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Behavioral Segmentation

74% of Best-in-Class companies track past business history for improved segmentation and 56% track behavioral attributes for use in segmentation.
                                                                                           - Aberdeen Group

Behavioral segmentation has recently regained its ebbing popularity thanks mainly due to the resurgence of behavioral targeting in digital marketing. Web marketers have banked on the quick and easy availability of the behavioral information in web marketing to anticipate and fulfill customer choices.

Psycho-Demographic profiling is important but they tend to be incomplete because they do not leverage knowledge, attitudes, interests and actions of the customer, which in turn determine, how customers respond to actual products/services or their attributes. With the recent advances in technology, this critical information which was once difficult to acquire, is now easy to obtain. Behavioral segmentation, relying on past customer behavioral data, is used in identifying homogeneous groups of customers that reveal similar behavioral patterns in the future.

Behavioral segmentation divides the customer base into groups based on the way they respond to promotions, price changes, channels they use to communicate, etc. Based on behavioral segmentation, consumers can be grouped aligned with any of various business strategies such as:

  • Product Usage: Rather than offering one’s product as a direct replacement for a similar or competitive product, it may be useful to segment customers based on benefits that she seeks for in a product thereby intensifying its relevance.
  • Buying Pattern: This includes recency, frequency and monetary (RFM) value of purchase, channel used, day/time of purchase, etc.
  • Decision Makers: This involves understanding people behind decision making process - is the customer influenced by online reviews/opinions or does she rely on feedback from friends within social networks or act on opinions within the family?
  • Decision Attributes: The criteria can include price, preference to self service, quality of product, service quality, approachability, events in customer lifecycle, etc.
  • Customer Attitude: This may include customer’s readiness to purchase, risk appetite (early adopter, early majority, late majority), brand loyalty, etc.

Some examples of behavioral segmentation in various industries are:

  • Retail: Using data from loyalty card program, one can understand purchase frequencies, transaction value, categories purchased, product affinities, etc. This information combined with demographic information can help in developing personalized campaigns.
  • Telecom: Based on customer’s usage pattern, the telecom companies can predict customer’s preference for value-added services, likelihood of attrition, etc.
  • Financial Services: As one of the most mature practitioners of behavioral segmentation, financial services industry make extensive use of financial behavioral data from credit bureaus to segment and manage its customer from both risk management and marketing perspective.

With real-time behavioral segmentation, one can better fulfill customer’s needs and dynamically align marketing strategies. The true aim of behavioral marketing is to deploy profitable marketing effort based on behavioral patterns exhibited by the customer. 


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