What Is Behavioral Segmentation? 6 Types + Examples

They say history repeats itself. That may be true in life, and it’s certainly true in marketing. If you want to figure out how a customer is going to behave in the future, study what they’ve done in the past.

In business, this analysis is known as behavioral segmentation. It’s a type of marketing segmentation that homes in on customer psychology to prioritize and personalize marketing efforts.

Here’s an overview of the benefits, plus how businesses use six types of behavioral segmentation to drive engagement and sales.

What is behavioral segmentation? 

Behavioral segmentation is a targeting approach in which you categorize your customers based on purchase behaviors, usage behaviors, brand interactions, and engagement data. This makes it easier to identify the marketing tactics most likely to influence future customer behavior within a given group. It allows you to be more accurate (speak to exactly what the customer wants), personalized (speak to a specific customer), efficient (niche focus rather than casting a wide net), and cost-effective (spend on customers you know are interested).

For example, Magnolia Bakery relied on segmentation when expanding its physical and digital storefront. When Magnolia launched an ecommerce store with Shopify, it was key that the brand have three sections on the website: a bakery locator, a directory of grocery store products, and a place to order products online.

“In these multiple revenue streams, it’s hard for us on paper, just at a glance, to understand the difference between a local customer and a nationwide customer,” Adam Davis, the brand’s senior marketing manager, says on an episode of the Shopify Masters podcast. “So we’ve set up a lot of tagging kind of out into the future where we know, OK, if a customer’s ordering a pie for Thanksgiving, we want to make sure that Shopify is tagging that customer as such so that next Thanksgiving, we don’t have to go back and understand, oh, well, what was that customer? Shopify is already doing the work for us.”

6 types of behavioral segmentation

1. Customer journey stage
2. Customer engagement
3. Purchase behavior
4. Benefits sought
5. Probabilistic
6. Customer loyalty

Here are six types of behavior segmentation:

1. Customer journey stage

Customer journey behavioral segmentation uses historical behavioral patterns to identify behaviors associated with specific stages of the customer journey and where a customer is on that journey. For example, customers interacting with your blog or social media content are at the awareness stage, but if they’re browsing your store, they’re at the consideration stage.

Categorizing customers by journey stage segmentation is complicated because people don’t tend to follow a linear path while shopping around online. Segmentation tools can help make sense of customer journeys. It uses your criteria to create customer segments and updates them in real time based on new customer actions, making it easier to visualize your customers’ journeys.

To boost revenue in the near term, you could target customers at the consideration stage. If your goal is to earn more customers, you could target prospects at the awareness stage with eye-catching promotions or incentives.

2. Customer engagement

Customer engagement behavioral segmentation sorts customers based on their engagement with a brand. Use this approach to determine how engaged a customer is with your brand and how and where to reach them. Here are a few key engagement-based behavioral segmentation approaches:

• Brand engagement. This type of engagement segmentation focuses on a customer’s level of engagement with your brand. You can measure it by assigning point values to key behaviors—like signing up for marketing emails or time spent browsing your site—and using point totals as a proxy for overall engagement levels. A business might use insights to target highly engaged customers with transactional content and less engaged customers with brand storytelling campaigns to continue building the customer relationship. 

• Channel engagement. Channel engagement focuses on where customers engage with your brand, such as TikTok or email, for example, and allows you to identify customers’ preferred channels for brand interactions.

• Content engagement. You can also segment customers by the types of content they prefer, considering content format (such as blog post versus newsletter), purpose (such as educational versus entertaining), and theme (such as advice for dog or cat owners). You can use this information to target customers with their preferred types of content.

• Usage behavior. Usage behavior focuses on how customers engage with your products or services. You can use software or customer surveys to quantify user behavior and sort customers into heavy, moderate, and light user groups.

3. Purchase behavior

Purchase behavior segments customers based on purchase-related behavior patterns, such as items purchased, browsed, or added to cart; interactions with sales representatives; marketing material engagements; and sales cycle length. Here are the key approaches to purchase behavior segmentation:

• Product preferences. Some businesses segment customers based on products or services purchased, allowing them to target customers with similar or complementary items. You could send a follow-up email with umbrella suggestions to customers who’ve purchased rain boots or send customers who’ve purchased a cashmere sweater a discount code for a bundle of cashmere-care products.

• Purchasing process. You can also use purchase behavior to segment customers based on their approach to the purchasing process, such as impulse purchasers, reluctant buyers, and researchers. You’d serve the first group eye-catching visuals and strong value statements, the second group ongoing retargeting campaigns or discount codes, and the third group product or service case studies and invitations to connect with a customer service or sales representative.

• Purchase motivators. This approach sorts customers based on what drives their purchases, such as perceived bargains, low prices, customer testimonials, influencer recommendations, and perceived exclusivity or scarcity.

4. Benefits sought

This behavioral segmentation approach categorizes customers based on the problem they’re trying to solve. You can use information about items purchased, content engagement patterns, brand representative interactions, and customer feedback to identify the selling points that resonate with particular customers and target them with marketing campaigns that stress how a product meets their specific needs.

A skin care company that sells products that combat the signs of aging, clear acne, reduce redness, and minimize facial hair growth could use marketing email clicks, browsing history, and purchase history to create customer segments for each benefit and use them to serve clients with relevant product recommendations. 

5. Probabilistic

Probabilistic segmentation groups audiences based on the likelihood that a customer will take a particular action, such as purchasing a product. Artificial intelligence (AI) and predictive analytics segmentation tools are making probabilistic segmentation increasingly accurate and powerful because AI-powered segmentation tools can analyze a large number of variables and a broader range of possible results.

Probabilistic segmentation tools can also estimate customer lifetime value (CLV) and provide valuable insight into a segment’s likely response to a particular marketing tactic, allowing businesses to optimize campaigns and focus their efforts on high-value customer groups. It’s particularly valuable in combination with other segmentation strategies. For example, a company might target the overlap between high-value new customers (probabilistic segmentation) and wellness-focused customers (benefits sought segmentation). 

6. Customer loyalty

Customer loyalty is a key driver of long-term business growth. Loyal customers can increase your long-term business resilience, improve your brand reputation, and help you earn more customers. Customer loyalty segmentation helps businesses increase customer lifetime value, build brand loyalty, and encourage word-of-mouth marketing.

Purchase history, brand engagements, and content engagements are all common loyalty signifiers. You can use loyalty segments to recognize and reward your most loyal customers and target them with incentives designed to encourage referrals. You can also target audiences with emerging or potential brand loyalty with campaigns designed to build loyalty and serve less-engaged customers with retention-focused content. 

Behavioral segmentation example 

Imagine a hypothetical ecommerce company, Cyclomute, that sells road bikes and cycling accessories to bike commuters. Cyclomute wants to boost revenue and increase customer loyalty on a limited marketing spend, so it uses behavioral data to perform two types of customer segmentation: customer loyalty and probabilistic.

It divides existing customers into high, medium, and low loyalty segments and sorts current and prospective customers according to predicted CLV, creating high, medium, and low CLV categories.

This analysis generates 12 subsegments. To minimize spend and maximize return on investment (ROI), Cyclomute’s marketing team decides to focus on customers that represent high potential value (high CLV) and are easy to reach (high loyalty), prioritizing segments as follows:

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ALT: spreadsheet showing high, medium and low value prospective and current customers

Source: Shopify 

It then develops the following marketing strategies for each group:

1. High-value, loyal customers. Cyclomute designs a loyalty program to encourage referrals and ensure continued loyalty.

2. High-value potential customers. The brand further divides this behavioral segment according to benefits sought, reaching out to the three largest subsegments with custom campaigns that emphasize how the brand delivers the type of value each group needs.

3. High-value, moderately loyal customers and medium-value loyal customers. The brand adds a tiered element to its loyalty program to build loyalty with the first group and encourage customers in the second group to prioritize the Cyclomute for relevant promotions. It uses the same messaging with each segment to reduce marketing workload and keep costs down.

4. High-value customers with low loyalty. The brand solicits customer feedback and looks for ways to improve customer satisfaction. It also offers a 30% discount as an incentive to join the Cyclomute loyalty program, encouraging high-CLV customers to increase brand engagement.