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What is Behavioral Segmentation and Why Should You Use It?

Customer demand for customization has continued to increase in all industries. If any of your business is online you have valuable data from the people who interact with you. Nothing is more important than how your customers are behaving. Behavioral segmentation is a hot topic for 2017 because of all the data you already have. I know you have heard it, but segmented campaigns perform markedly better than non-segmented campaigns.

  • 14.31% higher open rate than non-segmented campaigns
  • 100.95% higher click through rate than non-segmented campaigns

We have talked in the past about how important it is to have an email segmentation strategy. While many segmentation strategies are based on demographic information one of the best ways to to segment individuals who actually purchase your goods is to use behavioral segmentation. In this blog post we will cover the basics of behavioral segmentation and the six ways you can segment your audience based on behavior.

What is behavioral segmentation?

Behavioral segmentation is the process of segmenting your customers based on how they act as consumers. In order to stand out from your business competition you need to understand your customers and how to satisfy their needs. One of the top reasons people unsubscribe from email lists is because the content isn’t relevant to them. Taking the time to segment to your list and personalizing content can make a huge difference.

The 6 Types of Behavioral Segmentation

Behavioral segmentation allows your business to reach users and speak to them directly, but it’s not helpful if you are not targeting the right behaviors.

You can segment your market and create tailored behavioral market segmentation campaigns for each segment based on the six different types of behavioral segmentation.

1) Benefits Sought

Every customer has a need and is turning to your business to fill that need or help solve their problem. This means that by dividing a population based on that need or benefit is a great way to further understand your audience and give them what they want!

One classic example of benefit segmentation is toothpaste. The toothpaste industry targets their market based off the benefits customers are searching for from their product. Different customer needs means that toothpaste can be targeted to those needs: sensitive teeth, teeth whitening or an array of other oral hygiene problems.

Take time to completely understand the different reasons your customers come to your business or use your product and use this information to keep the group interest. Remember, it is important to not only cater to the needs of one group, but to simultaneously cater to the needs of all segments purchasing your product.

2) Occasion

People tend to buy something that is related to an occasion. This means that if you miss this chance with a certain customer segment you may not have the chance to encourage them to purchase from you again, or you may have to wait an entire year to try again. Taking the time to understand when a customer group is likely to make a purchase will help you created a targeted campaign to catch them in the buying process.

Occasion can be broken down into three subcategories based on frequency of the event:

  • Universal occasions apply to the majority of customers who purchase your product. We can say that people are generally more prone to make more purchases during the holiday season than they are the rest of the year.
  • Regular-personal occasions apply to purchases an individual makes based on their personal life. An example would be yearly anniversary flowers or a daily coffee order.
  • Rare-personal occasions apply to abnormal purchases that are not as easy to predict. A spontaneous vacation or friends wedding are two examples.

3) Usage Rate

Classifying customers based on frequency of purchase or interaction with your brand is another important type of behavioral segmentation. You may want to reward those who engage with your business more frequently. In turn, you may want to speak differently or provide a different offer to those who haven’t interacted with your business in some time.

Typically users are ranked under three different levels:

  • Heavy users apply to your most reliable customers who account for the majority of your sales. Developing customers into heavy users is the goal behind almost any type of frequency or loyalty programs. Supermarkets, airlines and coffee shops commonly use these reward programs.
  • Mid-level users apply to the group of customers who purchase on a semi-regular but not frequent basis. These customers may make more purchases during certain times of the year. A common example is when companies offer birthday freebies to keep you interested in their product or service.
  • Light Users are most likely to be one-off customers unless a company offers them something to keep them coming back. This is precisely why many companies offer discounts or deals to first-time customers; the goal is to encourage brand loyalty.

4) Brand Loyalty

You can classify customers based on their level of loyalty to your product or service. Loyal customers are by far the most important customers you have because they are cheaper to retain while providing the most value. Understanding who your loyal customers are, their buying habits, and their needs is key to encouraging these customers to continue engaging with you.

The hospitality industry has some of the best loyalty programs and treats highly loyal customers with the best services possible. Airlines, hotels and restaurants provide their best service and go out of their way to make loyal customers have an excellent experience.

5) User Status

A user's status will affect the probability of retaining customers as well as acquiring new ones. Different sized companies focus on new users while a campaign may focus on one of the user statuses below:

  • Non-users
  • Prospects
  • First-time buyers
  • Regular users
  • Defectors

Knowing the user status will help your company better communicate with your different users, and more effectively encourage engagement from them.

6) Buyer Readiness

The intention to buy is different for each customer group just as the purchasing cycle varies by product. Segmenting customers according to their readiness to purchase the product or service your business offers can help you understand what promotional materials and messaging is needed.

Buyer readiness can be classified into five different stages each with a different physiological stage of the purchasing cycle:

  • Awareness applies to the customer that has a minimal idea of how the product can meet their needs. Your goal is to create full awareness of the product to this customer group.
  • Knowledge applies to the customer who is aware of the product but unaware of the full benefit or offering. Your goal is to illustrate what the products benefit is and what it offers.
  • Liking applies to the customer who is aware of the product and benefits and is trying to compare it with competing products. Your goal is to demonstrate why your product is superior.
  • Conviction applies to the customer who is convinced the product can satisfy their need. It is your job to create a campaign that fully convinces the customer that your product is the right one.
  • Purchase applies to the customer who is fully confident they have made the right decision and wants to purchase the product. Your goal is to outline purchasing steps in the most convenient way to get the customer to follow through.

Behavioral market segmentation is powerful to those who can use it effectively. It will not only help you better understand your customers, but it will also help you better speak to a group and encourage them to take a desired behavior.

What other thoughts do you have about behavioral segmentation? Be sure to leave them below in the comments!

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Sophie Sunderland

Written by Sophie Sunderland

Sophie Sunderland is a marketing insights manager. She is interested in data and how data can be used to improve marketing efforts both internally and for our customers. When she’s not looking over data you’ll find her enjoying the outdoors and hiking with her dog.

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