Do you ever feel like no one's listening to you about your product? In today’s digital world, it's essential to reach the right people with the right message. Old-school marketing often casts a wide net, throwing an effort to catch anybody at all. But this can be frustrating when it does not always work. What if you could make your marketing reach out to the people who really want what you have? That's when segmenting your market into groups based on what they do and like comes into play.

Read the blog to learn how segmenting your market into small groups based on behavior can change your marketing approach and lift your brand up.

What is Behavioral Segmentation?

Behavioral segmentation is a marketing strategy where customers are grouped based on their behavioral patterns. It is a form of market segmentation that looks into customers' behaviors and actions.

It is a strong tool for understanding the behavior of customers and directing targeted marketing efforts. It goes beyond just demographics and psychographics or even the purchases that have already been made to understand how people interact with and react to products and brands.

Also, read - Psychographic Segmentation for Your Market Research Strategy

Behavioral Segmentation Examples

Consider a CPG company that manufactures breakfast cereals. Their market research on this product might categorize customers into different segments based on behavioral segmentation, such as - 

The Health-Conscious Segment: This segment values healthy ingredients, whole grains, and fiber content. They are more responsive to nutritional information and health claims on packaging.

The Convenience-Driven Segment: This segment values quick and easy breakfast options. They might respond to marketing that focuses on single-serve portions or microwaveable options.

The Price-Sensitive Segment: This segment looks for value for money and affordability. Promotion offers, coupons, and bulk-buying options would appeal to them the most.

By segmenting their customers in this way, the cereal company can tailor their marketing activities. They can create targeted advertising campaigns, design packaging that appeals to specific segments, and even create loyalty programs that accommodate different usage patterns.

Key Elements to Consider While Segmenting

Behavioral segmentation segments customers on the basis of their behavior, interaction, and habits with respect to a product or brand. Some of the key elements to be considered here are:

Purchase behavior 

Frequency of purchase, size of the basket, preference for online or brick-and-mortar channels, and what prompts them to make a purchase.

Brand loyalty 

The loyal user who always chooses the same brand, the cost-savvy buyer who switches on the basis of price, or the user who experiments with different brands.

Product usage 

Heavy user, moderate user, or the occasional user.

Response to marketing communications

Those who respond well to email campaigns, social media promotions, or loyalty programs.

Importance of Behavioral Segmentation

Demographics and psychographics are helpful because they contribute greatly to understanding behavioral characteristics. However, their reliance on generalizations and projections does not give the full picture. What do consumers do, and why do they do it?  This is where behavioral segmentation truly comes into play, and there are several reasons why this is the case. Here are five key reasons why behavioral segmentation is essential for modern market research:

Provides Practical Insights

Demographic and psychographic data provide broad customer characteristics. At the same time, they tend not to explain specific actions and purchases.  Behavioral segmentation fills this gap: by analyzing how customers engage with products, brands, and marketing messages, researchers develop an understanding of triggers, the communication preferences of the target audience, and loyalty patterns.  These practical insights equip market researchers with the tools to prepare marketing strategies that appease specific customer segments.

Identifying Customer Needs

No matter what field market research resides in, its goal remains the same: to know what customers need and want.  Behavioral segmentation excels at this because it allows researchers to develop clear customer segments with unique preferences and behaviors.  This enables marketers to move away from generic marketing messages and design targeted communication that speaks directly to the needs of each segment.

For instance, a company selling athletic wear may identify a segment of fitness enthusiasts who value performance fabrics and innovative technologies.  Another might be interested in comfort and style for their casual workouts.  By segmenting their audience, the company will be able to execute targeted marketing campaigns that contribute to a more effective marketing spend.

Improving Campaign Performance

Generic marketing campaigns tend not to deliver high engagement and conversion rates. Behavioral segmentation solves the problem by providing accurate data that can be used to optimize marketing efforts.  Market researchers can understand how different segments react to different marketing approaches, such as email campaigns, social media promotions, or loyalty programs.  Data from different segments can be used to make data-driven decisions in developing marketing campaigns that will resonate with the different segments, thus improving the performance of the campaigns with higher ROI.

Brand Loyalty

Building strong brand loyalty requires an understanding of customer behavior.  Behavioral segmentation gives market researchers the ability to identify loyal customer segments and understand the factors driving their loyalty.  These insights enable companies to create targeted loyalty programs and experiences that appeal to the needs and preferences of the most valuable customers, thus cultivating stronger brand loyalty and repeated purchases.

Predicting Future Behavior

Behavioral segmentation extends beyond understanding past actions; it can predict future customer behavior.  By analyzing past purchase patterns and engagement with marketing efforts, market researchers can identify trends and create predictive models about future customer needs and buying decisions.  This insight can be used proactively to develop new products, personalize product recommendations, and tailor marketing strategies to capture emerging customer trends.

Types of Behavioral Segmentation

Here are the three types of behavioral segmentation:

Usage-based segmentation 

It defines market segments according to how consumers use a product or service. It includes how often users use the product, how loyal they are, and how much they use. 

Example: A video streaming platform such as Netflix. They may separate their users into segments that use the product more often. It will include the regular weekend users, the periodic users who watch only selected genres, and those who never use it.

Netflix may identify a segment of its users whom they refer to as "Weekend Warriors." These people watched entire seasons of TV shows on a weekend. They will then begin to be more proactive in releasing new seasons of popular series on Friday evenings, ensuring that their availability coincides with when the "Weekend Warriors" were most active. This will induce more engagement and renewal of subscriptions among that segment.

Benefit-based segmentation: 

It groups consumers according to the benefits that they expect to achieve through the product or service. It is more concerned with the actual needs and motives of different consumer groups. 

Example: Gaming industry. Gamers can be divided into various segments depending on their primary benefits to playing games—whether it be for entertainment, social interaction, competition, relaxation, or skill development.

A gaming company like EA Sports may find that a large portion of their player base was primarily using the platform for social interaction and community building in online multiplayer games. The company will then develop features like in-game chat, guilds, and multiplayer tournaments in order to build a thriving gaming community. This will lead to greater retention of players and increased word-of-mouth marketing from happy gamers who enjoyed the social part of the game.

Occasion-based segmentation 

This segmentation separates consumers by identifying the occasions or situations in which they need or utilize a product or service. It considers things like timing, events, and other occasions.

Example: Consider XYZ as a ticketing platform. They might segment their users by the kind of event that they attend: a concert, conference, festival, sporting event, and more. 

XYZ might find a segment of users attending music festivals during summer. To engage the target segment, they will send personalized emails and recommend upcoming festivals, with exclusive discounts and privileges for early bird ticket purchases. Consequently, there will be more ticket sales and a greater proportion of users active during the festival season.

Pros and Cons of Behavioral Segmentation

Behavioral segmentation is an important tool for the market researcher, but like everything, it has its own set of strengths and weaknesses. Below is an overview of the major advantages and disadvantages to keep in mind.

Pros

Highly Targeted Marketing 

Understanding consumer behavior allows companies to create laser-targeted marketing campaigns that hit specific groups, improving overall engagement and conversion rates.

Deeper Customer Insights 

Behavioral segmentation looks beyond demographics and psychographics, giving insiders a much-needed view of the "why" and "how" of customer decisions.

Improved Campaign Performance 

Insights obtained from behavioral segmentation allow companies to test-drive and optimize their marketing campaigns based on the data, ensuring that messaging and strategies are set up to work for each segment, maximizing returns.

Enhanced Customer Loyalty 

Behavioral information on loyal segments can feed a targeted loyalty program or personalized experience, strengthening the relationship customers have with the brand.

Predictive Abilities 

Behavioral information can be turned into predictive models of future customer behavior and buying tendencies. This allows companies to be proactive in product development and personalized recommendations.

Cons

Challenges for Data Collection 

Obtaining behavioral data often requires pooling data from multiple sources and sophisticated analytics tools, which may be time-consuming and resource-intensive.

Privacy Issues 

Pooling and analyzing customer behavior raises some privacy concerns. The company needs to be transparent and comply with data privacy laws.

Segmentation Complexity 

Creating and maintaining effective segmentation models is an ongoing process of analysis and refinement to ensure that, at all times, segments remain relevant.

Scope 

Behavioral segmentation speaks to past and current behavior only and may not always predict future actions for each customer. It needs to be put together with other research methods.

Conquering the Challenges: How Decode Empowers Behavioral Segmentation

Behavioral segmentation is rich in benefits, but we have seen that it has some challenges. Fortunately, innovative solutions like Decode, an integrated consumer research platform powered by Insights AI, can empower market researchers to conquer these challenges and reveal the full potential of behavioral segmentation.

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Decoding the Challenges

Data Collection Simplified 

Decode is a one-stop shop that integrates data from a range of sources like surveys, social media interactions, website behavior, and loyalty programs. This makes it unnecessary to juggle multiple tools and saves crucial time and resources.

Privacy First 

Decode ensures data privacy. It operates with anonymized data and follows strict privacy regulations. This is the way that builds consumer trust in research.

AI-Driven Segmentation 

Decode's Insights AI, which includes Emotion AI, Behavior AI, and Generative AI, automates the segmentation process. This reduces the complexity of model creation and maintenance, allowing researchers to focus on strategic insights.

Beyond the Past 

While behavioral segmentation relies on past data, Decode's AI capabilities can more accurately predict emerging trends and future behavior. This future-oriented approach complements past and present insights.

Cost-Effective 

Decode is a single platform, which can potentially lower the number of research tools and subscriptions required. In addition, by simplifying the collection and analysis of data, Decode helps researchers optimize their workflow and maximize efficiency.

In short, Decode is a powerful tool for market researchers, handling the complexities of behavioral segmentation while unlocking its full potential. Leveraging its functionalities, researchers understand customer behavior in-depth, develop highly targeted marketing strategies, and achieve tremendous success in the marketplace.

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