Marketing segmentation is almost a mandate if you are a brand selling online through your D2C eCommerce store. It is a process that allows you to understand your customers better and thus communicate with them better. It helps a brand design its marketing and outreach efforts more strategically.
Marketing segmentation is broadly divided into four categories:
1. Segmentation based on demographics
2. Geographic segmentation
3. Psychographic segmentation
4. Behavioral segmentation.
As the name suggests, the first two modes of segmentation define your audience based on their age, gender, location, and such. Psychographic segmentation delves deeper and finer into the customer’s psyche. It examines customers’ perceptions of self that determine their shopping choices to correspond with their branding efforts, social background, and lifestyle.
Why is behavioral segmentation particularly important?
Behavioral segmentation is a different ball game entirely. It seeks to understand why a customer might behave in a certain way. It seeks to throw light on when customers are likely to shop, and what factors influence their buying decisions. It is rather like being able to watch over your customer’s shoulders as they go about the process of planning, browsing, selecting, and finally, buying your product.
Some of the vital questions that behavioral segmentation addresses include:
Why is the customer buying your product?
What makes them happy about it? Is it an attractive price point? Is it the discount on the product? Is it the product quality? Is it the fact that you ship to their area while other eCommerce businesses don’t?
Why do they prefer to buy at this time of day/month?
What makes them so loyal to your brand?
What goes into their planning and decision-making process?
When are they confident about their purchase and when are they likely to waver? and so on.
Behavioral Segmentation: Sub-Categories
Distilling out the deciding factor(s) that determine whether a visitor to your site makes a purchase, and converts to a brand spokesperson or regular customer is the goal of behavioral segmentation. To clarify the process, some subcategories help you understand the elements of your customer’s buying experience, i.e. the milestones that dot their buying journey.
Let’s look at these ones by one, as each sub-category of buying behavior represents an important aspect of the buying journey.
1. Purchasing behavior:
This is rather difficult to quantify or put a number to, however, you can gain rich data through regular customer surveys that afford you a glimpse into what they are thinking as they decide to put down their money. The insights you gather here can advise your marketing and communication campaigns, as well as enable you to make changes to your checkout process to make the experience as seamless as possible.
One metric that can help with this segmentation is the ratio of adding to cart and checking out, which in eCommerce tends to hover around 0.3, a rather low ratio. Studying purchase behavior using numbers like these allows you to see where you can do better than your peers.
2. Occasion purchasing:
Christmas or Valentine’s Day are obvious occasions when people shop for specific products. But outside of such occasions, what are the occasions of personal significance to the customer that they are keen to shop for? What are their patterns? Are their purchases seasonal? Is a purchase of, say, a designer dress a one-time event, or are they likely to come back for more? Tracking occasion purchasing is like playing the long game: Observing the ebb and flow of your consumers’ buying habits over extended periods is key to uncovering patterns of behavior.
3. Customer usage:
This subcategory is all about identifying the heavy, medium, and light users of your product, service, or website. The heavy users are the ones who keep coming back and shopping actively, and they must be nurtured. Medium users need to be nudged in the right direction with offers and promotions they find attractive. With light users, you might need to do a bit more research into what makes them tick, and allocate resources for advertising according to your estimate of whether they can be converted to more active users.
4. Benefits:
To put it succinctly, what you want to know here is, “What’s in it for them?” Does your product or service assuage a pain point? Does your brand capture their personal style? Or is it because they did their research and your website offers the best price? The answers, again, lie in customer surveys as well as A/B testing. This subcategory is all about understanding the precise value addition you deliver to your customers.
5. Loyalty gauge:
In this age where hundreds of eCommerce businesses are vying for a piece of the action within a finite consumer segment, your loyal customers are worth their weight in gold! They are the ones who keep coming back, telling others about you, refusing to go anywhere else, and driving your revenue. Such loyalty must be rewarded, but first, you need to know who these people are. Separating them from not-so-loyal customers is also important. You can then refocus your marketing effort, or alter your message, to try to retain others.
6. Buying stages:
The stages along the buying journey range from non-users (beginning with those who don’t know you exist) to former customers who have left for greener pastures. In between lie your prospects, first-time experimenters, regulars, and loyalists. Your messaging will have to be tailor-made to address each of these consumer profiles.
Several SaaS platforms are available to discern and visualize the patterns from within the data. Go with one that allows you to compare and contrast various consumer segments in a single dashboard to see the big picture of your customer experience.
Advantages of Behavioral Segmentation
The biggest benefit lies in being able to streamline your marketing efforts and speak to each segment you have identified in a way that might influence their buying decision, depending upon what stage of the funnel they’re currently in. This is the age of personalized messaging, and behavioral segmentation is what allows you to do it.
For example, for new prospects, you can advertise specific products or offers based on their search keywords. For repeat customers, you can offer discounts on their favorite products. You can even capitalize on opportunities in real-time, by sending prompts or push notifications at specific times of day, or on specific days.
Behavioral segmentation empowers you to make more judicious use of your marketing budget and prevents you from throwing more marketing funds at consumers who rank low on the loyalty scale or those who are not likely to be blown away by your service or product no matter what.
Knowing all this about your customers’ behavior puts you in a position to predict their future steps, as well.
Examples of Behavioral Segmentation
Have you ever been asked by Netflix whether you liked a particular show? That’s customer surveying at work. Netflix has set a high benchmark for behavioral segmentation with its powerful algorithm that consistently does A/B testing of viewer preferences.
The output of Netflix’s behavioral segmentation is seen in everything from the thumbnail, the visuals, the landing cards, your homepage layout, and your recommendations: all of which are based on what Netflix determines you will like. This recommendation system is so successful that it drives 75% of all Netflix user activity. Netflix’s personalization effort is legendary, plus, it saves them millions in marketing every year.
Haldirams Products, a mainstream food category brand in India, sells products like soan papdi and premium chocolates during Diwali and Gujiya (Indian traditional sweet) during Holi. Each category comes with its concept and price structure. A typical case of occasion purchasing.
Medimix’s behavioral segmentation is based on creating products based on usage and frequency. Heavy usage customers can buy large quantities or combos packs and less usage customers can buy smaller packs.
With behavioral segmentation, you have the power to gain deep insights into your customers’ minds and thereby direct their buying choices. Segmentation is heavily dependent on gathering data, and on making sense of this data.