Customers are complex.
They have different wants, needs, habits, and behaviors.
Whether they like to accept or not, their wants, emotions, needs, backgrounds, and habits play a massive role in their purchasing behavior.
Most of the customers have habits that they do every day without thinking. Some of them might start their day with a cup of espresso, some might start the day checking game results, or others finish their day with quick jogging.
Businesses want to understand different customer groups based on their behaviors and patterns. That's why they use behavioral segmentation.
However, behavioral segmentation is NOT only about understanding people's patterns and motives behind their actions. It's also about optimizing and tailoring their messages for each specific group to match these patterns.
This article covers the basics of behavioral segmentation and how businesses can use these strategies to reach their business goals.
What Is Behavioral Segmentation?
Behavioral segmentation is the process of dividing customers into categories with similar behavior. These behaviors are customers' attitudes towards a product or service, their usage rate of it, whether they like or dislike it, and many other behavioral patterns.
These behaviors are then used to target specific audiences with appropriate messages and offers.
The idea behind behavioral segmentation is to take advantage of what companies know about consumers by targeting them with the right message at the right place at the right time, which leads to more persuasive messaging and higher conversions.
6 Tactics to Boost Businesses With Behavioral Segmentation
Here are six ways companies can use behavioral segmentation to build better, more cost-effective business strategies:
1. Increase Sales Amount With Upselling and Cross-Selling
Perhaps the most basic usage form of behavioral segmentation is targeting the customers who had completed a purchase.
Based on customers' previous purchase behavior, companies can segment them and offer related or complementary products after the purchase.
For example, suppose a customer purchased a holiday package with a safari last year and wants to purchase a holiday package this year as well. In that case, the company can offer these customers a safari or similar leisure activities during their checkout process or after they complete their purchase.
This upselling and cross-selling strategy allows companies to capitalize on consumers' previous behavior in their online or offline stores.
2. Retarget Customers Based on Where They Left
E-commerce companies know that not every customer who adds products to their cart completes the purchase. Some customers leave the website:
- after adding a product to the cart
- after visiting their cart
- on the customer information page
- during shipping page
- before/after entering the payment information
- during the order review page
- and so on.
For e-commerce companies, identifying all these (and many more) behaviors is very crucial.
By knowing where the customer is left, companies can apply better targeted retargeting campaigns and tailored messages for each one of their customer's behaviors.
Alternatively, companies can use retargeting campaigns based on visitors' page visit behavior to show visitors what content or product they viewed on the website or related popular products other customers also purchased.
3. Make Better Product Recommendations
Behavioral segmentation helps develop recommendation engines that can accurately forecast which items or features each customer would be interested in their next session.
Amazon, Netflix, YouTube, Spotify, or any other company that comes to your mind uses past behavior (pages visited, links clicked, liked/disliked, etc.) to segment its customers with similar behaviors. So that these companies can recommend similar products based on these behaviors.
These companies are using this type of data to build more accurate recommendation engines that provide individuals with what they crave when it's most convenient!
For the very same reason, according to research by McKinsey, 35% of Amazon's sales come from such recommendations.
4. Create Better Timing for the Messages
Everyone has a different schedule. Some people have a tighter schedule while others have more flexible. For this reason, it's very important for companies to understand when their customers are engaging with their products.
Understanding their usage preferences and segmenting customers based on this data may help companies send timely and better-tailored emails, push notifications, or any other messages.
Imagine the following scenario. A company has localized an app for Brazil and realizes that many users use the app during midnight. Instead of sending notifications right after people wake up to get their attention, this company could send one push notification just before midnight, right before most people engage with the app.
5. Find the Most Loyal Customers
Another tactic of using behavioral segmentation is finding the most loyal customers.
To define their customers' loyalty, companies can use a combination of two:
- Brand Love: How likely customers are to recommend the brand to family and friends. Or, how likely are they to switch the brand given the price difference?
- Purchase Behavior: the total number of items they bought and the total amount they spent
Once companies combine these two data, they can create customer segments based on loyalty.
Understanding customer loyalty level is very important because most loyal customers usually have a higher lifetime value, and it's more profitable to retain them than to acquire a new customer.
6. Find Where the Customers Are Coming From
Where are the customers coming from? What is the traffic source?
It's important to know where the customers are coming from. It can help companies decide how much marketing should be focused on the different sources.
It also helps companies understand what types of products or content resonate best with those audiences. It can give them ideas for new products and content that might not yet exist in their product catalog, blog, or social media channels.
Segmenting this type of customer behavior enables companies to understand:
- Do visitors from certain websites convert more than visitors from other websites?
- Do visitors from certain websites spend more money than visitors from other websites?
- Do visitors from certain websites spend more time than visitors from other websites?
All of these insights can help companies optimize their user experiences to meet their business and marketing objectives.
The Bottom Line
Behavioral segmentation is a powerful marketing tool that can help companies reach their business goals. It can increase sales, retarget customers who left and make better product recommendations resulting in higher-value conversions for companies.
With these six ways, marketers have the tactics to create better, more cost-effective strategies for their company:
- Upselling and cross-selling with the right offers
- Retargeting campaigns based on past user behavior
- Product recommendations based on similar activities and past behavior
- Better timing for the messages, emails, and notifications
- Targeting higher lifetime value customers by understanding more about customers' loyalty levels and previous purchasing behavior
- Identifying the most valuable traffic sources
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