What is behavioral segmentation?
Behavioral segmentation is one type of market segmentation that groups audiences, prospects, and customers by their actions and behaviors. Where demographic and psychographic segmentation study who customers are, behavioral segmentation looks at what customers do.
Behavioral segmentation doesn’t exist in isolation – it works in partnership with demographic, psychographic and geographic segmentation to build up a complete customer profile. Where other segmentation data suggests potential interactions with your brand, behavioral can confirm them.
Customers can be grouped by their interactions with your brand, product or service, such as:
- Their attitude towards it
- How they use it
- Their overall knowledge and awareness of it
- How they buy it
In the world of ecommerce, you can segment customers by their online behavior:
- How long do they browse your website (dwell time)?
- How rapidly do they click off your site (bounce rate)?
- Are they a new or returning customer?
- What do they add to their basket or playlist?
- How frequently do they abandon their cart?
Effective, data-informed behavioral segmentation has been made possible by the development of artificial intelligence. Powerful AI marketing analysis platforms can help deliver personalized content, tailored to each consumer segment.
Benefits of behavioral segmentation
- Better targeting accuracy: You’ll be able to take advantage of different behaviors, and, knowing those, direct your marketing messages. For example, you would treat a new customer differently from an older, loyal customer, perhaps with attractive introductory offers rather than an invitation to join an exclusive VIP club.
- More personal experiences: The days of blanket-bombing your email list with the same generic message are thankfully long gone. By identifying your audience’s needs, wants, concerns and the type of messages they notice, you can connect with each one personally, making relevant offers and suggestions that they are more likely to take up.
- Filter the interested from the uninterested: By separating the most engaged customers from the least, you can target your product or services at people who need or want them the most.
- Cost-effectiveness: You can target your budget at your most interested, engaged and valuable audiences, rather than waste it on cold leads and the uninterested.
- Trackable: You can track metrics within each segment, take action and improve results.
- Increase brand loyalty: Customers who feel special will stick with the brand that makes them feel that way. Customer loyalty increases customer lifetime value, and hence revenue for your business.
Types of behavioral segmentation
There are many ways your customers will interact with your brand, product or service. You’ll need to understand these to help create a behavioral segmentation strategy that is effective and sustainable. AI-powered platforms can analyze all these behaviors along the customer journeys, identifying trends and patterns that will help you predict which customers are most likely to make which purchases.
The main ones are:
1. Purchasing behavior
How do customers behave on their journey to a purchase?
Purchasing behavior can be segmented into four categories:
- Complex: Imagine the process of buying a new car, or a home. Customers are highly involved, research in depth, and eventually buy something that is a one-off or infrequent purchase.
- Dissonance-reducing: Do you worry that you might regret your purchase? You’ve been highly involved in a buying process, but you’ve found it hard to choose between brands. Customers will seek follow-up reassurance that they made the right choice.
- Habitual buying: Every week you go to the grocery store and buy whichever products are cheapest or on special offer. You have no brand loyalty: this is your habit.
- Variety-seeking: You’re bored with citrus-scented shower gel, so you choose a cedarwood-scented one. The citrus one cleaned your body just fine, but you fancied variety.
2. Usage behavior
How often do customers use your product/service and how?
This segment looks at the frequency of customer interaction with your business, and the nature of the interaction (what they do while interacting, which features they use, how long they spend, etc.). This can be further segmented into heavy, medium and light users, and marketing targeted accordingly.
3. Benefits sought
Which particular benefit is a customer seeking when they decide to make a purchase?
Customers place higher value on one benefit over another when choosing a product. A classic example is toothpaste. Any toothpaste can contribute to good dental health, but customers may prefer:
- Sensitivity relief
- Tartar control
- Cavity protection
- Gingivitis prevention
- Fresh breath confidence
- Gel or paste
- The cheapest
4. Occasion or timing-based
Which special occasions do customers buy for?
These include universal and personal occasions.
- Universal occasions: Such as Thanksgiving, Halloween, Holidays, when most people are likely to make specific, seasonal purchases.
- Recurring personal occasions: Such as birthdays, anniversaries, vacations, monthly, yearly or quarterly purchases, daily purchases like newspapers or coffee.
- Rare-personal occasions: Such as weddings, baby showers, college graduations. These are harder to predict.
5. Customer journey stage
Where is the customer currently along their journey?
The customer journey is, at its most basic, the process from when a customer becomes aware of a product to the point where they’ve bought it and are telling others about it. There are five touchpoints:
- Awareness (Advertising, radio & TV, PR campaign)
- Consideration (reviews, blogs, direct mail/email marketing campaigns, social ads)
- Purchase (website, store, contact center)
- Retention (loyalty program, community, newsletters)
- Advocacy (word of mouth, social media, reviews)
Segmenting the customer journey stage will reveal any pain points or sticking places where the customer cannot complete their journey. For example, at Purchase, the store may habitually run out of stock, highlighting a problem with supply.
6. Customer satisfaction
How happy are your customers?
Customers’ needs, wants and experiences change in real time as they progress through their purchase journey. The traditional Net Promoter Score alone doesn’t really cut it any more as it doesn’t reach all customers, and there’s too much unmonitored between-survey time. Real-time behavioral data is a much more accurate and reliable measure of customer satisfaction.
7. Customer loyalty
Which customers are the most loyal?
The most loyal customers are your most valuable. They are:
- Cheaper to retain
- Have the highest customer lifetime value
- Are your best brand advocates, contributing to brand equity
Once you’ve highlighted them, you need to find ways to maximize their value and bring in more customers like them. Behavioral segmentation gives you insights into their needs so you can retain them with special VIP privileges and rewards to strengthen the customer relationship.
What are your customers interested in?
If you can continually pique your individual customers’ interests, they’ll keep coming back for more. Keeping customers engaged makes it easier to increase their usage of your product or service, keep them loyally on your platform or in your store, and to sell them other products.
9. Customer engagement level
Who are your most (and least) engaged customers?
Different companies will have different interpretations of ‘engagement’. But generally speaking, when customers have positive experiences with your brand and are willing to interact with it regularly, there’s a good chance this will lead to profitable outcomes.
10. User status
How do people use your business?
This is another way to behaviorally segment different customers by how much they use your business. These can include, but are not limited to:
- ‘Freemium’ users (consumers who use a free product but pay for add-ons or in-app purchases)
- Defectors (previous customers who’ve switched to a competitor)
11. Spending Habits
How do customers spend their money with you?
These tell you how customers spend their money, and where and when they generally buy. This segment may include:
- Buying online vs. in store
- Buying with a store credit card vs. a regular credit card
- Using coupons vs. never using coupons
- Visiting during sales vs. non-sale times
12. Brand Interactions
How do customers engage across all your branded channels?
This kind of behavioral segmentation tracks all interactions with your brand, both online and off, and demonstrates how engaged a customer is with your brand. Think of the Disney brand, which covers movies, merchandising, dedicated stores, websites, theme parks, vacations.
- Frequency of store visits
- Frequency of website visits
- Web pages visited
- Interactions with your social media
- Content viewed on social media
- Frequency of purchase
- Previous purchases
How to use behavioral segmentation to help your business
Automated brand experience management programs allow you to segment target customers, identify and develop your value proposition, conduct brand research, and personalize your communications. You can then track every behavioral brand metric that matters to your business, from awareness to loyalty and advocacy, picking up and resolving all the pain points as you go.
You will understand your customers better so you can enhance the experience of existing ones, and connect with new ones.