Behavioral segmentation: Examples and variables

What if someone were to say that all customer journeys are the same or that all your buyers show identical purchase behavior – looking up a product online, adding it to cart, and proceeding to checkout?

Any marketer worth their salt knows that it is a false statement because:

• Not all customers follow the same path to purchase.
• Only a few buyers proceed directly from online search to checkout.
• Users of the 21st century do extensive research, compare products, and check reviews before buying the smallest of things.

The statement heavily oversimplifies the complex dynamics of consumer decision-making.

In reality, there are various factors like demographics, psychographics, past purchase experiences, and situational contexts that influence how, when, where, and why customers interact with your brand, product or service.

Behavioral segmentation helps you answer the “how” by segmenting your consumers based on their actions and interactions with your brand.

You can use behavioral data to sort your customer base into different segments and identify distinct purchasing behavior, optimizing your marketing campaigns and overall customer experience to drive successful conversions.

What is behavioral segmentation?

Behavioral segmentation is a type of market segmentation that uses customer behavior to divide your audience into different groups based on the way they act and interact with your brand, product, or website.

You might wonder, what is customer behavior?

Customer behavior refers to the actions, decisions, and interactions that people engage in when they consider buying or using your products and services, like their buying habits, product usage, and attitudes.

Of course, behavioral segmentation is not limited to just these variables.

It also includes a range of other consumer activities, such as finding products, comparing options, making purchase decisions, using or consuming products, seeking customer support, and giving feedback.

It empowers you to find answers to questions like:

• How many touchpoints does one need to cover before they become a customer?
• How do customers interact with your website and content?
• What sources of information do they rely on to learn about new products or updates from the company?
• How do they typically use the product or service?
• What features or aspects do they find most valuable?
• Do specific occasions, events, seasons, or holidays influence their purchase decisions?
• Are they attracted to freebies, promotions, and discounts?

You don’t find this kind of data in other types of segmentation options – think geographic segmentation or psychographic segmentation.

Here’s a practical example.

Suppose a tech store is targeting young adults aged 18 to 30 years as part of their search ad campaign. After analyzing their behavioral patterns, they identify four subgroups within their target demographic:

• Tech enthusiasts interested in the latest gadgets
• Fitness freaks looking for wearable health trackers
• Gamers interested in gaming accessories
• Budget shoppers looking for discounts and promotional products

The gadget store can use this information to personalize their marketing messages to suit the interests and preferences of each segment, maximizing engagement, relevance, and ultimately, conversions.

Benefits of behavioral segmentation: Engagement, personalization, and more

When you divide customers into different behavioral segments, you take a positive step toward understanding your customer base, building better products or services, and developing highly targeted marketing strategies.

This not only helps you save time and money but also invest your resources and subsequent marketing efforts in a better direction.

Having said that, let’s explore some of the benefits associated with behavioral segmentation.

Identify engaged users

A customer may like or dislike your products; those who like them will probably buy them, while those who don’t will not.

Highly engaged users, such as the people who regularly visit your ecommerce site, download your web resources, share your social media posts, and respond to all your outreach emails are highly profitable for your business.

Knowing who these customers are, along with the factors that motivate them, can help you refine everything from your marketing materials to your brand or product positioning.

According to Twilio, brands who focus on customer engagement are 41% more likely to achieve higher conversion rates. Behavioral market segmentation thus empowers you to make decisions that will positively impact your budget and total marketing revenue.

Offer personalized experiences

Personalization or the act of customizing a product, service, or business plan to suit the tastes and preferences of your target customers is the end goal of any segmentation strategy.

When you know the needs, wants, and demands of your target market, you are more likely to get the right message to the right person at the right time and place.

You can reduce cart abandonment rates, fasten the purchasing process, and reduce bounce rates.

It need not just apply to messaging and communication.

By segmenting your customers based on their behavioral patterns, you will be able to build products that are the best fit for your ideal users. Doing so not only guarantees user satisfaction but also increases the likelihood of repeat purchases and long-term loyalty.

Moreover, a user-centric product gives your brand a strong standing in a crowded marketplace, leading to an increased market share.

Save resources

As we’ve mentioned, focusing your efforts on customers with high conversion potential is the best way to save valuable business resources. In fact, zeroing in on this group can help you cut costs.

No need to splurge on an audience that wasn't yours to begin with, right? It's all about efficiency—getting the most bang for your buck.

Instead of casting a wide net, you're targeting those closest to your ideal customer profile – the people who actually need your solutions to their problems. By narrowing your focus, you're maximizing your impact and efficiently using your budget.

It's like aiming for a bullseye instead of shooting in the dark. So, when pinpointing your target segments, you're not just saving money; you're also acquiring and retaining customers every time.

Build brand loyalty

Customers who are not bombarded with irrelevant ads or messages usually like your brand because you are different from the others.

By carefully sending them content that is closest to their needs, they are more likely to engage with the ones that are closest to their preferences. Customers who get personalized attention are more likely to become advocates of your brand.

• Identify loyal customers who frequently interact with your brand
• Offer rewards and incentives to encourage repeat purchases
• Customize messaging to build a strong connection with your buyers

Recognizing specific needs and preferences of customer segments enables you to address their pain points effectively, increasing satisfaction and loyalty.

You can additionally enhance customer experiences by creating memorable interactions that strengthen the bond between customers and your brand.

Predict patterns

It doesn’t matter if you are running an ecommerce website or a brick and mortar store – with the help of behavioral data, you will be able to predict how your customers will buy (along with the products they will buy) in the future.

Historical behavioral patterns collected from customers can be used to gather valuable insights to shape future behaviors and outcomes.

Whether it's recommending relevant products, optimizing the shopping experience, or refining marketing campaigns, behavioral data equips you with the foresight needed to anticipate and meet the ever evolving needs of your audience.

Improve customer retention

According to Forrester, a 5% improvement in customer retention can boost profitability by 25%. The stats are out; you give customers what they want, and they'll keep coming back for more, exponentially driving up your revenue.

Grouping users based on their actions and interactions allows you to personalize your marketing and product strategy. This, in turn, enables marketers to:

• Create tailored experiences based on past actions
• Solve customer needs and problems at the right moments

It saves you from making the error of sending the wrong advertisements and marketing messages to the wrong crowd. For instance, loyal customers should receive exclusive offers to reinforce their loyalty, while at-risk customers can get targeted ads to prevent churn.

In addition, analyzing behavioral data helps you identify areas for improvement in your products or services and increase user satisfaction.

Major types of behavioral segmentation variables

In behavior marketing, your audience is divided into segments based on certain factors and variables. These can include the time when your customers make a purchase, their buying habits, product usage, or loyalty to your brand.

Now, some of the main types of behavioral segmentation are:

• Occasion-based segmentation
• Purchase-based segmentation
• Usage-based segmentation
• Loyalty-based segmentation
• Benefits-based segmentation
• Customer journey-based segmentation

You can use your customer segmentation data to group your buyers into one or more of these categories.

1. Occasion

Also known as timing-based segmentation, occasion-based segmentation segments your users based on when they typically make a purchase or use your product.

It can include universal instances or seasonal holidays like Christmas or Easter and personal events like weddings, anniversaries, and birthdays.

• Universal occasions – Regular, everyday purchases made by people across the world (or a majority of your demographic audience). It can include holidays, national days, and international events.
• Seasonal occasions – Purchasing patterns are controlled by seasonal factors. For example, people are highly likely to buy warmer clothes in the winter to beat the cold weather.
• Rare occasions – Products and services are bought for personal events like weddings and anniversaries. Often hard to predict, these purchases are spontaneous and irregular.

In order to group buyers under this category, you need to consistently monitor their purchasing and spending habits for a long period of time.

2. Purchase patterns

Purchasing patterns are analyzed to create segments based on users’ behavior when they are trying to make a purchase. Basically, it focuses on how customers make buying decisions.

Henry Assael has identified four types of customer buying behavior:

1. Complex

Consumers are highly involved in the buying process, especially if there is a big difference between brands. They research a lot, compare options, and think carefully before making a decision.

Such behavior is commonly seen with expensive or infrequently bought products such as cars, houses, or high-end electronics.

2. Dissonance reducing

Although buyers are still highly involved in the purchase process, they fail to see differences between brands. Consequently, they experience uncertainty about whether they made the right choice after buying the product.

To feel better, they seek positive reinforcement from others. This is typically seen with high-involvement items like appliances or furniture.

3. Habitual

Habitual buying behavior occurs when users have low involvement in the purchase process since there is little difference between two brands.

Buyers make routine purchases without thinking about it, often out of habit and convenience – opting for familiar brands. Common examples include everyday items like toothpaste, soap, tissues, or groceries.

4. Variety seeking

Customers love trying out new products or brands; often switching between brands to avoid boredom or routine.

Such users have low involvement in the buying process but pay close attention to the differences between brands. They are open to change and seek novelty in their experiences.

This behavior can be seen in product categories such as snacks, beverages, or cosmetics.

3. Usage

Usage refers to the number of times a customer uses your products or services. Instead of relying solely on demographic or psychographic variables, it looks at how users engage with different types of products.

Engagement and usage can be heavy, moderate, or minor.

• Light users: One time buyers who don’t often use your products
• Moderate users: Engage with your services on specific occasions
• Heavy users: Spend the most amount of time and money on your solutions

Usage based segmentation makes use of factors like frequency of usage (how often), usage intensity (how much), or specific features utilized. In fact, your audience can be grouped into light users, moderate users, and super users.

Segmenting customers based on this criteria will help you tailor pricing plans to better meet the usage capacity of each user segment.

4. Customer loyalty

Loyalty is an important factor for identifying repeat buyers and understanding their behaviors. Repeat buyers are useful since they give out referrals and spread positive word-of-mouth to their friends, family, and acquaintances.

Walker’s Loyalty Matrix segments prospects into four groups based on their behavior (what they do) and attitude (how they feel about a brand).

Truly Loyal: Emotionally attached, these customers love what you offer and plan to stick around. They are happy with your products, more likely to spend and recommend you to others.

Accessible: Their loyalty is conditional. Even if they like your services, they will discontinue usage if something changes in their needs, and they no longer require your product.

Trapped: People buy out of habit and are not particularly thrilled about it. They feel stuck, maybe because they lack alternatives. Eventually, they'll find a better option.

High Risk: These buyers have had a negative experience with your brand and thus won't be using your services again. They might even spread negative reviews about your company.

Many industries use customer loyalty segmentation to attract users.

One of the most common examples is the frequent fliers programs airlines promote. Customers appreciate these programs because they know they get rewards for sticking with the airline, like a way for businesses to acknowledge and thank them for their support.

5. Benefits

Benefits based segmentation is a specific approach within behavioral segmentation that focuses on grouping customers based on the benefits they seek from a product or service.

Here’s an example.

People buy clothes, but they look at different things before making a purchase. Some seek comfort, while others want to find the right size and fit, and still, others may be looking for a specific color.

If you’re an apparel store, you need to identify the benefits they want from your products and customize your offerings accordingly.

You can discover the benefits that users seek from your product by doing the following:

• Conduct surveys and interviews to gather direct feedback
• Analyze reviews on different social networks
• Monitor product usage data

This exercise will give you an understanding of how customers interact with your products, as well as the jobs they want to get done.

6. Customer journey

Most marketers are familiar with the concept of customer journeys – the series of steps or touchpoints that lead a prospect through various stages until they become paying customers.

You can use the AIDA (Attention, Interest, Desire, and Action) marketing model to segment your buyers based on their interactions and experiences throughout the customer journey.

• Attention – Customers first notice your product through ads or fliers.
• Interest – They become interested as they learn about its benefits.
• Desire – As desire builds, they develop a need for your product.
• Action – Customers finally buy your product.

Using this model, you can optimize engagement, conversion, and retention campaigns by delivering customized content for each stage of the buyer journey.

Of course, gathering data to map a customer’s journey can be challenging since they engage in multiple activities simultaneously, but it’s well worth the effort.

Using behavioral segmentation strategy in your marketing campaigns

Behavioral segmentation allows marketers to do a number of awesome things. The data you uncover can be combined with psychographic and demographic segmentation data to produce astounding results.

So if you can get behavioral segmentation right, you will be able to give people exactly what they want even before they want it – that’s gold.

Create buyer personas

You know buyer personas – they are fictional representations of your most ideal customers. A proper persona tells you all you need to know about consumer demographics, goals, challenges, personalities, interests, and buying behavior.

A marketer can create personas by gathering quality customer data via reputable sources and tools. Now, there are several ways to collect behavioral data:

• Google Analytics – track user behavior on your website and app, like page views, app usage, in-app purchases, and actions taken.
• CRM softwares – collect information on purchase history, support tickets, and feedback.
• Social media analytics – observe customer interactions, sentiment, and engagement with your brand.
• Surveys – ask customers about their preferences, behaviors, and buying barriers.
• Email marketing – track open rates, click-through rates, and conversions.
• Loyalty programs – analyze purchase frequency, reward redemptions, and points accumulation.
• Online tracking tools – use cookies to track users across different websites and platforms.

All of these data sources will provide insights into their interests (products, content, and topics), browsing habits (browsers, search engines, and marketing channels), and interactions (day and time) with your site.

Map customer journey

Once you have a clear idea of who your target audience is, you can map out the customer journey. Ensure that you include the steps your buyers will be taking when they reach out to you.

Normally, a granular marketing funnel consists of seven stages, namely:

Awareness: prospects become aware that they have a problem that requires a solution, i.e, your product.

Interest: they develop an interest in your product, looking out for more information and content on it.

Consideration: customers actively consider whether your product solves their problems, comparing it with your competitors.

Intent: they demonstrate a clear intention to purchase by requesting quotes or signing up for free trials.

Purchase: customers buy your product.

Retention: efforts are made to retain the buyer, encourage repeat purchases, and foster loyalty.

Some models also include the advocacy stage, where satisfied customers become brand advocates, leaving positive Yelp reviews and creating word-of-mouth referrals.

Using this type of behavioral segmentation, you can create content for each stage of the marketing funnel to guide prospects deeper into it until they become paying customers.

Develop behavioral marketing campaigns

Behavioral marketing aims to sell products to customers based on their interactions and engagement with your brand’s website, app, emails, advertisements, and social media campaigns.

Think about all the ads you are bombarded with after you visit any site. Ever wonder how companies do it? Cookies.

You can create marketing campaigns that offer exciting deals to buyers, such as a 10% discount for second-time buyers on a $500 purchase, increasing overall cart value.

Additionally, you can use buyer personas and customer journeys to:

• Send out emails to customers on special occasions, like their birthdays.
• Provide a variety of product variants for buyers who like to experiment and try out new things.
• Offer discounts to a loyal customer the next time they buy.
• Give out informational eBooks to users who want to know more about how to use your products.

All of these behavioral marketing activities will ensure that your prospects have a high customer lifetime value and remain loyal to your company.

Great examples of behavioral segmentation in action

Many companies have used behavioral targeting to tailor their marketing and advertising campaigns. That said, here are a few examples of behavioral segmentation in action.

Amazon’s wish list

Amazon is one of the world’s largest ecommerce retailers, which segments its customers based on their purchasing behavior.

The brand spots prospects who are in the buyer readiness or purchase stage and subsequently tailors its marketing efforts to nurture potential buyers towards making a purchase.

One of the tactics employed by Amazon is the Wish List feature.

The Wish List feature allows users to bookmark products they are interested in, ultimately creating a personalized glossary of items they will probably buy in the future.

It is extremely useful for customers who are not ready to buy immediately but are interested in making a purchase in the future.

Subsequently, Amazon uses the Wish List to:

• Streamline the decision-making process (compare prices, read reviews, and look for alternatives)
• Offer personalized recommendations (similar or complementary products)
• Customize promotional campaigns and offers (targeted emails or push notifications)

For instance, they may send SMS notifications to customers when items in their Wish List go on sale or when there are limited-time offers available on those products.

Netflix’s AI recommendations

Netflix's personalized recommendation system is the backbone of its strategy for retaining subscribers and improving the user experience.

To begin with, the platform collects vast amounts of user data, including what they watch, how long they watch it, when they pause or rewind, and the content they search for.

Using sophisticated AI algorithms, Netflix then analyzes this data to understand individual preferences and predict what content users are more likely to enjoy.

It takes note of what you are watching (and not watching).

If you frequently watch crime thrillers, chances are that Netflix's algorithm will suggest similar movies or TV shows in that genre. Moreover, it customizes these suggestions down to the thumbnail level, selecting the image displayed for each title.

If the user tends to click on titles with specific actors, genres, or visuals, Netflix will prioritize thumbnails that highlight those elements.

Spotify’s personalized playlists

Spotify is the numero uno choice for music lovers because of its obsession with data, especially consumer behavioral data. Mostly, the music and podcast app:

• Analyzes user data, like listening history, genres, artists, and time of day preferences
• Generates personalized playlists based on mood and activity
• Refines music recommendations via user feedback and interactions

Through features like Discover Weekly, Spotify leverages its listener data to segment users into groups based on actions like song skips or repeated listens, curate personalized playlists, and refine music recommendations.

Users are more likely to spend time on the app when they discover music that is in line with their tastes. With these features and techniques, Spotify does a great job of increasing user engagement and retention.

Wrapping up

Behavioral segmentation is a great way to learn about your customers, both online and offline. It empowers you to delve into the minds of your users and understand how they function – the behavior they exhibit, the factors that influence them, and the actions they take.

So, don't hesitate to use behavioral segmentation data to gather consumer insights and drive marketing campaigns that build meaningful connections with your audience!