Behavioral Segmentation: The Ultimate Guide [Definition, Strategies, and Examples]

Trying to sell a product to a broad audience without proper market segmentation is like shooting ducks with a bazooka. It may be successful but is messy and costly in time and money.

It’s time to put down the bazooka and pick the right “weapon” to help you utilize your marketing budget, target the correct demographic audience, create effective selling strategies, and build long-term customer loyalty.

Throughout the past decade, our team at crowdspring has achieved successful outcomes in campaigns by frequently employing this powerful marketing strategy. And we’ve led numerous webinars, talks, and workshops sharing our insights with thousands of other entrepreneurs and small business owners.

This guide shares our experiences and insights on how behavioral segmentation can help marketers grow their businesses faster.

What is behavioral segmentation?

Behavioral segmentation categorizes and classifies target customers based on their behavior. Behaviors include the items and content they consume and the frequency with which customers connect with a product or a service.

Behavioral segmentation extends beyond acknowledging that different people have distinct habits; it is also about tailoring marketing efforts to match these behavioral patterns with a specific message.

With behavioral segmentation, customers that exhibit similar purchasing behaviors can be categorized into a group that will be targeted with a greater degree of specificity.

By dividing your customers into distinct groups, you can better cater to their preferences and boost conversions.

Why behavioral segmentation is essential

Behavioral segmentation is powerful because:

1. Behavioral segmentation increases personalization

The days of spamming everyone on your email marketing list with the same bland message are long gone.

Brands must understand how various categories of clients should be targeted with varied offers at the most opportune times using their chosen channels to ensure positive results.

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2. Behavioral segmentation improves targeting accuracy

You’ll be able to capitalize on various activities and tailor your marketing messages accordingly.

Attractive launch promotions may entice new customers, but long-standing loyal customers may benefit from loyalty programs such as admission to an exclusive VIP club.

3. Behavioral segmentation is cost-effective

Rather than wasting money on cold leads and uninterested customers, you can direct your budget toward your most valuable, engaged, and interested audiences.

4. Behavioral segmentation increases customer engagement

You can better serve those genuinely interested in your offerings by segmenting your customer base and separating active participants from passive ones.

5. Behavioral segmentation boosts customer loyalty

The more special customers feel, the more likely they will remain loyal to the brand that provided that feeling. Customer retention results in a higher customer lifetime value, which boosts your company’s revenue.

6. Behavioral segmentation helps track and predict

Using previous behavioral patterns, behavioral segmentation helps predict and influence future customer actions and results. You can monitor metrics for each segment and activity and enhance outcomes.

Behavior segmentation strategies

Many strategies can help you improve your marketing campaigns based on behavioral segmentation. Here are some strategies we use successfully for hundreds of monthly email marketing campaigns:

1. Retarget desired behaviors

Past behavior is a strong indicator of future behavior. Segmenting similar customers helps you to present offers based on how other, similarly situated customers acted before purchasing your products or services.

2. Segment by location

Our clients and prospects come from 100+ countries. Most of our marketing campaigns segment clients and prospects based on location. We do this sometimes to differentiate messaging and to track conversion metrics and ROI based on location segmentation.

If you sell products or services locally, you can leverage geofencing to send SMS notifications to app users when they’re near your retail location.

Ride-sharing apps use behavior segmentation to forecast demand and pricing across service territories. For example, holidays and weekends are busier and require more drivers. Weekday evenings in business districts are generally less busy and require fewer drivers.

3. Price based on customer segments

Apple sells a range of similar devices, targeting different customer segments. You can purchase an iPhone for $600 or $1,500 for high-end versions. Those price points cater to different types of customers, and the advertising targeting each segment differs.

Understand how price sensitivity among your customer base impacts your pricing decisions and look for opportunities to differentiate your products and services by price.

4. Recommend complementary products

Behavioral segmentation helps you recommend other products or services a customer may want to purchase. Most businesses use such cross-selling and upselling strategies to increase lifetime customer value.

You can see many examples of this on Amazon. Amazon uses your past behavior and the purchase history of similarly situated customers to recommend other products.

Examples of behavioral segmentation

1. Purchasing behavior segmentation

Customer segmentation based on purchase behavior might reveal more about their decision-making process. This segmentation type aims to answer the following questions:

• How do customers act throughout the buying process?
• Do they talk to their peers? Do they compare prices? Do they read the reviews?
• What elements most affect their buying decision? Is it a good deal? A time of the year?
• What obstacles (both evident and hidden) do they face when purchasing?
• Which behaviors will result in a purchase?

Purchase behavior may be classified into four main categories:

1. Complex buying behavior typically occurs when individuals prepare to make a large purchase. Customers become very involved in the vetting process and do extensive research. Buying a car, house, real estate insurance, and pet insurance are all examples of difficult purchasing decisions.
2. Habitual buying behavior happens when individuals purchase items that they use daily, such as coffee or a toothbrush. Here, participation is modest, and there aren’t many variations between the companies from which they purchase.
3. Dissonance-reducing buying behavior occurs when a customer engages in infrequent, risky, and expensive purchases but encounters difficulty choosing because of the little differentiation in their options. Most of the time, the customer buys things without thorough research. They would buy based only on how conveniently available the items are or how much money they have.
4. Variety-seeking buying behavior happens when customers have access to several brands and numerous alternatives. As a result, they often swap between brands. They do so with little engagement, maybe switching based on a friend’s tip or after reading a few internet reviews.

2. Usage behavior segmentation

Another common way to segment customers by behavior is through product or service usage, based on how frequently a customer purchases or interacts with a product or service.

Usage behavior can be a good predictor of whether a customer will stay loyal or leave, and therefore of their lifetime value.

This segmentation seeks to understand the following:

• How often do current customers utilize your product or service?
• How are customers using your product or service?
• Which features do they use the most?
• What is the average amount of time they spend on it?

Under usage behavior, customers can even be further segmented based on the intensity of their product consumption:

• Heavy users (ideal). These people are brand patrons, your superfans, who use the product daily and rush to repurchase it when it runs out.
• Medium users. These people are repeat customers who use the product less frequently. There is sometimes a time lag between the rising need and when they purchase the product or service.
• Infrequent users. These people purchase a particular brand’s product irregularly and may cease to use it at any moment.
• Non-users. These people do not use the product but are interested in the category and might be targeted as prospects.

3. Benefits sought segmentation

Different customers often want other things from the same product or service.

The benefits sought behavioral segmentation aims to find out: what specific advantage is a customer looking for before they make a purchase?

When researching a product or service, a customer’s behavior often reveals insights on which features, use cases, perks, values, or issues are the most important motivators affecting their purchase decision.

For instance, two prospective customers may seem similar in demographics or customer persona. However, they may have different values regarding which perks and features are most and least significant.

When you message four customers about a particular benefit, each wanting a different feature, you will misdirect your messaging on 75% of your communications. You will waste 75% of your time and money.

Understanding each customer’s behavior as they connect with your business over time allows you to segment customers based on their needs and preference and customize your marketing messaging to each segment.

4. Occasion or timing-based segmentation

If you can determine customers’ feelings at the right time, your interactions with them will be much more meaningful.

That is the essence of occasion-based behavioral segmentation. This segmentation targets prospects looking for products for a particular event or occasion.

Generally, occasion and timing-based behavioral segments have been used to reference universal and personal events.

However, you can also further segment events into the following categories:

• Universal. The bulk of your clients or target audience will be affected by universal events. Holidays and seasonal events are typical examples of when customers are more inclined to make particular purchases throughout the holiday season or at specific periods of the year.
• Recurring-personal occasions. Recurring-personal occasions are purchasing patterns for an individual customer that consistently repeat over time. This covers annual, monthly, and daily categories. Yearly events include birthdays, anniversaries, and vacations. Monthly expenditures cover events such as business trips, and daily habits involve activities such as stopping for a cup of coffee on the way to work every day.
• Rare-personal occasions. These are more irregular and unexpected, making them more difficult to foresee. An example of this would be a friend’s wedding or celebrating a promotion. This form of behavioral segmentation is also effective for product or service categories that customers utilize regularly. Beverages, eating out, applications, and buying music, videos, and streaming material are just a few examples. Offer special discounts, happy hours, or free shipping for these momentous occasions.

5. Customer loyalty

Long-term customers are the backbone of every successful business.

Long-term customers are less expensive to maintain, often have the most significant lifetime value, and, most significantly, may become your most ardent brand champions – the ultimate aim of every customer relationship.

Customer loyalty segmentation aims to identify loyal customers of your brand to create unique, rewarding programs to demonstrate their importance to you.

Customer loyalty behavioral segmentation can be used to find valuable answers to queries like:

• What significant elements and behaviors contribute to loyalty during the customer journey?
• Which customers are the best prospects for loyalty or advocacy programs?
• How do you keep your most loyal customers happy while maximizing the value you receive from them?
• Who are your most devoted customers?
• How can you increase their value and discover additional customers like them?

Loyal clients are ideal candidates for programs that provide unique treatment and privileges, such as exclusive rewards programs, to nurture and enhance customer relationships and motivate future business.

Discovering your most dedicated customers and knowing their needs can help you grow your business faster.