Segmentation and product design

October 27, 2022 · writing

The point of customer segmentation is to be able to ask yourself:

How can we better help people like this?

That’s a product question. In biz school, segmentation is taught largely as a tool for market sizing, business planning, and fundraising. Once you’re out in the wilds, you’ll mostly see segmentation used for marketing and messaging. That stuff is fine.

But segmentation’s greatest strength is in clarifying what to build right now, and what to skip or save for later. Good segmentation narrows the possibility space and focuses your focus.

The grand irony of feature requests is that they disproportionately arrive via users who are almost, but not quite, your ideal customer segment. From the perspective of these customers, the product is so close to what they need that they can feel the potential. So they send in lots of compelling suggestions. In a vacuum, the enthusiasm and clarity of these requests can make them difficult to handle, and they can easily send you off course, toward a business that is no longer the right fit for your goals.

After all, you very likely began the business for the reason that you care, deeply, about helping a particular type of person:

https://www.youtube.com/watch?v=_CmDj-Ry_-I

With a clear sense of who you’re really trying to help, and with an understanding of what those people need, the conundrum clears right up. With helpthisbook, for example, we receive lots of suggestions from tradpub authors who really want collaborative features to loop in their editors, agents, or promoters. And they’re right—those features would be great! But we’re a small team, our core segment is indie authors, and there are other features that would help that segment more.

As an aside, consider segmenting NOT by demographics, but by worldviews, fears, goals, and concerns:

https://www.youtube.com/watch?v=vC2_B9h9l6w

How can we better help people like this?

This framing helps debug your churn and customer (un)success. If you have an existing audience or set of customers, you probably have several different segments.

For example, in the OOC Builders group🔒, (OOC=Outcome Oriented Community), we see three main member segments: 

1. Aspiring indie entrepreneurs who see OOCs as a viable and desirable first step for their future businesses
2. Coaches and trainers who see OOCs transitional step to shift add a more productized layer to their existing practices
3. Existing community leaders seeking useful mechanisms and design principles that they can bring back to their own groups

(All three also care about “figuring out community,” so there’s a bit of knowledge co-creation alongside the individual outcomes.)

Each of our segments suffers slightly different problems. Segment #1 (the upstarts) often hit an early blocker with cold start marketing and attracting the original members, for example, while being fairly relaxed about the details of the business model. Whereas #2 (the coaches) are broadly the opposite. Similarly, #1 would love a step-by-step process, whereas #3 (the existing community leaders) would find more value from an a-la-carte menu of tools and techniques.

In terms of gut feel product design, these sorts of insights are about as actionable as it gets.

When I look at the our full set of members, segmentation allows me to see who I’m doing the worst job for. And I can then ask myself:

How can I do a better job helping people like this?

It’s how segmentation—plus a pinch of customer empathy and understanding—can help you make a better product.

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