Business Marketing

What are the Benefits of Behavioral Segmentation?

No matter what the size and nature of the business you run, the one thing you know all too well is that finding, knowing, nurturing, keeping and enhancing the pool of customers are at the heart of growth and success. 

Prior to the 1960s, marketing and advertising were like firing shots into the dark. You knew the target was out there somewhere, but had no way of knowing where and who they were, why and how they got there, what they would do with your ad message or finally, when they would act on it. 

As a result, mass production ruled manufacturing, and sales were a matter of hit or miss, leading to business losses and closures. 

Gradually, the light dawned, and marketing gurus discovered that it was important to identify target audiences. 

This resulted in the crucial concepts of market segmentation and behavioral segmentation. 

What Is Market Segmentation?

Before we get into that, it’s important to understand what a “market” is. It is the group of people/organizations that make up a pool that has the ability to purchase/consume goods and services. These could be actual or potential customers. 

An amorphous or undefined market can be further divided up into sections or segments that each have certain common characteristics. These characteristics cause the segment to have certain common needs, preferences and/or budget. Segmentation can also be on the basis of location, gender, age, ethnicity, income, lifestyle, education level, position in family life cycle, etc. or various permutations and combinations of these. They are distinct and differentiated but may share characteristics with other segments. 

The primary reason why segments are created is to address their specific needs. This helps to save time, resources and money while designing a sales/advertising campaign and ensures that the message reaches the persons whom it’s truly intended for. Failing segmentation, the company’s entire business model could collapse. Studies show that broad based market segmentation without using modern data analytics and information works only for 33% of companies. Traditional segmentation techniques don’t reflect modern reality. As a result, deeper analysis is needed. 

What Is Behavioral Segmentation?

As technology and brand awareness advance, customer profiles undergo dramatic changes and economic realities fluctuate, market segmentation becomes more fine-tuned. 

An important category is behavioral segmentation. 

It arose out of the realization that it simply wasn’t enough to know who the customers were. Marketers needed to know much more. This meant that besides knowing the identity and profile of customers, they had to gain insights into what they did too. 

This gave rise to a new category of segmentation known as behavioral segmentation. It examines several important aspects of the customer’s actions, right from the moment she/he enters your online store/website till the point at which they leave. 

Behavioral segmentation classifies customers according to their knowledge and use of the product/service/brand, and their attitude towards it. It also traces a purchaser’s individual journey through the purchasing process. 

This information is collected based on the customer’s purchasing patterns, usage and frequency, loyalty to your brand, the benefits they seek, what specific occasions give rise to regular purchases, etc. 

A common method of collecting behavioral data is based on the RFM model that examines Recency, Frequency and Monetary Value of purchases. Customers can be ranked on each category and then an overall comparison ranking can be given to identify high-value customers. 

You can look for this data in sales reports that tell you whether this is a repeat customer, website use to show if customers visit your website often, especially if you have a blog/widget. The most frequent customers can be identified by apps that record if they visited regularly during a particular time, date or occasion. Email tracking, cookies and social media provide leads in your Customer Relationship Management systems that can be fine-tuned. 

Benefits of Behavioral Segmentation

1. Smaller, well-defined sections: Instead of a large and unwieldy mass of customers, behavioral segmentation creates smaller and more homogeneous groups based on certain shared characteristics. This makes it easier to target them as a small group, or even as individuals.

2. Needs: Behavioral data can be analyzed to extract certain needs and preferences. Consistent behavior observed over a specific period of time helps you to understand the group/individual’s requirements better and to cater to them appropriately. You can also identify personal and group trends and move into niche marketing spaces. 

3. Building brand loyalty: Repeat customers and loyal customers can show the strength and impact of your brand. This helps to create sturdy, enduring and sustainable brands that can survive market fluctuations.

4. Remarketing: Up-selling or remarketing is a way in which you can put together a consistent customer base, continuing loyalty and revenues from a particular behavioral segment base.

5. Use income as a segmentation base: Once you combine demographic information with behavioral data, you can serve up specific ad messages to different income levels. This isn’t a strictly defined segment, but it helps to allocate your marketing resources with more precision.

7. Better aimed messaging: Based on previous purchasing behavior, time data and type of purchases made, you can provide useful reminder-type messaging to remind customers that they sent a gift/flowers to their Moms on Mothers Day, for instance. You can also target by time elapsed, regular intervals, universal occasions and national holidays, recurring personal occasions, spontaneous gifting etc. 

8. Predictions: This is really the pot of gold at the end of the rainbow as far as behavioral segmentation is concerned. Past behaviors are a great indicator of future behaviors. Changes can be monitored and predictive analysis can be obtained. You can tweak your pricing system, offerings, discounts, deals, new launches, etc. based on how customers have responded in the past.

9. Personalization: Marketing experts report a 20% boost in sales when personalized methods are adopted. Studies show that 80% of customers prefer to purchase from a business that offers more personalized and customized experiences. It makes the customer feel special when bespoke products are suggested. Revenues can go up by 15% using personalization and it also enhances brand loyalty and repeat sales.

10. Social media: Using tech such as social media chatbots, platforms such as Facebook, Instagram or Twitter help to create highly individualized marketing programs. Social media influencers can spread the message to their entire group, while becoming opinion leaders about products/services. You can fast-track customers through the purchasing journey funnel to avoid “shopper’s fatigue” and thus gain a competitive edge.

About the author

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Willi Mays

Willi Mays is a digital marketing consultant and writer. Currently she is working for ZineOne as a behavioral marketing topics research and content writer. Willi Also loves to read poems and novels in her free time.