What is user segmentation?

Jan 05, 2022

Posted by

Marcus Hyett

On this page

User segmentation, explained
Why is user segmentation important?
What are user segments used for?
The four different types of user segmentation
How can I segment my userbase?
Further reading

User segmentation is a term which is thrown around a lot within product-led teams, but what does it mean? In this article we'll explain what user segmentation is, why it's important and give examples of how segmenting your userbase can uncover important customer insights.

Contents:

User segmentation, explained
Why is user segmentation important?
What are user segments used for?
The four different types of user segmentation
Further reading

User segmentation, explained

User segmentation is the process of looking at your userbase and breaking it down into groups based on user characteristics or behaviors. You can then analyze these groups to identify opportunities to improve and grow your product.

For example, a global ecommerce company such as Amazon might have user segments such as:

Users in the US
Users who subscribe to Amazon Prime
Users who use the mobile app

By understanding how these segments differ, Amazon would then be able to build products which better meet their individual needs.

This article is part of our PostHog Academy series where we explain the fundamentals of product analytics. Marcus Hyett is VP of Product at PostHog. Prior to PostHog, he was a Senior Product Manager at Meta working on ecommerce experiences across Instagram and its family of apps.

Why is user segmentation important?

In order to serve your users, you need to understand them in as much detail as possible. If you don't segment users then you're only able to understand them as individuals (which becomes impossible once you userbase start to grow) or as a whole.

Trying to understand your userbase as a whole is a trap. It means you can only focus on the average of all your users, which can both distort the data and eliminate the detail you need to make informed decisions.

For example, imagine a company has 10 customers. Seven of these customers are aged between 15-16 years old, while two are aged 40-42 and a single customer is aged 75. Segmenting users by age in this way reveals that the company is successful with users in the 15-16 age bracket, while looking at the average of the whole userbase would suggest an average customer age of 26 - almost twice the actual age of 70% of users.

Segmenting users enables you to focus on understanding, prioritizing and solving the unique needs of smaller and more focused group, rather than looking at everything at once.

What are user segments used for?

User segmentation is especially important for activities such as:

Product personalization: Tailoring the experience to users, such as by recommending products based on their behaviours, means they’ll be more engaged and more successful.
Marketing: You need marketing that’s relevant to your users. Sending special offers in English to customers to Japan won't lead to good conversion rates.
Prioritization: You can have more impact by focusing on solving specific problems for certain users rather than trying to build a one-size-fits all solution. (e.g. building a price comparison tool for price conscious customers).

The four different types of user segmentation

There are four key types of segmentation you can use to identify groups of users:

Demographic: Looking at attributes of the person (e.g. age, household income, gender)
Geographic: Considering where they are from or where they are currently (e.g. delivery town or country of residence)
Behavioral: Considering how they use the product (e.g. frequency of use, average order values)
Technographic: What technologies do they use to interact with the product (e.g. mobile, desktop or voice assistant)

It's often necessary to combine multiple segmentation types when running analyses. You might, for example, look at the behaviour of older users in France, or early-adopters on mobile.

How can I segment my userbase?

There are a variety tools available to help you segment users or use the segments to understand their behaviours within your product. These can include basic web analytics tools such as Google Analytics, or all-in-one product analytics tools such as PostHog.