If you go online to compare products before making a purchase, or you tend to post a review after a hotel stay, you are leaving digital footprints – aka usage data. Companies commonly use this data to perform marketing segmentation – grouping users according to specific traits to target them with more personalized content. After doing your online research, chances are you’ll see articles, ads, or posts related to that search; in other words, you’ll see content based on your online behavior.

In marketing, behavioral segmentation represents one of the four primary segmentation categories. The other three categories group users according to their demographic, geographic, and psychographic traits. Although each category plays a key role in profiling and defining your customers, behavioral segmentation can inform a business as to how and when a customer is ready to purchase or at risk for churn. By combining all four types of segmentation, you can anticipate their next move and offer high-value content. At the end of the day, your main goal is to create a great customer experience. 

This article covers:

  • An overview of Marketing Segmentation
  • What is Behavioral Marketing
  • Examples of Behavioral Segmentation
  • Why is Behavioral Segmentation important?

An overview of Marketing Segmentation

Marketing segmentation is the process where businesses group their customers according to demographic, geographic, psychographic, and behavioral traits. The first three can help you target users based on their age, gender, location, personal interests, etc. Behavioral segmentation‌ focuses on how, when, and why users purchase.

This last type of marketing segmentation has been especially relevant for subscription-based products, like SaaS. Start-ups in this sector are already born with a high CAC and surrounded by similar products. If you’re a SaaS business, knowing where your customers live or their gender is not going to cut it. You need to know what they think about your product and whether they’re getting everything they expected out of it.

What is Behavioral Segmentation?

Behavioral segmentation focuses on grouping users according to behavioral traits, especially relating to your product. This behavior is defined by their motivation in using your product, how easy or straightforward they find its usage, how willing they are to buy or sign up for a free trial/freemium plan/demo, etc. 

Examples of Behavioral Segmentation

Although we could safely say that there are as many behaviors as people in the world, when it comes to your product, these examples of behavioral segmentation can be applied across any business type.

Purchasing Behavior

Purchasing behavior can help you answer questions such as, what motivates a user to subscribe to a plan or product? Whereas some users may be “forced” to use specific software as part of their job role, other users may have tried a demo or used up their quota of the freemium plan and are ready for the whole deal.

Occasion Purchasing

This type of segmentation category helps you group your customers according to when they buy your product. For example, if you know when your customers develop their budgeting plan, then you’ll know the best time to showcase your product. 

Customer Usage

Customer usage helps you identify users who use and purchase your product most often. However, your most active customers aren’t necessarily the most profitable. To gain a better understanding of how to target this group, you’ll need to figure out the customer lifetime value (CLV) for each.

Benefits

The benefits refer to what users are getting out of using your product. It’s important to group according to benefits as it can vary between your cohorts. For example, pricing, customer service, integrations with other apps, etc.

Loyalty

Behavioral segmentation helps create more targeted end-users. In turn, this results in loyal customers who will not only pay for your product but advocate for it.

Buying Stage

The buying stage determines how you communicate with each type of user. In product-led companies, the figure of product-qualified leads (PQLs) has meant rethinking this buying journey. The incentives to convert are different, and the support provided needs to go the extra mile.

Why is Behavioral Segmentation important?

To give you some extra motivation, we’ve summed up the four main benefits that behavioral marketing can offer any business:

  • More accurate targeting. Since you have now identified behavioral patterns in your customers, it’s easier to predict what their next move is going to be. The result? A reduction in churn.
  • Personalized user experience. It’s not just about hitting the right KPI. The more you know about how your users behave, the more relevant and personalized experience you can offer. By increasing customer experience, you are also increasing engagement with your product.
  • Reduce your cost per acquisition (CPA). Every touchpoint involves some portion of the budget. Whether it’s time, money, or effort, they’ll be put to better use if focused on the most interested, engaged, and valuable users.
  • Improved tracking methods. Knowing how users behave will also help you understand when to apply specific metrics. Measuring user behavior regularly will also help reduce churn while improving your product at every stage.

Behavioral segmentation is key for any business, but if you’re in the SaaS sector, it will mean the world of a difference for your churn rate. In Is Churn a Dying Metric? (Part 2 of A Guide to Churn Rate) we show you how to make the most of this metric. Although it is a lagging indicator, behavioral segmentation is a great way to anticipate user behavior and reduce churn.

If you want to take an extra leap with use, read Behavioral Marketing with FROGED.