Without Behavioural Segmentation, Brands Will Struggle to Optimize Their Personalisation Strategy

behavioral segmentation for optimization

By Scuba CEO Tony Ayaz

Personalisation is proven to reduce customer acquisition costs by up to 50% and marketers throw everything at getting it right. Whilst they can build a picture of their audiences using standard data sets such as demographics, technographics and psychographics, these tell them nothing about their actual audience behaviour.

Using traditional data sets, marketers might, for example, know that a customer is a 25-year-old, marketing assistant from London, who loves cats and owns an iPad. But they have no idea how often this customer looked at a product before purchasing or at what time of the week they are most likely to buy.

Without behavioural analysis marketers only have part of the picture and risk their campaigns missing the mark. This is where behavioural segmentation can help.

What Exactly Is Behavioural Segmentation?

Behavioural segmentation goes one step further than traditional techniques and divides customers into segments depending on their behaviour and activity. It covers (among other things) purchasing behaviours and habits, use of a product or service and brand loyalty.

Behavioural segmentation might identify:

  • How a customer responds to offers
  • Whether they are likely to make a repeat purchase
  • What drives them to buy more
  • What they like and dislike about a product

The powerful insights behavioural segmentation generates work in tandem with other types of market segmentation, to add a depth of understanding to increasingly complex, omnichannel behaviour. It gives marketers everything they need to deliver an optimal customer experience and increase conversions by:

  • Finessing the buyer journey
  • Improving a product or service based on real feedback
  • Refining messaging according to audience

The Six Types of Behavioural Segmentation

Segmentation can be useful to determine a vast number of audience characteristics but here are six common categories:

1.)  Segmentation by Purchasing Behaviour

Take two customers buying a laptop: one fastidiously researches each feature to ensure they are making the best choice; the other looks for the cheapest model that will do the job. Clearly, they would benefit from different communications – an expert review article for the researcher and a price comparison chart for the money-saver. Behavioural segmentation enables marketers to do this by identifying:

  • How much research a customer performs before purchasing
  • The type of information they seek and what convinces them
  • The questions they ask during online chat support
  • Customer search queries
  • The complexity of their purchasing process
  • Any barriers that could derail a purchase

An in-depth understanding of purchasing behaviour led US-based online shoe retailer Zappo’s to launch free returns after learning that return fees deterred consumers. The change led to higher profit margins.

2.)  Segmentation by Occasion or Timing

Certain occasions or times of day can also drive customers to make a purchase.

Occasional-based purchases include:

  • Seasons
  • Holidays – Halloween, public holidays, Christmas, Eid, Diwali, etc.
  • Life events – weddings, birthdays, moving house, etc

Timing-related purchases include:

  • A morning train ticket or coffee
  • A post-work trip to the grocery store
  • A payday treat

Knowing when a customer is likely to buy something enables brands to insert themselves into predictable purchasing routines and increase the relevance of their offering. Starbucks’ use of seasonal cups is an excellent example. This also presents opportunities for timely discounts as well as cross-selling. For example, there are hundreds of products and services someone might need while moving to a new home and could be more likely to purchase multiple items provided by one brand.

3.)  Segmentation Based on Customer Loyalty

Loyal consumers are the most valuable group of customers – repeat buyers spend 67% more than first-timers and can be powerful brand advocates. Segmentation by loyalty helps identify and channel resources towards nurturing this strong brand relationship. This might be via a rewards programme, or delivery of strong, personalised customer service or user experience.

Toy-maker LEGO used this information to overhaul its VIP rewards programme by replacing passive discounts with segmented rewards – i.e. making certain awards available to specific customers – for example, collectable art prints for Marvel fans.

4.)  Segmentation by Journey Stage

Customers need (and want) different information and incentives at varying stages of their buying journey. During the research or awareness stage, they might benefit from a comparison chart; as they move closer to the checkout, a promotional voucher might get the transaction over the line.

Segmentation by journey enables marketers to identify points at which customers lose interest. If 7 out of 10 customers are abandoning their baskets, marketers can internally discuss if there is something wrong with the checkout process.

5.)  Segmentation by Benefits Sought

Consumers buy based on their need to solve a problem and segmentation by benefits allows marketers to group consumers according to what is driving their purchase. This includes perceived benefits such as quality, price, strong reviews and other unique selling points. It identifies:

  • ­   Why consumers buy a product
  • ­   The pain point it solves
  • ­   What they would be doing without it
  • ­   The most valuable features

6.)  Segmentation by User Status

First-time buyers and long-standing customers have very different needs. The former might need more explanatory information, whereas the latter might simply want a fast checkout. Segmentation by user status places consumers into groups such as:

  • ­   Prospects
  • ­   First-time buyers
  • ­   Return customers
  • ­   Defectors
  • ­   Brand evangelists

For example, car insurance brand GEICO leverages status segmentation to target defectors. It sends out “we miss you” emails to former customers alongside an offer for a new competitive rate, in the hopes of reconverting them.

Unlocking a 360-Degree Consumer View

Understanding and identifying a customer’s journey and behaviours is critical for brands. Without developing a comprehensive view of the customer journey, marketers and their brands will struggle with personalisation.  In an increasingly competitive digital marketing landscape, behavioural analysis can give brands the edge by unlocking detailed consumer insight and enabling the delivery of a truly personalised customer experience.

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