Behavioral segmentation guide for building customer loyalty

James Bance, Head of Growth and Expert in Marketing Strategy

Published 11/04/2022

Behavioral segmentation

Behavioral segmentation is a popular marketing strategy known for its unique ability to reveal valuable, timely trends in consumer behavior. Using insights from behavioral segmentation, marketers can tailor effective, targeted marketing campaigns that best align with the wants and needs of their customers.
Learn about the types of behavioral segmentation, explore some examples of this strategy at work, and understand how segmentation can elevate your company’s marketing strategy. 

What is Behavioral Segmentation?

Behavioral segmentation is a market segmentation strategy that divides a customer base into chunks of target customers based on shared behavioral characteristics.
This strategy moves beyond traditional methods of market segmentation, which separate customers based on geographic location or demographics like age or occupation. While these strategies can yield valuable data about who your customers are and where they live, behavioral segmentation allows marketers to understand clients more deeply. 

By conducting behavior segmentation research, marketers receive a more holistic understanding of their target audience and gain insights into behavioral trends they can use to improve marketing efforts. Data gleaned through behavioral segmentation also informs the company about how to best adapt and tailor its products or services to meet the unique needs of its target customers. 

What are the Four Types of Behavioral Segmentation?

To fully understand customer behavior, marketers combine insights from the four behavioral segmentation types: Purchasing Behavior, Benefits Sought, Usage Behavior, and Occasion-Based (or Timing-Based). Each method can reveal nuances in consumer behavior that the company can use to tailor its marketing efforts. 

#1. Purchasing Behavior

Behavioral segmentation may be based on the trends and patterns potential customers engage in when making purchasing decisions. Purchasing behavior segmentation looks at these patterns to gain insight into the customer’s mindset during the purchasing process.
Purchasing behavior segmentation can shed light on a range of purchasing decisions, including: 

  • How often a customer interacts with your product or brand before making a purchase 
  • What search queries do your customers enter to locate your products
  • How often your customers read reviews and the impact of reviews on purchasing decisions
  • The questions and concerns a customer brings up when speaking with a virtual assistant, using a live chat function, or in a contact message

Marketers use this data to determine what phase of a customer’s purchasing process and then employ complementary strategies to influence the customer’s behavior. For example, many customers conduct online research before purchasing a product, which involves looking at competitors’ prices. A marketing strategy can attempt to retarget these customers by offering a “price match” or “best price” guarantee. 

#2. Benefits Sought

This segmentation strategy divides customers based on what specific value they hope to gain from your products or services.
Benefits sought segmentation aims to identify the unique benefits and features that make customers choose your products over your competitors. The company can then use this information to tailor its marketing to focus on these benefits and strategize future products with similar beloved features.
A benefits sought segmentation strategy is one of the best ways to build customer loyalty, and your clients can expect that your products contain the benefits they are looking for.
Take toothpaste, for example. A benefits sought segmentation could look at the features a company’s target customers value in toothpaste (gum sensitivity, whitening) and craft a marketing strategy that promotes those benefits.

Usage Behavior

#3. Usage Behavior

Usage behavior segmentation categorizes customers based on when, where, and how they use your product or services. By understanding usage, a company can forecast demand and tailor its products, services, and marketing efforts to correlate with the needs of its clients.
For example, a ride-sharing company could look at customer usage to identify when and where drivers are most needed. If a usage behavior analysis revealed that customers request fewer rides on weekends, they could incentivize riders by offering a weekend discount. 

#4. Occasion-based 

Occasion-based (or timing-based) segmentation identifies the set times or specific occasions when customers are most likely to engage with a company’s brand and make purchases. By grouping customers based on occasion-based behavior, a company can preemptively strike when the proverbial marketing iron is hot, targeting customers when they are ready to buy.
Many customers make the same daily or weekly purchases, such as happy hour drinks or a morning cup of coffee. Marketers can use this information to identify marketing opportunities, for example, selling a signature drink that promotes the business’ brand.
This strategy can also help companies that sell holiday-themed products identify customers who only participate in holiday promotions and ways to draw them into the store year-round. 

What is a Behavioral Segmentation Strategy?

Behavioral segmentation strategies are the marketing strategies a company uses to improve its marketing efforts guided by data and insights revealed through behavioral segmentation.
Marketers can use information from behavioral segmentation to develop and enhance several advantageous marketing strategies, including: 

  • Retargeting Desired Behaviors

This foundation of this strategy gets at one of the core truths of marketing: past behavior is an excellent indicator of future behavior. In other words, if you know how customers respond to your products now, you can make an educated assumption about their future usage.
This strategy is heavily used by entertainment platforms like YouTube, which uses its sophisticated recommendation engine to draw in and retain loyal viewers. By retargeting its users with related content, viewers remain on the site for longer. Brands wishing to advertise on YouTube will also pay more for ad space if they know YouTube’s vast audience will view their videos. 

  • Pricing by Device

Price by device refers to how marketers can gain insight into a potential customer base by looking at the products these customers own. One popular way of segmenting potential clients is by the brands of their devices like phones and computers.
For example, the travel site Orbitz segmented its customers based on whether they used Apple or Android/PC products and increased its hotel rates for Apple users by $20-30 dollars per night. The idea behind the strategy is that since Apple products are priced higher than PCs and Androids, users are probably more affluent.
While the company cited the marketing strategy as an experiment, this strategy is becoming more popular and is already used more than most customers know. 

  • Using Location-Based Segmentation

Location-based behavioral segmentation in marketing looks at where a company’s target customers tend to be at specific parts of the day to forecast pricing and demand.
This strategy is popular with ride-sharing apps, which can look at behavioral segmentation variables within a neighborhood to determine where to locate drivers to optimize their services. For example, if an urban area has a popular late-night bar scene, it can capitalize on a recurring situation by increasing the number of drivers and prices in that area. 

  • Suggesting Complementary Features

A company can build recommendation engines that accurately predict other features and products the customer may also like by looking at a customer’s purchase history. Amazon is the master of this strategy: its product suggestions are responsible for more than a third of its sales (35%). 

  • Optimizing Timing

Marketers can look at metrics like app usage to determine the best time to send out marketing materials like push notifications, emails, and updates. In marketing, time is everything, and optimizing the timing of a marketing message can make the difference between a purchase and an irritated customer. Your company's last thing is for a client to hit “unsubscribe.” 

What Are Examples of Behavioral Segmentation?

Prominent companies rely on behavioral segmentation to understand their client base and use insights from different segmentation strategies to tailor effective marketing campaigns. Recently, Guinness and Olay employed behavioral segmentation with incredible results. 

  • Benefits Sought: Olay Skin Care

Olay’s benefit sought marketing strategy collects valuable intel by asking customers engaging questions about their skincare routine. Clients answer a handful of questions, and Olay’s AI beauty tool generates appropriate product recommendations.
Using this fun and helpful skin advisor strategy, Olay can identify customer needs and preferences (benefits sought) while drawing more clients to its site and increasing customer loyalty.
The results can be immediate and transformative. Olay’s benefits sought segmentation identified a need for Retinol products. In response, Olay created Retinol 24, now one of the brand’s top-selling products. 

  • Occasion-based: Guinness and Rugby

Guinness, the popular producer of Irish stouts, created a new product due to occasion-based segmentation. Its analysis revealed an entire market of potential customers who surprisingly want to engage with the Guinness brand: non-drinkers.
The strategy was Guinness Clear, which, as it turns out, is just water. However, by pairing an emphasis on responsible drinking with its brand, Guinness was able to subtly market its products while establishing itself as a company that cares about the health and safety of its customers.Examples of behavior segmentation

Why do we use behavioral segmentation?

As evident in the behavioral segmentation examples, dividing customers based on shared behavioral characteristics can be incredibly effective in predicting future behavior, building brand recognition, and customer loyalty, identifying need gaps, and understanding when and why consumers make purchasing decisions.
For a more comprehensive understanding of consumer behavior, marketers should plan to use a range of behavioral segmentation strategies, as well as other segmentation methods. Demographic, geographic, and psychographic market segmentation are all popular and effective means of revealing the identity and location of potential customers. 

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