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Fuel Cycle Blog: Behavioral Segmentation

Behavioral Segmentation – Methods to Know Your Market

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Behavioral segmentation is an advanced type of customer segmentation approach that focuses on understanding how customers interact with your brand.

Engaging in smart behavioral segmentation is key to capturing telling data to provide personalized customer journeys.

While behavioral segmentation provides valuable customer insights, many companies are failing when it comes to capturing the right customer data. The reason? They are using outdated customer segmentation approaches, and not leveraging advanced analytics and the breadth of customer data available through behavioral segmentation, according to Forrester.

This article will provide an overview of what you need to know about behavioral segmentation so you can take practical steps toward more relevant and meaningful connections with your customers.

What is behavioral segmentation?

Behavioral segmentation means capturing customer data that tells you more about how customers behave when they interact with your brand at various stages in the customer lifecycle.

The purpose of dividing customers by behaviors is to help you address the different needs of a group of customers and find ways to optimize their customer experience.

What are the advantages and disadvantages of behavior segmentation?

There are several reasons to segment customers by behavior. Here are four of the main reasons:

  • Personalization. When you learn how different groups of customers behave, you can personalize your messages at the appropriate time in the customer journey via preferred channels, and with messages that resonate well with that particular group.
  • Prioritization. Some groups of customers may be more lucrative to your brand than others. When you hone in and identify these groups, you can prioritize them when it comes to offering promotions.
  • Predictive. Understanding a pattern of behaviors provides substantial insight into how a group of customers might act in the future.
  • Performance. When you group customers by behaviors, it’s easier to monitor their growth patterns and track changes within that particular customer segment. This information can help you determine customer value.

As with any market research approach, there can be limitations. Here are a couple of potential disadvantages of relying on behavioral segmentation for insights:

  • Change. Customer behavior can change depending on circumstances, including location, time, occasion, budget, and more. While some behaviors can be determined, they are not 100% reliable.
  • Qualitative data. Behavioral segmentation can also take a qualitative approach, and this sometimes results in making assumptions for a full group that might change or not ring entirely true.

Objectively, when behavioral segmentation is done right, it can provide invaluable insights for your marketing, product, and sales teams.

What are the behavioral segmentation methods?

Here are the top ways brands are making use of behavioral segmentation today.

1. Purchasing behavior

Purchasing behavior segmentation is the process of identifying trends in how customers behave while making a purchase. This type of segment helps brands understand things like how different customers approach making a purchasing decision, barriers in the purchasing process, and what behaviors are predictive of a future purchase.

2. Benefits sought

Evaluating benefits sought means learning what primary benefits customers seek out while making a purchase. When customers research a company, their behaviors show which benefits, features, use cases, or pain points are the most important for influencing a purchase.

3. Customer journey stage

Since the way you market to customers varies depending on where they are in the customer journey, it’s critical to understand what stage of the journey they are in, and what behaviors they exhibit at each stage. This data helps brands tailor marketing messages and drive personal experiences at the appropriate stage.

4. Usage

How much a customer group uses a product or service is another popular behavioral segmentation method. This information tells you who your most loyal and avid users are and can help inform marketing decisions.

5. Occasion or timing-based

Interested in learning when a customer is most likely to make a purchase or engage? This segmentation type helps you understand when different groups of customers are more likely to make purchases (e.g., holidays, vacations, birthdays, weddings, etc.).

6. Customer satisfaction

Segmenting your customers based on their satisfaction levels is vital to your customer service strategy. When you understand satisfaction levels, you know things like when to upsell, when to engage, what services to offer, and when to resolve a customer problem.

7. Customer loyalty

Your most loyal customers are also your most valuable customers. The likelihood of selling to an existing customer is 60 to 70 percent, but the probability of selling to a new prospect is only 5 to 20 percent. When you capture customer loyalty data and segment your customers appropriately, fostering repeat business is easier.

8. Interest

Another popular behavior segmentation method is segmenting based on customer interests. Knowing this information can help you deliver personalized experiences, dynamic content, and can help you engage with customer groups in ways that they will appreciate.

9. Engagement level

There are several ways to group customers by engagement level. You could arrange them by how engaged they are with using your product, how active they are in your user community, how often they consult your brand during the pre-purchase funnel, and more.

10. User status

You can also group different types of target audiences based on engagement level, including non-users, prospects, first-time buyers, regular users, and old customers.

Wrap Up

With the help of behavioral customer data, you can more effectively segment your customers. How does this help you? It enables you to suggest the right complementary products or features, set pricing correctly, perfect the timing of your marketing, customer service, and sales teams, fine-tune your marketing and retargeting efforts, and get to know your customers more accurately.

When push comes to shove, engaging in behavioral segmentation is a winning way to leverage data to provide experiences your customers crave. For help with capturing and managing behavioral data, check out Fuel Cycle today.