches for segmentation:

   • ABCDX segmentation—suitable for companies with more than a thousand paying users.
   • JTBD segmentation—also used for finding new segments.
   • User Journey segmentation—one of the universal methods of dividing users based on the tasks they perform in the service.

Using all three frameworks helps us thoroughly study users, identify their pains and motivations. All three models excellently complement each other and help create a complete picture of users, based on which you can grow your business.

# ABCDX Segmentation

The essence of ABCDX segmentation is dividing users who have at least made a purchase from you into four segments based on the value these customers derive from the product.

• A—they have a significant pain, the product is highly needed, resulting in a high purchase conversion and consistent usage.
• B—they have a significant pain, the product is highly needed, but have reservations. They pay a lot but take a considerable time making purchase decisions.
• C—the pain is partially addressed, there’s a need for the product, but the value isn’t high. They are willing to pay less and have a set of significant reservations.
• D—they have many questions and reservations, often resulting in not making a purchase.
• X—a major client requiring something specific, some personalized adjustments that you are not ready to provide.

Let’s consider an example from our experience. Our main feature is a form for AI validation of business ideas, which allows collecting qualified leads and selling. Users from segments A and B come to us with their tasks, and our service handles them well. As a result, clients from these segments are satisfied with the cooperation.

Co-Founder Ai also has an AI task tracker and a training platform, but there’s no click map analysis for them. This isn’t our main feature, and clients who come to us to solve just this task (segments C and D) will notice the shortcoming and might leave.

The problem is we often spend more time addressing segments C and D: they are dissatisfied and constantly write to support, while bringing much less revenue than segments A and B. As a result, we become unfocused and waste efforts. Growth speed slows down.

## How to Apply ABCDX Segmentation

• Distribute current clients into ABCDX categories
• Identify and document the main characteristics of each segment
• Develop qualifying questions that will help quickly determine to which segment each new user belongs in the future

## Examples of Qualifying Questions for ABCDX Segmentation:

• Name
• Website
• In which country does the company operate?
• Your role?
• Sector in which your product operates?
• Number of employees in the company?
• Number of support team members (for example)?
• Number of clients/subscribers?
• Other gathered information

# JTBD Segmentation

We believe in the Jobs to Be Done (JTBD) theory and see results from applying the framework in various products. The essence is that customers don’t buy products; they “hire” them to perform specific jobs. Every product has one major job (core job) that can later split into dozens and even hundreds of smaller ones.

For example, we used the JTBD approach and found that the Co-Founder Ai service fulfills two key jobs for our clients, formulated as follows:

• Job Story 1: I want to generate an AI report based on a description of the main features of a business idea in 5 minutes,
• Job Story 2: I want to conduct a manual competitor research and independently compile a report on a business idea in 5-10 hours.

Our users perform their tasks in specific ways. For us, this is an effective segmentation approach.

## How to Apply JTBD Segmentation

• Identify similar patterns in customer behavior through interviews that led to purchase, as well as their pains, motivations, and context.

• Qualifying questions for JTBD Segmentation:

  • Motivation Identification:

    • Why did you decide to buy ____?
    • What were you thinking about when you bought ____?
    • What did you want to achieve with the help of ____?

  • Context Identification:

    • What prompted the purchase of ____?
    • What pushed you towards buying ____?
    • Where were you at that moment?

  • Pain Identification:

    • Why did you need ____?
    • What difficulties did you encounter using ____?

  • Other Solutions Identification:

    • Why did you choose ____ specifically?
    • What other options did you consider besides ____?
    • What characteristics were important to you when making a purchasing decision?

Once you determine the key jobs that clients perform with your product, segment them based on these jobs and supplement with firmographic data. From our experience, it is necessary to conduct at least ten qualitative interviews with clients to identify key jobs.

# User Journey Segmentation

The User Journey or Customer Journey Map is a description of the client’s journey in the product from the first acquaintance with the company to the first purchase and further usage of various features.

Users go through specific stages of their lifecycle in the product. Studying the User Journey within the product helps primarily to improve the product, as well as conduct segmentation research based on how they use certain features and for what purposes.

Segmentation based on User Journey involves collecting data on user actions and subsequent interviews with clients. Customer pathway analytics allows dividing users into groups based on the features they use and how actively, as well as common issues and limitations they encounter.

## How to Apply User Journey Segmentation

• Collect data on users and analyze their behavior. To segment users based on User Journey, you need to set up data collection on your website or service for key events. This will help identify users who performed action A or B. This provides data on how customers use the product and which features they utilize to solve their tasks.

• Build funnels for the stages customers go through in the product. Some users will use one feature after registering in the product, others will use another.

• Conduct interviews with clients to correct the data. After collecting data and initial segmentation using funnels, you need to complement the information with stories from the clients themselves. Likely, the built funnels do not fully reflect the client’s journey in the product, and through qualitative interviews, you can identify the main insights on how the service operates.

## Questions for User Journey Segmentation Interviews:

The goal of the User Journey segmentation interview is to determine how the user interacts within the service: how they find the needed function, how they use it, and where they seek help.

• Purpose of the interview questions:

  • Describe how you went through the registration in the service: what you did, where you clicked?

  • What did you see?

  • Where did you encounter difficulties?

  • For long-term users:

    • Which functions do you use?
    • How do you solve arising problems?
    • Where do you seek help: in the knowledge base or by writing to support?
    • How do you utilize a specific feature?

Segmentation based on User Journey helps split users based on their paths within the product and the key features they interact with. However, to obtain a full picture of the segments, it’s necessary to use all three frameworks for a qualitative division of customers into groups.

# Conclusion

Combining ABCDX segmentation, JTBD theory, and User Journey segmentation provides a comprehensive approach to understanding and segmenting your customers effectively. By leveraging these frameworks, Co-Founder Ai helps startups and businesses identify their target segments, optimize their communication, and enhance their product offerings to better meet the needs of their diverse user base.

Whether you’re looking to engage private equity firms, angel investors, or venture capital companies, effective customer segmentation can drive more targeted investment opportunities and startup success. Embrace these segmentation strategies to make informed decisions, boost your venture capital business, and ultimately, start a successful startup.