(Note: we published this blog post in October of 2019, and the notable difference between then and now is that AI-based tools have only become more ubiquitous. Behavioral segmentation still matters more than demographics (this is not just our humble opinion), and it’s now easier than ever to automate the process of collecting that data and using it to make a bottom-line impact. To learn more, read on to the blog below, and consider joining me for a masterclass on how to find your real audience and how to talk to them with Builder.AI on Thursday, April 27, 2023.)
Behavioral segmentation gets at the heart of what customers are doing, a pattern of past/current actions, and a projection of future actions, versus who they are.
In other words, using demographics to segment your prospects and customers isn’t enough. You have to look at how the contacts in your customer database act to understand what they want, and what they’ll want in the future. Tailoring your messaging, campaigns, etc., by behaviors (versus demographics) is much more likely to create engagement – and therefore position you to convert faster and at a higher rate.
So why do marketers and sales teams still focus so much on demographics? Business plans typically have a dedicated section on who your target market is, and perhaps that’s why demographics are so ingrained in entrepreneurs.
But behavioral segmentation is the better indicator of why your product or service is right for your target market because it tells you what matters to your customers, and therefore what drives their purchases.
How behavioral segmentation works
Traditional demographics groups your customers by age, location, gender, job position, geography, etc. These aren’t necessarily bad. They can work if you happen to have products for men and women, or, say, geo-targeted discounts.
When you step beyond that to real engagement, you’d only be guessing if you use demographics. They give you vague signals on what your audience wants and needs, and what you can do to nudge them along the sales funnel.
With behavioral data, you’d have a more accurate grasp of your customers.
Behavioral segmentation groups your customers according to their actions (or lack of), which empowers you and your team to plan campaigns/outreach efforts and provide personalized experiences that lead to better engagement, conversions, and best of all, repeat customers.
A few behavioral segments include the buyer’s journey stage (early adopter versus late adopter), purchase behavior, benefits sought, usage of your service/product, and customer loyalty, among others.
For example, you send completely different messages to a lead who keeps visiting your landing page (but hasn’t opted-in yet), a lead who has visited your landing page for the first time and downloaded your ebook, and a customer who has bought your products four times already.
If you treat the above repeat customer as if you didn’t know her, you can bet she’d stop buying (click here for more on that).
Understanding your customers at a high level
Demographic data doesn’t get you far. On the other hand, insight into your customer’s values, interests, needs, and preferences through behavioral data can help you connect with them.
This was what drove decades of market research, an entire industry dedicated to asking people what they want and why, and days, weeks, and even years documenting what customers do. Without these complex data points, most demographic data can be useless.
From “target market,” we’ve graduated to “buyer personas,” and from buyer personas, we now have “buyer intent” and “transaction history.” That sounds more invasive than it actually is, but today’s age of information and convenience leaves trail marketers can utilize to understand their customers on the highest level. Now that we are undoubtedly in the zeitgeist of AI, you can count on AI-infused tools (probably being launched daily) to help automate the process of aggregating data on – and making predictions based on that data – prospects and customers.
From a Marketing Week survey in 2019:
- “When asked to reflect on recent campaigns, behavior emerges as the most effective method of segmentation, according to 91% of the marketers questioned.”
- “Nearly three quarters (73%) think behavior has also become a more effective means of segmentation over the past five years.”
Four years later, I don’t think much has changed.
Asking the right questions
A deeper understanding of your audience leads to more of the same. Behavior tracking helps you to ask the right questions, like adding “gift” buttons at checkout, or sending a more interactive and effective “survey” through offers and seeing which your customer would pick.
Do your customers buy your items as gifts? Or maybe they like trying out the flavors you release? Or perhaps they simply don’t want to run out of your products? The answer would drastically change your personalized campaign messaging. Behavioral segmentation matters more than demographics in giving you insight into your marketing campaigns.
Behavior is THE essential ingredient of customer data
AI can now pack and analyze transaction data, first-party and third-party data to form a reliable data set, combined with any demographic characteristics, for a complete picture of your customer’s needs and wants. Add today’s sophisticated analysis that can recognize opportunities for your business and you get to ask the right questions and send the right offers, with the double benefits of, 1. Delighting your customers with your personalization, and 2. Conversions and customer loyalty. This means you are at the heart of what your customers are doing, and why.