Gone are the days when putting a sign up outside your business was all you had to do for customers to find you. Since then, companies have developed ways to use technology in their favor. Being able to track consumer behavior has created a whole new breed of personalized marketing rooted in behavioral segmentation.
But to even begin understanding consumer behavior, you must understand the overall journey a customer embarks on – from discovery to purchase to loyalty.
Understanding the Customer Journey
A customer journey seems pretty simple – you offer products and/or services, and people buy them. But when you begin to dissect this, you discover that the journey is actually quite nuanced with several steps along the way from discovery to purchase. Today’s consumers discover companies in a variety of ways, and not every contact begins the same. For instance, a potential customer’s first contact with your company could begin with:
- Search engine results
- Social media platforms
- Marketing campaigns
The overall goal of personalized marketing is to meet your potential customers at just the right moment, no matter what leg of the journey they’re on.
Segmenting Your Audience
Marketing segmentation is the division of your audience and the subsequent creation of smaller groups of customers. These groups, or segments, are based on common characteristics shared amongst the group. After you’ve divided your audience, marketing messages can be personally tailored to each group, providing a more relevant message to each segment.
Types of market segmentation
Whether your business is an established national corporation, a small local business, or a soon-to-launch online boutique, you must segment your market. The major types of market segmentation are:
- Demographic – based on age, gender, occupation, etc.
- Geographic – based on prospect’s location
- Psychographic – based on personality, values, interests, etc.
- Behavioral – based on actual purchasing behavior and other actions taken within the customer journey
Every segment is an important way to understand and communicate with your market, but behavioral segmentation is perhaps the clearest direct line that lets you know which consumers are more apt to purchase one of your products.
What is Behavioral Segmentation?
This method of market segmentation delves into the how and why of consumer purchases. For instance, how consumers choose to spend their money and when. Its focus is on their shopping behavior and answers 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? Services?
When you segment your market behaviorally, you’ll get instant answers to your own specific questions, such as:
- Which of your current customers are most loyal?
- Is there a certain time (of day or year) when specific customers are more likely to make a purchase from you?
- Do your current customers buy from you based on your price points, or do they simply prefer your company over others?
To gain a critical understanding of this type of segmentation, you must take a look at the heart of the category. By further dividing this market segment into subcategories, you’ll glean useful insight into how your market plans, decide, and ultimately makes its purchases. These subcategories are:
- Buying behavior
- Occasion buying
- Customer use
- Purchasing stage
These subcategories are discussed in more detail later in this article.
Why is marketing by behavior important?
Behavioral segmentation is by far a more difficult process than the three other main segmentation categories, but putting in the work is well worth it. Understanding why your customers chose yours over other products, services, or companies is the Golden Ticket of market research.
It’s important to separate your audience based on behavior because you’ll discover:
- What causes people to purchase from your brand
- Which customers are most loyal and how you can maintain their loyalty
- The perfect time to reach customers – when they’re ready to buy
- Where certain customers are in the purchasing process and how to get the right message to them at the right time
- Where to focus your marketing budget – reducing spending on consumers not ready to make a purchase, whose loyalty is on the low end, or those who aren’t or might not be heavy users or recurring buyers
Basically, all of the above is a fancy way to say that segmenting by behavior allows you the focus of tailored marketing. Every dollar you’ve allocated to marketing can stretch further and provide better returns.
Advantages of behavioral segmentation marketing
There are four major advantages of behavioral segmentation marketing, known as the 4 Ps:
- Personalization – lets you nurture buyers and potential customers
- Prediction – knowing past behaviors allows you to predict future ones
- Prioritization – knowing the prospects with the highest value and greatest ability to impact your company helps you make smarter timing, budgeting, and resource-allocation decisions
- Performance – continuously monitoring patterns of growth and change can help you gauge the overall health of your brand, which allows you to track your progress towards goals
Of course, all segmentation methods are important in their own right, but behavioral segmentation offers more relevance – it’s not just effective for your company, it’s actually more preferred by consumers, also.
Are there disadvantages of behavioral segmentation marketing?
The whole idea of behavioral segmentation is to provide the consumer with a personalized message. While quite effective, there are certain drawbacks from the consumer perspective, as well as the advertiser perspective.
- Invasion of privacy – whether real or imagined, consumers can feel their privacy has been invaded when they see ads for items or services they’ve recently searched or purchased.
- Opt-out availability – many advertisers offer the ability to opt-out of personalized ad delivery, meaning the consumer’s personal information is no longer tracked by that advertiser – but this action must be repeated for each advertiser.
- Cost – personalizing ads usually cost more for companies versus broad scope, less-targeted advertising.
- General confusion – from small startups to established companies, there’s a general confusion surrounding personalized ads, how they work, how to best obtain results, and how to address privacy concerns.
Using behavioral segmentation also doesn’t consider why people purchase certain products, what their needs are, or their lifestyles. So, if you’ve never segmented based on behavior, there’s a bit of a learning curve. It may take time before you’re able to fully understand this view of your market, but with continued application, the results are well worth the time investment.
Examples of Behavioral Segmentation Targeting in Action
Behavioral marketing has several subcategories, as mentioned above. These subcategories also illustrate the customer journey in a much more detailed manner. Again, these subcategories are:
- Buying behavior
- Occasion buying
- Customer use
- Purchasing stage
Below, the focus is on buying behavior, benefits, loyalty, and the purchasing stage.
Sub-segmentation based on buying behavior gives you an inside look at consumers’ decision-making processes. It can help you understand just how complex the buying process is, as well as:
- How buyers reach their purchase decisions
- The barriers consumers may reach on the way to buying
- Behaviors that are more or less likely to predict a purchase
These behaviors can be further divided into four categories:
- Complex – when there are significant differences among similar products or brands
- Variety – when the consumer isn’t heavily invested in the act of buying. In other words, the buyer doesn’t care much one way or the other.
- Dissonance reduction – when the consumer is contemplating a major purchase, but there are no significant differences between competing products. The buyer may choose a product based on price point rather than quality, for instance.
- Habit – when the purchase isn’t involved and there’s little to no variance between competing products, simple personal preference is the deciding factor.
At some point, nearly every consumer falls into all of these categories. If you can understand how personal buying behavior and product purchases are related, you’ll have no trouble determining the perfect strategy for your market.
When consumers look for products or services to purchase, their online behavior reveals significant insight into the benefits, features, and/or problems that most apply to them. When you realize consumers place greater value on a certain benefit or feature over another, you’ve just uncovered the motivation for that specific prospective customer.
For instance, two prospective customers could appear identical demographically but have values at opposite ends of the spectrum. If you were to send the same message to all consumers, you’re only going to capture those with whom that message resonates.
This subsection of behavioral marketing is actually a good gauge for other segments. For instance, buying behavior, use, and time of purchase can be gleaned by taking a look at your loyal customers. Two types of customers exist, though – habitual and loyal. The difference between these two customer types is that the habitual customer always needs your products or services, but the loyal customer always buys from you. So for instance, the habitual customer always needs body wash – whether they buy yours is really inconsequential to the buyer and more an impulse purchase, whereas the loyal customer will always buy your body wash.
Segmenting your market based on loyalty can yield some of your most 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.
You can align your marketing communications based on the consumer’s place within the customer journey. By personalizing the consumer’s experience, you can increase your conversions at each stage. If there are steps within the journey where customers aren’t progressing, you’ll identify them right away and know where to boost your marketing efforts.
This is not to say that purchasing stage segmentation is simple. No matter where a consumer is along the journey, they’re still interacting across channels with no obvious order or timeframe. In other words, honing in on one single behavior won’t pinpoint where that customer is on the journey. By leveraging all behavioral data and building algorithms, you can begin to improve your accuracy.
How to Make Your Behavioral Segmentation Targeting Campaign Successful
There are several approaches to move your campaigns into successful territory, but these three tactics can glean the best results:
Implementing an email retargeting tool helps you deliver automated messages specifically personalized for each segment of consumers. For instance, say a prospective customer visits your site, adds something to their cart, but navigates away from your site before completing the purchase. This tool can automatically send them an email that recommends complementary or similar products. Decoding all the reasons why carts are abandoned is a whole other animal, so experimenting with various types of messaging could yield some interesting data.
Having a watchful eye on all your data collection helps you deliver exactly the right product offer at the right time to the best audience. Which products or product categories do consumers seem to gravitate towards in general? On your company website? By collecting and analyzing this data, you can deliver effective, personalized promotions to your market segments that exhibit similar behaviors. If you couple this with timing-based, behavioral segmentation, you’ll get even better results.
Small site navigational changes
Even the smallest change on your company site can impact consumer behavior in a big way. Font type and size, color changes, larger buttons, and different methods of contact are just a few changes you can implement based on user behavior. Do certain colors have a better response than others? Consider different strategies that can lead to conversions based on behavior. These changes can even boost your sales regardless of audience segment.
Your marketing efforts should obviously be well-rounded, but mastering behavioral segmentation is a must. In fact, it’s something that consumers expect. Nearly all consumers expect companies to personalize communication and present products or services that are relevant to them.
Each time you segment behaviorally, follow up with marketing tactics specifically recommended by the data. You’ll create better campaigns that are better targeted which, ultimately, leads to increased sales.