Behavioral segmentation: What is it and how can it drive engagement and loyalty
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Segmentation has long played a role in targeting different consumer groups. Demographics and location data were first, offering a powerful way to target customer segments based on what they’re likely to want.
With new technology, it’s now possible to understand consumers on an even deeper level. Customer habits and actions say a lot about their purchasing behavior, and understanding these factors is vital to optimizing our marketing campaigns.
In this article, we’ll provide a behavioral segmentation definition and show how to leverage it to enhance your marketing strategies. We’ll also look at the six main types of behavioral segmentation and how you can use them to increase customer engagement.
What is behavioral segmentation?
Market segmentation involves splitting your audience into groups that have similar characteristics. This helps sales and marketing teams optimize their messaging to be more relatable and has a higher chance of converting.
There are four main types of market segmentation:
Geographic segmentation. This is the simplest form of segmentation and involves grouping customers based on their location.
Demographic segmentation. This involves separating customers into groups based on their age, gender, sex, income, ethnicity, education level and so on.
Psychographic segmentation. Similar to demographic segmentation, psychographic segmentation groups customers based on their personality traits, beliefs and values.
Behavioral segmentation. This process subdivides customers into groups based on their behavior, including their interactions with your brand, shopping habits and how you help them.
While demographic and geographic data made early market segmentation possible, they only provide a surface-level view of your customer base. Analyzing behavioral data enables marketers and salespeople to get deeper insights and segment their customers into more specific groups.
For example, imagine you’re running a behavioral marketing campaign for an outdoors camping store. You discover that their most active audience is 20 to 29-year-olds. With behavioral data, you then find out that there are four main subgroups within this segment:
Customers looking for hiking shoes
Customers interested in camping
Customers who purchase fishing gear every week
Customers who only buy from you during sales
You can now develop targeted email lists based on these segments and engage them separately, increasing personalization and better engagement.
Why you should use behavioral segmentation marketing
Using basic segmentation tactics is a powerful way to target key customers. However, behavioral market segmentation can take this to the next level, letting you filter your audience based on their actions. This enables you to hyper-target those customers who are the most engaged and likely to convert.
Here are some of the other benefits of behavioral segmentation:
Inform every department with updated key insights. By including behavioral segmentation into your marketing strategy, everyone understands your customers on a deeper level. Learning why your customers use your products and when they are most likely to buy can inform marketing, sales, product development, stocking plans and more.
Target customers at the right time. Certain customers may only be active at specific times or buy your products on certain sale holidays. With behavioral segmentation, you can target them when they are most likely to engage with your marketing material.
Optimize your messaging. Personalize your content beyond merge fields (“Hi %FIRSTNAME%”) and share relevant information with each customer. Returning to the camping store example, you could segment your audience based on interests, such as parents buying camping items or senior customers who are new to fishing. You can then optimize and target their preferences in your messaging.
Allocate budget and resources optimally. Allocate your resources to customers who are almost ready to buy, increasing your return on investment (ROI), such as customers who regularly comment on social media posts. With optimized targeting, you can spend your budget more efficiently.
Increase brand loyalty. Delivering a personalized experience helps customers feel that you’re willing to cater to their interests. Behavioral segmentation can help you increase customer lifetime value (CLTV) and reduce churn, driving revenue in the long term.
6 types of behavioral segmentation
There are six main types of behavioral segmentation you can use to build a complete customer profile.
1. Segmentation based on purchasing behavior
Purchasing behavior, or consumer buying behavior, refers to a consumer’s actions before they buy a product or service. This includes exploring search engines, clicking on ads or opening marketing emails.
Looking into purchasing behavior can uncover groups of customers that act in similar ways when approaching a purchase decision.
Purchasing behavior includes:
A customer’s role in the purchasing process
How they approach the purchase decision
Any obstacles to making a purchase
Incentives they might respond to
For example, imagine the following three customers:
Customer A likes to research a product in depth before making a decision
Customer B waits for sales to buy products they’re interested in
Customer C chooses products based on social proof
Targeting all three with the same messaging can waste resources as each customer will respond to different materials and incentives.
This is where segmentation helps. You could target Customer A with informative material that speaks to your product’s strengths over your competitor’s (like the email below) and run a separate campaign that informs Customer B of upcoming sales. You could also post case studies or invest in influencer marketing to entice Customer C.
An informative email example from Greenhouse:
If a research-focused customer displays interest in your product, this kind of email will provide them with the information they need to make a purchase decision.
Knowing how customers purchase helps you reach them with your message wherever they are in the buying journey.
2. Segmentation based on occasion or timing
Occasion-based purchasing is when customers make a purchase decision on particular occasions or at specific times.
Occasions can include holidays (like Christmas), sales events (like Black Friday) and personal occasions (like a wedding or birthday). They can also include purchases at set times in a customer’s routine, like a coffee on their lunch break or fast food on Friday night.
Tracking a customer’s timing-based behavior helps to find habitual patterns that you can then target with relevant marketing materials. It can take a while to establish these patterns, but anticipating a customer’s actions lets you warm them up ahead of time.
Many brands use a strategy to send out broadly focused material on holidays. Take a look at this example from Pulp & Press:
If you have customers who exclusively purchase from you on Valentine’s Day, then it’s important to send them material in advance to keep your brand top-of-mind.
However, there are other powerful capabilities with timing-based behavior. For example, you may discover a subset of your customers is more receptive to your offers on a Friday night. Likewise, if a customer has just purchased a product from you, you could use the opportunity to upsell a related product.
To make the most of occasion purchasing, use subscription web forms, lead magnets and surveys to collect your customer’s personal information.
3. Customer usage segmentation
Customer usage behavior and user status define customers by their level of engagement with your products or services. There are three basic levels of use:
Light users (or occasional customers). These customers only use your products sometimes and rarely make purchases.
Medium users (or semi-regular customers). The customers who use your product fairly regularly and make multiple purchases throughout their customer lifecycle.
Super users (or intensive customers). These users spend the most time with your product or service and make the most purchases.
The more a customer accesses your products or services, the more you should divert resources and personalized marketing materials toward them.
Keep in mind that the level of usage isn’t everything. You can have a customer who purchases your products daily but spends far less than other customers who make bigger purchases only occasionally.
For example, say you run a cafe that also offers platters for catering services. You might have plenty of customers who buy a coffee every day, but the caterer who makes one $1,200 purchase regularly might be worth more to your business.
By working out how your customers use your product, how much time they spend using it and what features they access most, you can try to convert lower-use customers to new heavy users while retaining the super users you already have.
4. Segmentation based on the benefits sought
Benefits sought segmentation divides your target audience based on what they are looking to get out of your product or service. This extends from expensive one-off purchases to everyday products that we buy, like toothpaste and food.
Customers buy your product for a specific reason. They expect that they will get value from the product, and targeting them with a specific value proposition can convince them to purchase your product rather than a competitor’s.
To continue the behavioral segmentation example of an outdoors store, imagine three customers, all of which make up the same demographic (20 to 29-year-olds):
The first is interested in hiking boots for rough terrain
The second wants trail running shoes
The third needs waterproof boots for fishing trips
From a demographic perspective, these customers are identical. They even want very similar products. Yet they have very different ideas when it comes to the benefits and features they want from your products.
Once you have grouped your customers based on the benefits they seek, you can optimize your messaging to draw attention to how your product is better than your competitor’s, how other customers feel about it and how it will uniquely benefit your customer.
This is the kind of email you could send to the customer interested in trail running shoes:
In this email, Salomon introduces the benefits of their new release, mentioning the increased grip, stability and dynamic upper. This is better than generic promotional material because it speaks to the specific features that the customer is looking for.
5. Customer loyalty segmentation
Segment customers by loyalty to target repeat customers and find out what makes them keep coming back.
Loyalty-based segmentation takes into account:
The number/frequency of purchases they’ve made
The level of engagement they have with your marketing material
Their engagement with a loyalty program
Loyal customers spend more over time than one-off and occasional customers, but that isn’t all. They also help your business with word-of-mouth referrals and valuable feedback. This is why it’s vital to segment your most loyal customers and target them with material that will prevent them from being poached by a competitor.
This type of marketing segmentation can also help you uncover crucial information about your customers, such as:
Which of your customers are most likely to respond to a loyalty program
How you can engage and retain your most loyal customers
What key indicators lead to customer loyalty
Which customer experiences encourage them to become loyal, and how you can maximize their lifetime value
Once you identify customers who are likely to find value in a loyalty program, you can send them information or an incentive to sign up. For example:
This email introduces the loyalty program and encourages customers to share personal information in order to sign up for free rewards, keeping them engaged and allowing you to learn more about them.
6. Segmentation based on buying stage
Customers engage with your brand differently depending on what buying stage they are in.
The AIDA model defines these stages:
Attention. A potential customer hears about your brand, product or service.
Interest. The customer becomes interested or curious.
Desire. The customer begins to want your product or service.
Action. The customer is ready to make a purchase decision and become a first-time buyer.
Depending on where a customer is in this journey, they will respond to different material and messaging. For example, at the attention stage, you might want to cast a wide net to attract customers on a broad scale (such as with advertising campaigns targeting large demographics).
As they move to the next customer journey stage, the messaging should become more targeted and specific. For example, if a prospective customer signs up on your website and spends some time on a particular product page on your website, you could send them relevant information about that product in an attempt to pique their interest.
Segmenting by buyer stage also helps to discover customers who aren’t progressing who you might be able to retarget with email marketing campaigns (such as when they leave products in their cart).
Understanding where your customer is in the buying journey lets you deliver relevant and timely material, leading to more conversions.
How to apply behavioral segmentation for increased engagement
Some customer behavior patterns are difficult to uncover, especially in less active segments. This makes applying behavioral segmentation a challenge. To understand a customer, they need to interact with your brand multiple times. You’ll need to note and track their key customer interactions across time to discover patterns and actionable insights.
Each type of customer behavior is complex and often customers don’t progress in a straightforward way. However, looking at a single interaction isn’t enough to understand their needs or habits.
To build a complete understanding of their behavior, you’ll need to leverage behavioral customer data over time and across many touchpoints.
Powerful software solutions and automation, such as a capable CRM, are invaluable to this process. They can now quickly segment your customer types in real time.
To improve your overall behavioral segmentation strategy:
Choose which interactions and metrics to track. You first need to choose which engagement metrics are important for your brand and product. This could include what a customer searches for when they discover your product and how they interact with your marketing messages (for instance, tracking web visitor frequency and which pages they click on most).
Identify key segments based on observed behaviors. The most active, loyal and clearly defined segments will often return the most value. However, you may also discover neglected segments that you can prioritize to become new customers.
Make strategic changes based on deep insights. As you uncover key insights, you can tailor your strategies (like your email strategy) to each segment and target your customer’s needs, desires and habits. Over time, you should be able to develop a 360-degree persona for each customer segment as they continue to interact with your brand.
Track engagement and continue to optimize. Using marketing and sales CRM tools, you can track how each customer is progressing through the customer journey. Once they make a purchase, you can continue to nurture them to increase customer satisfaction and retention and, eventually, encourage them to become advocates for your brand.
Final thoughts
Behavioral segmentation is a powerful way to understand why your customer chooses to buy your product or service. This added layer of insight complements your geographic and demographic segmentation, helping you to discover new ways to hyper-target your customers with your marketing efforts.
In other words, the better you understand your customer, the more you can send the right marketing material to the right customers at the perfect time.
