What is Behavioral Segmentation?

The internet has enabled companies to understand their consumers better, thanks to data. Today, brands can dig deep into data insights to unearth consumer patterns that can help them sell more. Thanks to advances in predictive analytics, it is possible to deliver the right message to the right person at just the right time. At the heart of this kind of personalization lies behavioral segmentation.

What is Behavioral Segmentation?

Behavioral segmentation delves into the how and why of consumer purchases. For instance, how consumers choose to spend their money and when. The goal of this kind of segmentation is to understand the shopping patterns of the target audience and answer key questions such as:

• How do they arrive at a purchasing decision?
• What makes them choose Product A over Product B?
• What are their feelings towards certain companies, products, or services?

When used in conjunction with other kinds of audience segmentation, such as demographic segmentation, behavioral segmentation can help brands discover key insights, such as:

• Opportunities for upselling and cross-selling
• The best time of the day or week to deliver marketing messages to their target audience
• Expectations and/or pain points of customers, which can explain high churn rates

Why is Behavioral Segmentation Important?

Let’s say you are an online education platform that is looking to consolidate its market position. In order to do so, your primary focus has to be on existing customers, and hence, reducing your churn rate. With the help of behavioral segmentation, you can drill down into behavior patterns of users who are quitting your platform. Based on this information, you can then devise a content strategy that keeps them from quitting.

Typically, this method of audience segmentation has four key benefits:

• Personalization: By understanding how different audiences interact with your brand, you can personalize your marketing messages nurture leads, and improve engagement rates. In fact, most consumers prefer personalized marketing messages, since they seem less intrusive.
• Forecasting trends: A careful analysis of users’ past behavior can tell you when they are most likely to purchase from you. The predictive benefits of behavioral segmentation are especially handy for capitalizing on life events and micro-moments.
• Prioritization: With the help of behavioral segmentation, you can prioritize your marketing spend to achieve business goals, such as a lower churn rate, or higher revenue. Our example of an online education platform is a case in point.
• Optimal performance: It allows you to monitor the changing tastes of your target market, thus allowing you to stay ahead of your competitors.

Examples of Behavioral Segmentation Targeting

Typically, any behavioral segmentation strategy takes into account any or all of the following key parameters:

• Acquisition: How a target consumer converts to a paid customer
• Usage: How users interact with a product, service, or brand
• Engagement: How often users interact with a product, service, or brand
• Retention: How long users stay with the brand

Based on those parameters, there are several ways to segment your target audience, behaviorally, such as, based on:

Usage behavior

Let’s say you have a ride-sharing app. Typically, office-goers are likely to use your service on weekdays, while the younger crowd might engage with your app more on weekends. By segmenting your audience according to weekday and weekend users, you can then craft marketing messages that goad your audience into more engagement. For instance, you could offer discounts to weekday users on weekends to encourage them to book a ride through your app.

Similarly, you can also segment the audience according to regular users and people who use your app infrequently. You can give regular users special discounts to increase loyalty, or offer discounts to infrequent consumers for more engagement, depending on your business goals.

Benefits sought

When consumers are researching products or services, their browsing history can tell you the benefits they are looking for from a particular purchase. For instance, person A might be looking for sweatproof earphones for a workout, while person B might be more interested in high-fidelity earphones for listening sessions. Demographically, the two people can be similar. However, if you target both these people with the same marketing message, you have a lower chance of a conversion.

By drilling into why people buy a certain product or service, you can personalize your marketing messages to improve your marketing ROI.

Loyalty

Broadly speaking, customers can be segmented into two kinds – habitual and loyal. Habitual customers are people who always need products or services that you are selling, while loyal customers are the ones that always buy those products or services from you. For instance, a habitual customer always needs body wash – where they buy it from is really inconsequential to them. It is more of an impulse purchase. On the other hand, a loyal customer will always buy your body wash.

Segmenting your market based on loyalty can yield some valuable marketing data, such as key behaviors in the customer journey that point to customer loyalty, how best to maintain that loyalty, and how to maximize that segment’s value.

Timing

You can also segment your audience based on a particular time of the year or a certain occasion in your consumers’ life. For instance, you could segment your audience according to people who are the highest spenders during the holiday season. Similarly, you can segment people according to certain life events, such as birthdays and anniversaries. Some life events are periodic, such as taking your car for a yearly checkup; while others can be more spontaneous, such as road trips and bachelor parties.

A typical approach for using this kind of segmentation, though, is to hone-in on time of day or week for maximum engagement. For example, if you are a food ordering app, you might find that you get maximum engagement on Fridays. Thus, you can tweak your marketing strategy to deliver ads to your target audience on Fridays to push engagement.

How to Make the Most of Behavioral Segmentation

Whatever method of behavioral segmentation you use for marketing, it is important that the purpose of segmentation is closely tied to your business goals. For example, if you are vying for new consumers, it makes sense to understand what benefits are the most appealing to your target audience. Here are a few ways you can make the most of your behavioral segments:

Remarketing

Based on historical data, you can predict future buying behavior. For instance, someone who has bought a blazer online might also be interested in formal shoes. Using such information, you can make remarketing lists and target people with the right messaging.

Targeting high-value customers

Analyze the buying patterns of your most loyal and high-value customers. Find out what benefits they are most attracted to, when do they usually buy, and how often they buy from you. Based on this information, target them with exclusive discounts, or personalized content, to boost your top line.

Nurturing leads

Behavioral segmentation can also tell you when someone is most likely to convert. For example, an online education platform might find that people who signup for their newsletter, typically, convert within 1-2 weeks. Based on such information, you can prioritize your marketing resources to nurture such leads and increase your conversion rate.

Increasing customer lifetime value and/or reduce churn rate

You can segment your audience according to people who are most likely to quit being your customer. This can be especially useful for SaaS companies since they rely on repeat, monthly business. For instance, data might show that people who haven’t used your software in more than 15 days are likely to end their subscription. Behavioral analysis can also throw up a bunch of likely causes for churn. Based on such information, you can then target these people with messaging that (maybe) alleviates their pain points and convinces them to stay, thus lowering your churn rate.

Similarly, you can segment your audience according to long-time customers who are likely to quit. You can target them with lucrative offers in order to goad them to stay longer with you, thus increasing your customer lifetime value.

As with any other kind of modern marketing tactics, behavioral segmentation relies on A/B testing and agile methodologies. Test, rinse, and repeat is the order of the day. At IronFocus, we have experts who eat, sleep and breathe marketing. We help you optimize your marketing campaigns, so you can focus better on the rest of your business.