Oh it matters.
Customer segmentation is essential for the success of any business. Since personalization and customer experience are make-or-break factors for business, effective list segmentation is a must.
According to a recent report by Forrester, only 33% of companies using customer segmentation find it impactful. According to that report, many companies fail because they’re still using traditional customer segmentation strategies and they don’t leverage customer data and the advanced analytics tools available today.
Traditional customer segmentation strategies focus on who the customer is, and customer segments are based on demographic traits such as gender or age, and firmographic traits like company size and industry. But understanding who your customers are is from a demographic perspective is not enough!
Behavioral segmentation is much more powerful. This is customer segmentation that focuses on patterns of behaviors shown by customers as they interact with your brand or as they make a purchasing decision. It enables you to sort customers into groups according to their knowledge, attitudes, use, or response to your product, service, or brand.
The Importance of Segmenting Customers by Behavior:
Behavioral segmentation helps you understand how to target different customer segments with different offers, at the right time through their preferred channel, to help them move towards successful outcomes in their paths.
Using behavioral patterns, you can predict and influence future customer behaviors and outcomes.
Behavioral segmentation helps you identify high-value customer segments and initiatives with the greatest potential; this helps you to make smart decisions on how best to allocate time, budget, and resources.
With effective behavioral segmentation, you can track growth patterns and changes in vital customer segments. This helps you gauge your business’s health and check its performance against your goal. In this way, you are able to test the size and value of various customer segments and see how "positive" and "negative" segments are growing or declining.
Two Types of Behavioral Segmentation:
1. Purchasing Behavior
Purchasing behavior-based segmentation is finding trends on how different prospects behave when making a buying decision.
Purchasing behavior can help you understand:
- How various customers approach the purchase decision
- The difficulty of making the buying process
- The role of the customer in the buying process
- Critical barriers along the purchase path
- Important and least predictive behaviors of customers making a purchase
2. Benefit Sought
As customers look at a product or service, their behavior can show valuable insights into what benefits, features, values, and problems are important motivating factors influencing their purchase decision.
When a potential customer places a higher value on one benefit over the other, this primary benefit is the key motivating factor driving the purchase decision for that customer. For example, customers buy toothpaste for different reasons such as whitening, sensitive teeth, price, or flavor.
Two prospects may have similar demographics or firmographics traits, but they may have different values regarding what benefit or feature is most and least important to them.
By understanding each prospect’s behavior as they interact with your brand, you can group customers into segments based on their desired benefits and personalize your marketing strategy for each segment. As you’re able to more fine tune the strategy, customers will feel that you understand them better and as a result are much more willing to make more purchases.
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Holly Kile - Marketing Assistant