Business owners have been applying the principles of behavioral segmentation for decades, perhaps without realizing it.
You were offering your customers discounts for loyalty, extended payment plans for a younger age group, two-for-the-cost-of-one schemes for the price conscious and the like.
But perhaps these efforts were not collated, analyzed or used in the systematic way as they are now.
Today, more than 2.5 quintillion bytes of data are generated every day. Unfortunately, just a fraction of this humongous volume is used by businesses. They are held back by near-obsolete legacy systems, database silos and compartments, inconsistent automation features and other hurdles.
For many organizations, the sheer amount of data seems an insurmountable mountain and they may not really know what to do with it.
This means that valuable information is left on the table, ignored or under-utilized.
One of the most valuable aspects of data is the behavioral insights it offers. Studies show that organizations that leverage behavioral segmentation strategies outdo their competitors by as much as 85% in sales growth and more than 25% in gross earnings margins.
Customer Behavior, Needs and Goals
Customers interact and engage with your business and your brand in multiple ways.
- need to purchase your products or services
- want to know where to get them and how
- want information about new launches, latest models, trends and fashions
- would like to know about similar items at different price points
- look for consistent quality
- would like to know what people like them recommend and consume
- would like timely reminders for occasion purchasing
- want only relevant and personalized messages
- would like to be rewarded for loyalty
- want easy, safe and convenient payment gateways
This is information that provides deep insights into their behavior as they visit your website, purchase online, interact on social media and respond to your products and services.
What Is Behavioral Segmentation?
- Did you know that there is archaeological proof to show that Bronze Age traders determined trade routes according to different geographical circuits?
- In the 16th century, retailers outside the urban areas had a window opening into the street to serve the “ordinary” customers, while high-value ones were invited into the store or even into a separate room.
- 18th century entrepreneurs held private shows for exclusive clients in their homes, but had traveling salesmen to cater to the masses.
Segmentation has always been one of the cornerstones of marketing almost since the beginning of commerce itself, and long before it entered the realm of theoretical knowledge. When 20th century marketers used census data, city directories and tax information to divide their customers into segments, and others developed socio-demographic segmentation tools, the concept of separate marketing strategies truly came into being.
However, up until now, segmentation concepts have focused on groups, products and services served to them and increasing sales and revenues.
Behavioral segmentation looks at customers not from a demographic or socio-economic point of view. It tracks their individual behaviors along their customer journey, records their customer experience and addresses their unique wants, needs and preferences.
Customers can be grouped according to their response and attitude towards your brand, products and services and how they use them. Their knowledge and awareness of your brand provides important insights. Purchasing behavior provides authentic information about life events, social relationships, occasions, events, holidays.
Marketers can segment customer behavior according to purchase and usage behavior, occasion or timing, benefits sought and customer loyalty. You can also segment behaviors according to customer journey stage, level of engagement and satisfaction levels.
This allows you to offer more personalized messages. Companies that provide personalized messaging benefit from increased visitor engagement, better customer engagement and brand perception, higher conversion rates, lead generation and new customer acquisition.
Why Is It Important?
Level of engagement: Customers can be segmented according to their level of engagement and interaction with your brand. Studies show that loyal and more engaged users purchase more often, are ready to pay slightly higher prices, make more impulse purchases, and are more willing to recommend your brand/products/services. They spend more time on going through your communications and your product pages. As a result, your marketing efforts get more streamlined, on target and cost-effective.
Accuracy: Modern customers resist and resent irrelevant, inaccurate marketing messages. Behavioral segmentation ensures that your messages are right on target. You can provide different messaging to consistent purchasers, occasional or one-time shoppers. When behavioral data is used in collaboration with demographic data, you can truly sync your messaging to the individual rather than to amorphous groups.
Personalization: Once you have more knowledge about individual customer behaviors, it’s possible to provide them with complementary or similar choices, upsell or cross-sell. You can reduce cart abandoning and bounce rates, while speeding up the buying process, and building social media networks. You can also minimize customer churn and reduce fraud and risk. Personalization also allows businesses to derive spending patterns, so that you can direct these into the right channels. Rich behavioral data offers better chances of accurate profiling so that you can provide the right content and information. The tools to gather this data were unavailable some years ago. Today, they are, and they can be used to tailor and time your messages to the individual customer.
Impact on Productivity: Optimized behavior data reduces inefficiency in business practices. Behavioral segmentation allows you to compare pricing bands, use specialized knowledge, and refine your reporting systems to ultimately result in higher productivity. You can also plan which products/services to focus on and which ones to discard or give less importance to. This helps you to make more accurate financial projections and plot better business growth trajectories.
Use Behavioral Insights: Marketers already have certain important insights into behavior. For instance, allowing customers to delay payments often results in a higher willingness to purchase. Psychologically, spending money can create anxiety and pain in many people. Behavioral data helps you to identify these pain points and address them accurately. You can also avoid choice overload factors that may overwhelm the average consumer. Behavioral segmentation also allows you to position the product or service more carefully.
Customer behavior is remarkably diverse, unpredictable and often irrational. However, businesses can successfully unlock this paradox by using accurate, consistent and verifiable behavior segmentation.
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