As the world continues to morph into more of a global village, marketing remains a vital ingredient for every business’s success, and mobile app businesses are no exception. Unfortunately, it has become exceedingly hard for competitors to survive in the market for prolonged periods without employing smart marketing approaches like market segmentation.
Since competition is more cutthroat, the development of proper marketing strategies over time is required. Fortunately, as an early concept in marketing, segmentation evolved to provide different marketing avenues such as behavioral segmentation, which is the subject of today’s discussion.
What Is Market Segmentation?
Generally speaking, as a marketing concept, segmentation entails dividing a market into groups of customers with similar needs, then developing appropriate marketing programs that meet those needs. As an activity, segmentation is very crucial for marketing success as markets tend to be heterogeneous while customers vastly vary in their values, constraints, needs, wants, beliefs and incentives to act in a specific way.
The Purpose of Market Segmentation
Overall, the purpose of market segmentation is to ensure companies can serve different customer types satisfactorily. But, unfortunately, organisations cannot connect with all customers in large, broad or diverse markets. As such, prioritising and focusing on specific groups is prudent.
Market segmentation allows business entities to focus on customers within their capacity, depending on their distinct needs and wants. So, with markets divided into homogenous groups, organisations can then concentrate their marketing energy and force on gaining a competitive advantage within the particular segment.
How Markets Can Be Segmented
Consumer markets can primarily be segmented by the following customer characteristics:
What Is Behavioral Segmentation?
Fundamentally, behavioral segmentation is loosely defined as the process of splitting a market into smaller homogeneous groups based on underlying customer buying behavior. Behavioral segmentation is performed by business entities and organisations based on purchasing patterns of customers, for example, usage frequency, brand loyalty, user status, readiness to buy, or benefits sought etc. It is usually executed in line with the needs and wants of customers based on the behavior they portray.
Generally, behavioral segmentation in marketing principally involves tracking and analysing the actions and decisions consumers make. On the positive side, behavioral data is relatively easy to collect online through websites or in-app as one can install tracking mechanisms like cookies. For instance, brands such as Netflix exploit algorithms to track the behavior of users in order to tailor content specifically for them, based on their viewing and navigational behavior.
What Are The Objectives of Behavioral Segmentation?
- To understand how to address the needs and desires of different customer groups.
- To quantify buyer’s potential value to one’s business
- To specifically tailor products or services to meet customer’s needs and desires
- To discover new opportunities to optimise the buyer’s journey better
- To help develop better marketing strategies that improve and expand one’s customer base
The Importance of Behavioral Segmentation in Marketing
As alluded to earlier, in today’s evolving world, customers significantly vary in their buying behavior. As a result, there is a vital need to continually customise products, packaging, price and promotions to fit their needs. In simpler terms, today’s mobile marketing emphasis has shifted to differentiation based on unique needs, preferences and behavioral characteristics of each customer segment rather than exploiting a one-size-fits-all strategy.
Behavioral segmentation plays a vital role since the days of mass marketing are long gone. Companies no longer market to as many people as possible while hoping for the best. Rather, they now prefer tailored and data-driven strategies while still carefully considering packaging, price and promotion. With behavioral segmentation, companies can better understand their customers and target their marketing efforts more efficiently and effectively.
Furthermore, behavioral segmentation can be utilised to accurately determine potential prospects on whom to focus on, as they are most likely to purchase a business’ offering. Thus, ensuring the highest return for mobile marketing expenditures. Statistically, segmenting markets based on behavior, benefit sought, and customer expectation has a greater effect on marketing success measures in terms of repeat purchase, profitability, customer satisfaction, and sales growth.
Methods of Behavioral Segmentation
Traditionally behavioral segmentation can be classified into two categories:
- Based on numerical attributes of data like average and variance, median, quartile, etc.
- Based on logical groupings, for instance, discount buyers or frequent buyers, etc.
Advantages of Behavioral Segmentation
Breaking down the markets into homogeneous groups that have similar behavior has several advantages, namely:
- It enables companies to accurately identify and target customers.
- It helps organisations to change marketing campaigns based on customers’ consistent behavior or even erratic behavior.
- It helps establish brand loyalty further, built upon customers who have shown a strong affinity towards the brand.
Broadly speaking, segmenting one’s audience based on purchase behavior can facilitate:
- Customer purchase decision-making process
- Purchase milestones and buying journey
- Efficacy of the purchase process
- Uncover behavior and actions that can predict the probability of purchase
Disadvantages of Behavioral Segmentation
Notwithstanding, there are a few drawbacks to segmenting a market on the basis of behavior.
- Customer behaviors can sporadically change with time, location, occasion, requirement etc.
- Sometimes customer actions can be extremely difficult to predict correctly. As such, behavioral segmentation can only provide a framework for personality traits and behavior.
- Behavioral segmentation is mainly performed with qualitative data rather than quantitative data. Thus, making forecasts, budgets, expenses all depends on specific assumptions and parameters.
How Are Behavioral Characteristics and Types Grouped?
Target consumers for a product or campaign can be grouped on the basis of their behavioral characteristics in four key different ways:
- Occasion Segmentation: Where a product is purchased or used for a particular occasion only. Such an occasion can be repetitive or a once in a lifetime occasion. Typically, the marketing calendar is filled with multiple occasions for everyone, like global, community, and personal. Thus, the purchasing behavior of customers also changes with such occasions.
- Usage Oriented: In this approach, customers are grouped based on how much a product is being utilised/consumed. As a result, mobile marketers define customers as ‘heavy user’ or ‘light user’ groups.
- Loyalty Oriented: Here, markets tend to be segmented based on the retention rates of the consumers. This is a fair indication of brand loyalty among them. In practice, a brand with a high degree of loyalty has a very high retention rate and doesn’t need to worry much about acquiring new customers. However, a brand with low loyalty levels continually needs to recruit new consumers to its basket.
This behavioral segment type is vital because it accounts for the majority of companies’ e-commerce revenue. However, it is different from the ‘habitual’ buyer segment as habitual buyers tend to regularly purchase from brands because of constant need. On the other hand, loyal customers are genuine product or brand evangelists who do not purchase due to recurring needs.
- Benefits Segmentation: This benefits-oriented type of behavioral segmentation is performed based on the different benefits perceived by disparate consumers. In practice, there are specific benefits that an individual is seeking from a product despite variety or price, which could fulfil their needs. In this segmentation, customers are sectioned according to products that give them the maximum benefit.
Examples of Behavioral Segmentation
Generally speaking, behavioral segmentation and marketing delivers considerable advantages in niche advertising.
It helps marketers answer a few questions before engaging customers. For instance, if introducing a new electric car, would it be prudent to target customers who previously bought a Prius or those who bought a pickup truck. Or if selling a health product, which behavior would be more compatible for targeting: an individual who typically buys vitamins or one who buys cigarettes?
Or, if selling jewellery, will someone who bought jewellery in the past year or someone who has never purchased, be a better prospect?
People’s behavior usually stays the same over time. So, when a marketer identifies a specific behavioral trait or action that can help in marketing, it’s prudent to leverage it!
Here are two simple examples:
Example 1: By delivering discounts to high-momentum users
For instance, if a prospect who has never bought from you visits your website ten times over three months. Then, that same person visits your site ten times in the last week alone. This would ideally indicate they might buy from you soon.
As such, you can capitalise on this momentum with tailored, individualised messaging to them. For instance, promoting a 15% off discount.
Example 2: Retargeting frequent and yet-to-convert visitors
High bounce rates tend to trouble marketers, especially from high-frequency visitors who window shop, and do not purchase. With behavioral segmentation, you can retarget ads to different visitors when they leave your website through email or pay-per-click ads to regain their attention.
In practice, with a view of behavioral data in combination with other types of customer data (like propensity scoring, or lifecycle stage), you can retarget customers with individualised ads with special offers for products they previously checked out as they browse elsewhere online.
In summary, behavioral segmentation techniques focus on helping companies directly target audiences based on their unique behaviors, interests, geolocation, intentions, and other data-driven metrics like web analytics, cookies, and search history.
All things considered, mobile marketers and business entities that exploit all the above data points have higher chances of successfully delivering relevant content and contextual offers to their customers, in contrast to generic campaigns broadcasted to random broad audiences. As such, behavioral segmentation is known to yield a much higher return on investment (ROI) for e-commerce brands.
Additionally, deeply understanding customer spending habits can open mobile marketers’ eyes to different opportunities to engage with prospects in the right context.