Behavioral segmentation in marketing has become more important for businesses as customers increasingly raise their expectations for personalized experiences from organizations.
Customer experience is one of the core differentiators between businesses today, and it’s a primary factor for tech investment among SMBs, taking precedent over even quality and price in some instances.
81% of companies in a survey by Dimension Data say that the ability to provide a great customer experience is a key difference between retaining a customer and them taking their business elsewhere.
And this is where segmentation comes in. Behavioral segmentation in marketing is essentially an exercise in breaking down key attributes of your customer base and marketing to each “segment” in a different way in order to appeal to them in a more personal way.
Let’s break down the basics of behavioral segmentation and its core concepts.
Define Behavioral Segmentation
Behavioral segmentation is one of four primary segmentation categories in marketing.
The main four are:
- Demographic segmentation: Sorts customers based on age, income, gender, race, occupation.
- Geographic segmentation: Sorts customers based on region and where they live.
- Psychographic segmentation: Sorts customers based on interests, opinions, values, lifestyle.
- Behavioral segmentation: Sorts customers based on patterns in their decision-making, such as purchases, use, consumption, and product preferences.
While all of these are important, it’s behavioral segmentation we’re focused on today.
As you might have guessed, the most important aspects of this focus are how customers behave—so you may ask the following:
- Who are your most loyal customers?
- What drives their loyalty?
- Why are some customers more likely to repeat purchase than others?
- To what extent and how do they engage with your service and product?
- What are the commonalities between loyal customers, and how can that information be used to improve retention with them as well as drive more retention among other customers?
In short, you want to be able to understand why your customers are acting in a certain way towards your brand and then use that information to deliver more personalized experiences for them.
Key Aspects and Examples of Behavioral Segmentation
Now, let’s break down behavioral segmentation to its key factors. These are the determinants that will help you build a strategy to better target and retain customers throughout the buyer’s journey.
There are certain characteristics of customer behavior that businesses should be aware of to help their marketing strategies, including:
- Purchasing behavior
- Occasion purchasing
- Customer usage
- Benefits sought
- Loyalty gauge
- Buying stage
Purchasing behavior refers to the actions undertaken by consumers before concluding that they want to buy a product or service.
What are the key factors that drove a customer to buy your product? Was it free shipping? A simple returns policy? An extended warranty? What was it that made the buyer fully commit to the purchase?
This can often be difficult for a business to quantify, and many businesses send out surveys in order to get this information to inform their service.
Do customers buy your products at a certain time of year? What effect do seasonal trends have on your business?
Understanding how occasion purchasing influences the sales made by your business is key to being able to formulate a plan that takes full advantage of marketing campaigns.
You might discover a product or service sells surprisingly well during a particular month, and you’ll want to use that information to shift your marketing focus to that.
This is one of the more crucial aspects of behavioral segmentation. Marketers will typically split customers into three types:
- Heavy users: These customers use your service the most; they are the most engaged and the most loyal.
- Medium users: These customers use your service on a semi-consistent basis, often driven by occasion purchasing.
- Light users: These customers use your service less than any other and are susceptible to being poached by competitors.
Understanding which customers are your heavy users helps you build a picture of what it is about your service that they like the most—is there something about your software, service, or product that they especially enjoy using? Is there a feature that is used frequently by heavy users but not by medium or light users?
When you know information like this, you can begin to target light users with campaigns centered around what your heavy users find best about your service and turn them into more engaged customers.
What benefits are different customers seeking from your product?
If Customer A is buying your shoe product because of the comfort it offers and Customer B is buying your shoe because of style, you may want to segment them and target them with campaigns that appeal to their differing sensibilities
A business without this information on benefits sought might hit them both with the same campaign, whereas if you have this data at hand, you can target them more effectively with a personalized message.
Who are your most loyal customers? The ones who are invested in your brand and engaged with who you are and what you provide?
These are the people who you need to invest in, nurture, and keep around—they’re your biggest cheerleaders and provide you the most revenue.
A 5% increase in customer retention correlates with at least a 25% increase in profit.
By identifying which customers are most loyal to your business, you can segment them and send personalized campaigns that cater to their needs and make them feel cared about.
Likewise, you can see who your less loyal customers are and engage them with promotions and incentives to improve their loyalty and avoid having them take their business elsewhere.
Where is your customer in the buyer’s journey? Depending on where they are, whether they’ve only just heard of you or they’re a first-time buyer, your messaging towards these audiences will alter drastically.
The different stages of the journey are:
- Awareness: Customer discovers the product exists
- Education: Customer learns more about the product
- Consideration: Customer considers what the product can do for them
- Purchase: Customer becomes a first-time buyer or user
- Adoption: Customer retains product and buys again or decides not to buy again
- Advocacy: Customer spreads the word about the product
When you can segment your customers according to the stage of the journey they’re on, you can target them appropriately.
If you’ve ever left an online shopping cart with items in, you might receive an email reminding you of this—this is the company’s marketing team recognizing you’re in the Consideration stage and targeting you with a personalized email to nudge you along the journey.
Why Is Behavioral Segmentation Important?
Behavioral segmentation is important for businesses because it allows them to take a more personal approach in their marketing, and a personalized experience for customers is a huge competitive element for SMBs.
87% of organizations agree traditional experiences no longer satisfy the needs and expectations of customers today.
Generally speaking, it’s more difficult to ascertain the data necessary to segment audiences on their behavior, but the reward is significant if you can truly understand what drives your customers, get into their shoes, and deliver them a service according to their needs.
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