Behavioral segmentation stands out among other types of segmentation since it directly measures consumer behavior with your brand. It stands out in this experience economy. Discovering and leveraging how your customers interact with your brand can greatly drive customer engagement, retention, and loyalty.
In fact, 77% of email marketing ROI comes from such campaigns. A person’s behavior with other people and with companies is a leading indicator of whether the experience is good. Behavioral segmentation helps discover unknown patterns and segments. We’ll talk more about it and why it matters with four examples.
What is behavioral segmentation ?
Behavioral segmentation separates the customers into different segments based on their behavior with your website or app—products viewed, clicked, added to cart, exited, etc., and their overall interaction with the brand on other platforms.
For example, if a customer repeatedly visits a product page without completing the transaction, it can imply that they are waiting for the price to drop. You can immediately identify this behavior with behavioral segmentation and send a discount code to motivate them to complete the purchase.
Why is behavioral segmentation important for your business?
The most significant differentiator of behavioral segmentation is that it doesn’t rely on static data, like demographics or location. But on highly dynamic data that changes all the time, like what customers want and what they need, how do your customers make their decisions, why do they prefer one product to another, how they feel about your brand, why they choose you, and who are your most loyal customers.
Organizations that leverage customer behavior data to extract behavioral insights outperform others by 85% in sales growth and more than 25% in gross margin.
Behavioral segmentation accurately targets the ever-changing buying behavior—timing, browsing pattern, decision pattern, loyalty, purchase scale, average cart value, etc., and that’s why campaigns based on this can be more precise, personalized, and effective. It also drives unprecedented brand loyalty, puts you way ahead of the competition with targeted messaging, and helps reduce customer churn.
4 behavioral segmentation examples
There are four main kinds of behavioral segmentations that explain customer behavior with a brand and how brands can use it to their benefit.
1. Purchase behavior: Amazon
Purchase behavior answers what motivates your customers to make the purchase, their obstacles, and the triggers they respond to. It then helps you form strategies that support your customer’s buying decisions.
Amazon highlights a lightning discount deal to create subtle urgency and target customers who are encouraged by discounts. The brand addresses what customers think before making a specific purchase and, in this case, targets customers who seek discounts and are motivated by a time crunch when they are given one.
Sometimes customers gather a lot of information before deciding, make intensive comparisons which is common in the case of expensive purchases. Other times, they make an impulse buy without much research, or buy out of habit at a defined frequency. Amazon doesn’t use the same strategy and messaging to target all of these segments. It adjusts them to fit customers’ purchasing behavior.
To target customers who consistently use products, Amazon highlights the ‘Subscribe and Save’ option, where customers can automate the purchase of the product and avail further discounts.
Additionally, when you have answers to questions like—how many interactions does it take for your customers to proceed to conversion, what were they searching for when they found your brand, or what are they searching for on your website/app, you can address their needs better, target them with personalized messaging, and are much more likely to convert them.
Purchase behavior segmentation can be divided further into four types :
1. Complex buying behavior : cars, homes
Customers are highly involved since it’s an expensive purchase (economically risky decision). They conduct their due research, and consult with their friends, family, and experts before deciding. Brands must influence customers’ beliefs and attitudes to target this behavior.
2. Dissonance reducing buying behavior : diamond rings
Customers are highly involved in the purchase but settle for the readily available one because the variety is limited, and there are no significant differences between similar products of different brands. Since the products are similar, brands must offer exceptional customer service or after-sale experience and focus on driving repeat purchases to stand out.
3. Variety seeking buying behavior : frozen foods
Customer involvement is low, but there are significant differences between brands. With abundant options, customers often switch to try different varieties. Established brands can induce habitual buying behavior, while new brands can offer discounts, free samples, etc., to target this purchase behavior.
4. Habitual buying behavior : toothpaste
Customers’ involvement is low, but there are no significant differences between brands. Customers don’t research before making such purchases and are driven by brands they have always been using. Brands must focus on building and maintaining brand familiarity to influence this purchase behavior.
2. Occasion and timing : Uncommon Goods
You can also segment customers into different categories based on the occasion and timing. Here customers interact with the brand only during occasions—the holiday season or special occasions like birthdays and weddings.
Unique gifts brand, Uncommon goods, for example, sends one of the most well-known re-engagement emails to their dormant email subscribers just before Christmas and the holiday season to get them back. The brand targets customers who buy from them through these emails, especially before specific occasions (here, Christmas), as per their past behaviors.
Similarly, brands can track the right timing when the customer engagement is at its peak and reel in more customers by delivering personalized smart push notifications during those peak hours.
For example, Zomato sends lunch ordering notifications during lunch hours.
Occasions can also make space in a customer’s daily routine, for example, coffee before work, drinks on Friday after work, or ordering in and family time on Saturday nights.
You can use these occasions to target, retarget, and engage customers at the right time.
3. Benefits sought : Sephora
Benefits sought segmentation divides your audience depending on the benefits they are looking to receive from your products.
Sephora’s “Shop By Concern” category helps customers filter products based on their problems and the benefits they are seeking. In this way, the customers find the products faster, and the brand can use this data for segmentation and targeting purposes.
All kinds of customers go through Sephora’s skincare collection—some customers might need a product that combats dryness while someone else might want to reduce fine lines. And Sephora targets all these segments individually based on the unique benefits its customers are looking for from its products.
Benefits sought segmentation communicates the right value to customers, like the USP of your product as perceived by your customers, areas where your product is better than your competitors, areas that please your customers, and areas that need improvement.
4. Customer loyalty : Native
Loyalty-based segmentation divides customers on the basis of their loyalty level, which is measured through the number of purchases, engagement, rewards programs, referrals, etc.
Skincare brand, Native, offers quirky titles and certain perks to customers who display loyalty to the brand. The perks include early access to sales to get hold of the latest products. Moreover, they have introduced a point system where loyal customers can stack points for following them on social media, creating an account, making their first purchase, etc., and collect discount coupons in exchange for these points.
Native treats its loyal customers as assets as they create a regular stream of income and are also instrumental in referrals, feedback, and word-of-mouth advertising. Identifying and extracting value from this segment helps Native understand the motivation behind its customer’s loyalty and enables it to better stage the company’s value proposition and optimize its future campaigns.
For behavioral segmentation, marketers need to identify specific key points such as what exactly influenced loyalty in the customer journey, which customers should be offered exclusive loyalty programs, how to maximize engagement with loyal customers, and more. Brands must also prioritize the product feedback from this segment over others.
Benefits of behavioral segmentation
Behavioral segmentation helps you tailor your marketing efforts to your customers based on their interactions with your brand. Here’s how.
1. Leverage your loyal customers to drive further loyalty
Behavioral segmentation helps you understand larger trends, habits, and buying motivations of your most loyal customers, which you can leverage to drive loyalty from other customers.
2. The right message to the right customer
When you know how a customer behaves with your brand, it’s easier to reach them with relevant, targeted, and personalized messaging at critical points in their customer journey to engage and convert them.
3. Reach customers at the right time
Behavioral segmentation helps you influence occasion-based behavior by targeting customers who buy only on select occasions. As a result, none of the marketing communication to the customers is wasted, and you’re less likely to spam customers.
4. Optimize the marketing budget
Behavioral segmentation prevents you from spending a significant chunk of your marketing budget on customers who aren’t ready to buy or have low loyalty. With access to customers’ buying behavior, you’ll be able to optimize your budget allocation, extract the most ROI, and upsell and cross-sell to customers who regularly interact with the brand.
5. Understand your customers thoroughly
Behavioral segmentation gives insights into what motivates your customers to choose you and buy from you, what works, what doesn’t, and what needs to improve to build upon your unique value proposition and stand out from competitors. You can leverage all of this to segment and target better, deliver precise messaging, and engage, convert, and retain faster.
6. Create a forward plan
Learning about the customer’s purchase behavior will help you create a restocking plan to keep up with the sudden surges in demand. Behavioral segmentation will provide valuable feedback to either speed up or abandon the development process of new products and their updates.
Understanding consumer behavior with your brand has its unique benefits. Since behavioral segmentation isn’t as straightforward as other forms of segmentation, guesswork will waste time and resources. This makes tools necessary. Netcore’s customer engagement platform helps you with behavioral segmentation, automations, journeys, channels, and a lot more. Visit our customer engagement page to learn about our platform.