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Understanding the needs and preferences of customers is essential to business success. Knowing what, why, and how customers want products and services allows a business to create or modify their offer to market demands.
This understanding is also crucial to marketing campaigns. When you understand how your customer thinks, you can specifically design promotional efforts in ways that will be most appealing to your target audience.
One way to understand your customers well is through behavioral segmentation.
Behavioral segmentation is the process of grouping a heterogeneous market into smaller clusters that share the same buying behavior. There are numerous methods for behavioral segmentation:
Behavioral Segmentation Methods
When segmenting according to purchasing behavior, customers are split based on how they approach buying. What they consider before making a purchase and their possible barriers to making a purchase are also taken into account.
There are typically four types of purchasing behavior: complex, variety-seeking, dissonance-reducing, and habitual.
Complex purchasing behavior refers to customers that are highly involved in both the purchase and decision-making process between two different brands. Variety-seeking purchasing behavior is when a user doesn’t have a specific need but chooses a product or service for the sake of trying it out.
Dissonance-reducing purchasing behavior happens when the customer is satisfied with the product he’s using but thinks that there could be other options. Habitual purchasing behavior refers to customers who don’t engage deeply with product selection and chooses out of personal preference.
Under purchasing behavior, businesses can also group customers into 6 different kinds:
- The price-conscious shopper prioritizes affordable products.
- The smart shopper thoroughly researches a product, its features, and its value for money, before making the purchase.
- The risk-averse shopper doesn’t commit to buying until the purchase guarantees no inconveniences for them. These types of shoppers make “safe purchases,” such as those that are sold with hassle-free return policies.
- The needs-proof shopper only buys when the quality and popularity of a product is verified by their peers.
- The “I’ll Get it Later” shopper doesn’t rush into buying the product.
- The persuadable shopper buys on impulse after being convinced.
Understanding your customers in this way can help you implement marketing strategies that target them according to purchase behavior. For example, you can create brochures featuring your products for smart shoppers. You can feature reviews from well-known people or brands to tap needs-proof shoppers.
This refers to the specific need customers seek in buying the product or service. They usually consider factors like price, quality, specific features, ease of use, speed, and comfort.
Price-sensitive travelers, for example, will be more inclined in booking flights offered at lower rates. Sales agents who spend their time commuting from one place to another are likely to buy durable and comfortable clothes, and so on.
These considerations have to be examined in order to create a more personalized marketing message to customers. For a stronger market presence, identifying what product customers need isn’t enough. You also have to identify why they need the product so that you can make a more responsive and customized offer.
Occasion or Timing-oriented
The customers can also be segmented based on the occasion or time they buy products. Specifying when they buy can help you optimize your offers and promotional sales such as running them at specific times or giving them event themes.
For example, more people buy coffee in the morning so coffee shops usually offer discounts in the afternoon to augment the number of customers at such time of the day. Restaurants, clubs, or lounges are usually busy during the weekends, so they offer lower rates or promos on weekdays.
Holidays are factors influencing purchasing habits. People are likely to travel and go on a vacation during school breaks and national holidays. This opens opportunities for beach resorts and hotels to provide additional services. The start of school years will also guarantee an increased demand on school supplies and books, so department stores can offer more school-related products during these times.
While time and occasion are reliable factors that businesses can depend on to predict the habits of customers, daily purchases can be strong indicators of what they need. For example, a couple purchasing kitchen tools and equipment can suggest that they’re furnishing a house. You can offer them brochures of your furniture products or show them your bathroom accessory products.
Paying close attention to daily and occasional buying habits can allow you to be more responsive to the changing—but to some extent–predictable needs of your customers.
Businesses identify whether a customer is a heavy user, medium user, light-user, or non-user of their product. Segmenting customers based on the frequency of their use is valuable when it comes to identifying what is working well for the company.
Knowing your heavy-use customers allows you to know what kind of demographic your products or services sell to the most. You will be able to identify common trends like age, gender, and education, among others. Identifying the dominant and common characteristics of this group can help you devise strategies to increase the number of heavy-use customers.
Examining your medium, light, and non-user segments can also give you insight on how you can improve your existing products or create new ones that better cater to their needs and preferences.
Social media, streaming sites, and e-commerce companies commonly use this type of segmentation. Netflix observed the behavior of their light-use customers and introduced features on the platform to retain these customers and increase their usage. The thumbs-up thumbs-down rating system, automatic progression to the next episodes, and recommended content were major features added that contributed to increasing the number of customers and their usage.
This type of segmentation looks into customers who had favorable experiences with the company and make repeated purchases. Personal taste is usually the sole factor that motivates customers to exhibit brand loyalty. It’s usually apparent in their purchases of apparel brands, footwear, perfume, and beauty products.
Businesses that score high in brand loyalty have higher retention rates and are not mainly concerned about acquiring new customers.
Identifying who your loyal customers are can help you understand what kind of people your product or services appeal to the most. You can also personalize your marketing message so that you can respond to a market that is already very likely to support your business.
This refers to clustering the market based on personal and professional interests. This category provides great insight on what areas or topics your customers are interested in. Social streaming sites like Netflix and Spotify maximize this type of segmentation.
By observing what content people consume, companies can provide more content of the same nature. They can also predict what other content customers are likely to be interested in.
Spotify, for example, can identify your taste in music based on your downloaded songs. It then sends you a recommendation of artists similar to what you’ve recently listened to previously.
Facebook, on the other hand, can identify what news you follow and the kind of people you like. You can then find news about similar topics appearing on your timeline even though you don’t follow these accounts.
Behavioral segmentation is a reliable approach in identifying the psychology of customers when they make purchases. It identifies what products or services attract which groups of people. It also helps businesses understand the current market trends affecting the marketability of their products. They can make adjustments in their offers and implement more effective marketing strategies when they know their customers this well. When a business understands and responds to the needs of their market, they are more likely to achieve success.