What is user segmentation?
It means categorizing the users of a product into different buckets.
This categorization can be done in a variety of ways. Some examples are age, income, gender, behavior towards a product, political affiliation, where people live, etc.
What factors should be chosen to segment depends on the product itself and the kind of people using it. For example, for a company like Nykaa, which sells cosmetic items, gender could be a potential segmentation since males and females might use their product differently. But for a company like Uber, using gender as a way to segment users might not make a lot of sense since both males and females would have similar behavior towards the product.
The important thing is to understand the underlying reason behind user segmentation.
What's the benefit?
To understand customers better: It helps in developing a deeper understanding of how customers are interacting with products. This, in turn, helps in making good product decisions
To target their marketing and sales efforts more effectively: By targeting their marketing and sales efforts to specific segments of their users, companies can increase the chances of their messages being seen and heard by the right people. This can lead to increased sales and profits
To get people aligned within the company: The development team has to make a lot of micro decisions while developing the product. Segmentation of users helps in providing them with the correct context so that they can make better decisions
What does good segmentation look like?
Good segmentation should ideally:
Follow a MECE's structure. This means the segments should be mutually exclusive and exhaustive. In other words, there should not be an overlap between the segments and all the segments together should account for all the users.
Should be based on differences in behaviour towards using the product.
Let's work through an example to understand this better.
Example: Zomato
From a functional perspective, you can divide the users as follows:
People ordering on the platform (demand side)
Restaurants (Supply side)
Delivery person
Businesses listing ads on the platform
This segmentation makes sense since all these segments are interacting with Zomato in very different ways.
We can take the first one, i.e. People ordering on the platform, and segment that further based on the frequency of ordering.
Habitual users: 5+ times a week
Occasional users: 1-3 times a month
Rare users: 1-3 times a year
Again, the pain points of all of these segments would be different since they are relying on Zomato for different kinds of problems.
The habitual users might be looking at a Zomato for a fix for their daily meals whereas an occasional user might only be ordering when they are looking to try something new.