Why behavioral segmentation in market research matters

Understanding your customers is essential to designing products and services that meet their needs. However, not everyone has the same preferences or requirements, so segmentation becomes crucial.

Segmentation enables brands to customize offerings, personalize messaging, and optimize strategies for different audience groups.

Behavioral segmentation is a marketing technique that categorizes target audiences into distinct groups based on their actions, habits, and interactions with products and services. This approach helps identify and understand relevant differences among customer groups, allowing you to tailor your offerings to their specific needs. Doing so can foster long-term customer loyalty through a deeper understanding and connection with your audience.

Behavioral segmentation is a marketing strategy that divides customers into distinct groups based on their observed behaviors, such as purchasing habits, product and service usage and frequency, and engagement patterns.

Many successful companies use behavioral segmentation. It enables marketers and business owners to identify and target different customer groups and profitable niches by understanding variations in their preferences, desires, and needs.

Behavioral segmentation goes beyond dividing customers into groups based on demographic information (like age, sex, and location). It enables you to group customers based on their behavior, segmenting them based on their actions and behavior patterns. This information allows you to get to know customers better.

You can use the insights gained from behavioral segmentation to create more personalized and relevant messaging for different customer types. You can also enhance product development, ensuring that products meet customers’ needs and preferences.

The following five types of behavioral segmentation offer different frameworks for evaluating customer behavior and intent, helping shape business decision-making:

1. Purchasing behavior

Purchasing behavior refers to certain decision-making patterns, including brand loyalty and price sensitivity.

It’s one of the most important factors to measure since it allows businesses to tailor marketing messages and predict future buying patterns for different customer groups.

2. Customer journey stage

Customer journey segmentation involves categorizing customers according to their stage in the buying process.

For example, they might only be aware of your brand, be considering making a purchase, or have already decided to make a purchase.

Customers in these journey stages need different things. Using this framework can help marketing teams align communications with these needs.

Analyze your buyer’s journey to understand factors that may cause them to discontinue. Then, try to understand how you can nurture them past the consideration stage into the purchasing stage.

3. User status

User status categorizes customers according to their engagement with a product. It defines separate lifecycle stages. For example, user status could be “non-user,” “first-time user,” “active user,” or “churned customer.”

This type of behavioral segmentation can provide insights into retention strategies for active users and win-back strategies to re-engage lapsed customers.

4. Usage frequency

Usage pattern segmentation focuses on the frequency and intensity of product use. It typically involves segmenting customers into heavy, moderate, or light usage. The aim is to identify the proportion of customers using your product or service frequently versus those needing encouragement.

By identifying your most involved and valuable customers, your marketing team can create targeted messaging and loyalty campaigns that reward them for their continued support.

5. Occasion-based segmentation

Through occasion or timing-based segmentation, you can determine which customers tend to purchase around holidays and seasonal events and which purchase more irregularly.

For example, some customers might purchase around Christmas time, while others might make purchases spontaneously, such as before a road trip or special occasion.

Predictive analytics and historical purchasing data can help you identify seasonal trends or specific life events influencing purchasing behavior, such as weddings and back-to-school season. Once you understand this, you can create special promotions and marketing campaigns that engage with specific occasion-based segments at peak buying periods.

Embedding behavioral segmentation in your marketing offers many benefits. From better understanding your customers to determining how to target your marketing spend, behavioral segmentation can be a winning strategy for your business.

Here are some of the advantages you can expect:

Improved customer retention

When you find out what customers respond to and the specific behaviors, products, and services that keep them loyal to you over other brands, you can strengthen your relationship with those customers.

Behavioral segmentation can also help you to identify at-risk customers and implement measures to keep them from churning.

Customer lifetime value

Customer lifetime value (CLV) is the total money a customer spends with your business over time. Mapping CLV using behavioral segmentation allows you to identify the value different customer segments bring to your business. CLV can help you understand what value different consumers bring to your business.

With this insight, businesses can tailor strategies to retain and engage high-value customers while deprioritizing less valuable ones. This approach helps maximize your marketing and CRM budget, profitability, and growth.

Personalized marketing efforts

Every customer wants to feel that you have their best interests in mind and can speak to their needs and desires, whether they are new or have made multiple purchases over many years. Through behavioral segmentation, you can tailor your messages and offers to match the specific preferences of many customer segments.

Experts note that personalized marketing campaigns can improve consumer satisfaction and increase brand loyalty and conversion rates. Whether through customized email campaigns, individualized product suggestions, or automated trigger-based marketing messages, sending the right message at the right time to the right customer is one of the best ways to show them you listen and care.

Personalized marketing campaigns can greatly enhance a brand’s performance compared to its competitors, even if they are not always straightforward. A prime example is Sephora, a beauty brand that effectively uses behavioral segmentation in its inclusive marketing strategies. Sephora gathers data about each user through its Beauty Insider rewards program. The program collects customer preferences, lifestyle, and engagement data, allowing Sephora to create personalized marketing campaigns, such as tailored offers and experiences, encouraging engagement, loyalty, and repeat purchases.

By analyzing browsing and purchase history, Amazon predicts what items customers will likely buy next. These insights help promote products through targeted pop-up ads and features like the “essentials” bar on the home screen, highlighting frequently purchased or relevant items. This data-driven approach ensures customers see the right products at the right time, promoting engagement and encouraging repeat purchases.

Optimized resource allocation

Many businesses, from global powerhouse brands to start-ups, suffer from resource strain at some point. Optimizing resources through behavioral segmentation is a cost-effective strategy that allows you to spend more efficiently. It allows you to focus resources on promising segments instead of wasting budget and employees’ time on clients who are less likely to respond.

Other types of segmentation help you learn about your customers, too. Demographic, geographic, and psychographic segmentation enable you to comprehend and categorize your customers effectively.

Demographic segmentation

Demographic segmentation is a more basic categorization method. It involves dividing a large market into groups based on age, gender, education level, income level, and marital status.

While basic, demographic segmentation can support the creation of personalized marketing and brand experiences. It can drive sales, enhance customer loyalty, and bolster brand recognition.

Geographic segmentation

Geographic segmentation uses location-based targeting to reach customer groups. It works on the principle that where buyers live influences their purchasing habits.

Marketers who implement geographic segmentation in their campaigns might better understand fluctuations in sales and demand in different areas and uncover new ways to promote their products and services based on where people live.

Psychographic (or attitudinal) segmentation

While geographic and demographic segmentation uses tangible factors like age, gender, and location, psychographic segmentation considers variables like personality traits, interests, and values.

With advances in data collection and analysis tools, gathering and leveraging insights into your target audience’s motivations and behaviors is easier than ever.

For example, a health and wellness company might measure its audience’s values by asking, “How important is it that the brands you support prioritize eco-friendly production practices?” The company can identify customers motivated by sustainability and use the information to guide tailored marketing and product offerings.

Successful behavioral segmentation involves implementing and following best practices.

Data collection methods

Data is the cornerstone of any customer segmentation. Establishing robust and reliable data collection practices can help ensure sound results.

You can use many data collection methods for customer segmentation, from surveys and in-person focus groups to website analytics and sales data.

Social media engagement is an excellent tool for monitoring customer interactions, as are customer reviews and feedback from all your platforms.

Decide how many methods you’ll use for data collection and consider assigning a team to monitor and collect feedback from each platform.

Analyzing customer behavior patterns

Once you have collected data for analysis, look at past behaviors, including purchases and interactions across various platforms. You can also analyze social media engagement, customer support inquiries, and website visits.

As you gather information about your customer group, patterns will emerge that will allow you to predict future behaviors. Be aware of anomalies and outliers and account for seemingly random pieces of data that might not seem related at first. These outliers and anomalies are often important to your analysis and can reveal important information about your target customers.

Using insights for targeted marketing strategies

You can implement highly targeted sales and marketing strategies by analyzing customer behavior and forecasting future actions. These strategies enable tailoring product recommendations, crafting individualized promotions, or optimizing messaging. When done well, personalized marketing will enhance loyalty, boost conversion rates, and solidify brand presence in a competitive market.

As with any marketing strategy, behavioral segmentation presents distinct challenges. Be aware of common challenges and consider implementing safeguards when outlining your segmentation plan.

Data privacy concerns

As technology advances, consumers are increasingly concerned about how their data—personal information, browsing habits, survey responses, or purchase histories—is handled.

When engaging with customers, being transparent about your data privacy and security policies is essential. Always obtain clear consent before using their data and explain how it will be utilized, including any ethical considerations your company follows. This openness fosters trust and strengthens customer relationships.

Complexity of consumer behavior

Consumer behavior is always evolving. Even with the most thoughtful questions and sophisticated software, you can’t always predict it accurately.

Ultimately, behavioral segmentation can be both qualitative and quantitative. Look at it as a frame of reference rather than an end-all resource. Data-driven decision-making is key.

Use trustworthy processes, including data collection software that can show you customer feedback in real time, to obtain the most reliable data. Conduct research regularly to stay on top of consumer behavior.

With the advent of new AI solutions, businesses have more options than ever for observing and understanding customer behavior.

Advanced analytics and AI

AI is revolutionizing how businesses analyze large datasets, and it will only get easier. In the future, marketers will be able to gather, analyze, and act on data in real time, making it simpler to respond to changes in customer behavior faster than ever.

By harnessing advanced analytics and AI, companies can streamline operations and be more cost-effective, allowing teams to focus on high-value work. But even with AI’s power, human oversight will always be crucial. 

Evolving consumer expectations

Today, consumers rely on the internet for everything—from paying bills to booking vacations—and their expectations are higher than ever. They expect personalized experiences that meet them exactly where they are.

Businesses must rise to meet these expectations. The key is fine-tuning how they collect data and asking the right, more targeted questions to understand their audience better.

At the same time, data privacy will continue to be a growing concern. Consumers are becoming more protective of their personal information, even if sharing it could lead to better products and services. Transparency will be crucial. Businesses that openly communicate their privacy policies and demonstrate that they respect consumers’ time and data will build trust, promote long-term relationships, and encourage open data sharing.

Netflix is an example of a brand that has successfully implemented behavioral segmentation. The company tracks viewers’ preferences, including genres, actors, and titles, to suggest content that aligns with their interests. This data also helps Netflix guide future content development and tailor its offerings to meet audience demands better.

Behavioral segmentation of lifestyle aims to get to the heart of how consumers spend their time and why. It goes beyond basic demographics like age, gender, and income level. Instead, it explores customers’ habits and preferences, such as preferred type of exercise or favorite beverage. It looks at the why behind these choices and the emotions they evoke.

Analyzing these behaviors enables businesses to understand how certain habits and preferences influence purchasing decisions.