7 ways to use behavioral segmentation

Why do 95% of product launches fail?

Product launches, marketing messages, and ideas flop because companies did not identify or failed to reach their target audience. How can marketers improve the odds of getting their products and services seen by the right audience?

The market segmentation definition describes how companies group people into unique market categories, often using marketing research surveys to define their needs. After analyzing these market segments, companies will perform customer segmentation to describe different types of buyers.

Age, occupation, gender and other demographic data are common ways to segment customer groups. Companies can also describe their target market by defining their buying behaviors, known as behavioral segmentation. The definition of behavioral segmentation is grouping buyers based on their real-life behaviors, not just their general demographic traits. This form of customer segmentation can be more effective than demographics, psychographics, and other segmentation methods.

Behavioral segmentation is the process of grouping buyers based on their real-life behaviors, not just their general demographic traits.

Consumers have more product choices than ever before. Today's larger grocery stores carry 80% more individual items than they did 30 years ago. That product proliferation has expanded consumer choice and made it harder for any single purchase to stand out, so it's never been more critical for companies to understand how their buyers actually make decisions.

Market segmentation is the method companies use to identify their target market and develop messaging that cuts through that sea of product choices. Companies typically use market segmentation surveys to identify demographic, psychographic, and geographic approaches. But those approaches assume everyone with the same characteristics acts the same way. Will every 50-year-old buy the same orange juice? Will every 20-year-old buy the same shampoo?

Behavioral segmentation identifies a market's unique buying habits instead, describing what the ideal customer wants, why they want it, the benefits they're seeking, and how they go about getting their needs met. Through market research, companies learn what steps buyers take to gain awareness, buy products, and become brand-loyal over the long term. That's also how behavioral segmentation identifies target markets: by tracking a buyer's actual purchase actions and journey stage, not just their demographic profile.

Behavioral segmentation is the process by which businesses define a buyer's behavior. That's why companies study both business-to-consumer (B2C) and business-to-business (B2B) buyers to understand their actions and cater to their wants and needs.

The table below summarizes the seven behavioral segmentation variables covered in this guide, with a concrete example of each.

Through market research surveys and analysis, companies identify specific customer behaviors that include:

Purchasing behavior. Identify if buyers purchase based on the lowest price, best ratings, competitive research, or other criteria.

Occasion and timing.  B2C buyers may buy for a holiday (Valentine’s Day) or an event (birthday or anniversary). B2B buyers may purchase to stay within budget timing constraints or to meet a project deadline.

Benefits desired.  B2C purchases can increase the buyer’s status (a luxury car), safety (face mask), or offer the latest technology (iPhone 12). B2B buyers often purchase items with advanced technology to gain a competitive advantage or reduce costs.

Customer loyalty. B2C customers can accumulate and use points for free or discounted products, cash back rewards, and travel discounts. B2B buyers may receive a customer appreciation discount from a manufacturer for frequent purchases.

Customer journey stage.  The customer journey starts long before the sale and may last after the sale is completed. For instance, if  B2B and B2C buyers are new to a seller, they will require product information to make informed decisions. After the sale, they may need product support and service.

Engagement level.  Companies want customers to stay in contact to grow their relationship. New customers may buy one product (iPhone) from a company, but their engagement programs will develop devoted fans who will purchase more items (iPad, Apple Watch, Mac, AppleTV).

Customer satisfaction. Customer surveys show how companies can improve their products and services or make the buying process easier, which makes buyers happier.

Surveys are a great way to understand a buyer's behavior. Customized or pre-formatted templates can help you delve deep into a buyer's motivations by answering four questions.

Knowing the answers to these questions categorizes buyers by their behaviors and expectations. Companies can tailor their products, processes, and support to make the purchase process easier for their ideal customers.

Times and dates create urgency. Whether it is a holiday or business deadline, buyers want to fulfill their personal and professional obligations. When companies understand these time-sensitive obligations, they will improve the buying process.

B2C consumers and B2B buyers purchase products to receive a desired benefit or solve a problem. Here are some examples of benefits sought for different types of purchases:

There is a big payoff for companies that have loyal customers. The definition of customer loyalty is buyers who repeatedly buy from the same company or purchase the same brand. Research shows that “loyalty leaders,” who have high Net Promoter Scores (NPS) or satisfaction ratings for three or more years have revenues that grow 2.5 times faster than their peers. 

Loyalty programs are a win-win for buyers and sellers. The cost of losing a customer is expensive, resulting in a loss of future sales. That is why loyalty programs are popular because they help companies sell products. Customers receive free products, discounts, and benefits for buying products they enjoy. 

However, it takes time for new customers to build loyalty. Both B2C and B2B customers must be led through a product awareness funnel to learn about products. This process takes time and resources with no guarantee that they will make an initial sale or repeat purchases.

Once established, loyalty programs do increase sales. Statistics reveal that more than 90% of businesses offer loyalty programs, totaling 3.3 billion memberships. More than half of consumers spend up to 319% more when ordering online if they belong to a loyalty program.

Many loyalty programs offer purchase discounts in the form of points or dollars, encouraging members to buy more frequently or try new products. Successful programs include Sephora’s Beauty Insider, Amazon’s Prime membership discounts, and Starbucks’ Star program discounts and freebies.

Loyalty programs aren’t just for B2C and B2B buyers. Employers use loyalty platforms to encourage employees’ commitment to the company’s success through rewards, recognition, and performance that improve overall engagement with the company brand, strengthening the relationship between employer and employee.

The customer journey describes the steps that buyers go through to make a purchase decision. Buyers exhibit behaviors at every step, leaving marketers to understand the steps their ideal customer takes to buy products. Marketers create a map of particular questions, motivations, and actions customers take at each of the four stages listed below.

Awareness stage. At this stage, the buyer recognizes they have a problem. B2C consumers might realize they are gaining weight from eating unhealthy food. A B2B customer may discover the majority of their employees are unhealthy eaters, resulting in decreased productivity. Marketers need to describe their buyers’ challenges, what roadblocks or misconceptions they have about available solutions, and the price of inaction.  

Finally, marketers must clarify if this problem is a priority and what next steps they will take.

Consideration stage. At this stage, buyers take action on their problems and educate themselves about available solutions. Marketers want to know how buyers collect data, evaluate it, and eventually choose a product? If they are looking at healthier food options, are they focusing on breakfast, lunch, dinner, or snacks? Are they looking to lose weight, improve their overall health, or reach another outcome? 

Marketers create informational resources for buyers at this stage that show the benefits of their solution and the next steps the buyer should take.

Decision stage. Buyers review what they have learned, develop product expectations, and assess the pros and cons before selecting a product. Will the solution help them lose weight? Will it cost too much? Will they feel good about using the product? 

Marketers should be clear about the buyer’s expectations, criteria used, if there are additional decision-makers involved in the purchase, pricing sensitivity, and other factors that guide the buyer’s decision.

Purchase and post-purchase stage. The purchase process should be simple with few bottlenecks. Sellers should take advantage of the purchase momentum to make the sale as “frictionless” as possible. Product availability, easy checkout, and rapid, if not instant, delivery is now a standard expectation. Buyers also expect a post-purchase process that includes easy returns processing, prompt refunds, and after-sale service.

The more marketers know about how the customer behaves during and after the sale, the more they can refine their customer journey stages.

Marketers will need to update their journey maps and adjust customer behaviors to reflect new trends. Competitor moves, shifting business climate, new government regulations, and changing buyer preferences are all reasons to update journey maps.

Marketers use behavioral segmentation to define their target audience’s motivations and actions. Customers proceed at their own pace through the journey, challenging marketers to determine their levels of engagement.

Companies should remain engaged with buyers at every step of the journey, encouraging them to become more involved in the brand. In return, the company offers additional benefits, like loyalty programs or discounts, that keep the buyer engaged and dissuade them from looking at competitor options.

Customers want more than just product benefits. They also want a positive experience from the seller. 

Research shows that selling to an existing customer is 14x more likely than selling to a new customer. Over three-quarters of existing customers will recommend a brand if they have a positive experience and are 50% more likely to try new products. Companies are genuinely successful if their customers enjoy their buying experience. 

Companies should quickly identify and fix negative customer experiences. Businesses now collect feedback from many sources that include Amazon and e-commerce reviews, NPS surveys, social media, company websites, and other social media outlets. Buyers are vocal about their likes and dislikes, providing a wealth of feedback that helps companies pinpoint pitfalls.

Market research surveys provide feedback that represents real-life experiences, describing the buyer’s actions, thoughts, and feelings during the buying process. Sellers can use this information from their sources and competitors to identify ways to make their behavioral market segmentation efforts successful.

Behavioral segmentation is a market research method that groups buyers based on their real-life actions, such as purchasing habits, timing, loyalty, and engagement, rather than only demographic traits like age or income.

Common examples include grouping buyers by purchasing behavior (price-driven versus research-driven), occasion and timing (holiday shoppers versus routine repurchasers), customer loyalty (points redeemers versus one-time buyers), and engagement level (active community members versus one-time purchasers).

It identifies target markets by tracking what buyers actually do, such as when they buy, why they buy, and how loyal or engaged they are, then grouping people with similar behavior patterns into segments a marketing team can target directly, instead of relying only on demographic assumptions.

Behavioral segmentation is defined as the process of grouping buyers according to their real-life purchasing behaviors and journey stage, as opposed to segmenting them by demographic or psychographic traits alone.

Behavioral segmentation is a robust market research method to group customers based on how, when, and why they purchase products. The SurveyMonkey market research platform lets you tap into your ideal audience and get the results you need fast.

Not sure where to start? SurveyMonkey LaunchPad gives you a deeper understanding of your existing customers and target audience, and helps you segment them into distinct groups so you can target them more effectively and drive business sales.

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