The Definitive Guide to Behavioral Segmentation

Behavioral segmentation is an important strategy that brands can use to enhance marketing personalization, customer engagement, and customer experiences, and drive business outcomes like sales, customer lifetime value, and retention.

Investing in segmentation is more important than ever because most customers have come to want and even expect personalized experiences. According to McKinsey & Company’s Next in Personalization Report, nearly three-quarters (71%) of U.S. consumers expect brands to personalize their experiences, and even more (76%) get frustrated when businesses fail to meet their expectations. Per this study, the majority of consumers want: Relevant product and service recommendations; tailored messaging; targeted promotions; to be celebrated for the engagement milestones they achieve; to receive timely communication after taking important actions; and to get follow-up updates after completing a purchase or demonstrating other behavior.

In this guide, we’ll explore what segmentation is, the main types of segmentation, what behavioral segmentation is, the importance of segmentation, and more.

Key topics we’ll cover:

• What is segmentation?
• What is behavioral segmentation?
• Why is behavioral segmentation important?
• What’s the difference between behavioral segmentation and segmentation by user attributes?
• Behavioral segmentation use cases
• Examples of companies leveraging behavioral segmentation
• Finding the right technology to support behavioral segmentation
• Final thoughts
• Behavioral segmentation FAQs
• Behavioral segmentation resources

What Is Segmentation in Marketing?

Segmentation—also known as customer segmentation, audience segmentation, or market segmentation—is a process where marketers create and target audiences that have specific shared characteristics in common, such as a customer’s location, income level, favorite products, etc.

Segmentation can be used across channels—from paid advertising on search and social to owned marketing campaigns sent via email, push, SMS, and in-app and in-browser messaging. Brands leverage segmentation when running targeted ads. They also use segmentation when sending tailored campaigns to specific audience groups, rather than delivering generic, one-size-fits-all messaging to a broad, general audience.

There are four main types of segmentation:

1. Demographic segmentation: This type of segmentation groups customers together by shared observable, measurable population traits, such as by age, race, gender, level of education, income, nationality, marital status, religion, etc.
2. Psychographic segmentation: This type of segmentation groups customers together based on shared qualitative traits, such as common attitudes, opinions, personalities, interests, values, and lifestyles.
3. Geographic segmentation: This type of segmentation groups customers by common location-based data, such as by a shared ZIP code, city, metro area, county, state, country, or global region.
4. Behavioral segmentation: This type of segmentation groups customers together based on shared behaviors and actions taken when interacting with a given brand’s app, website, marketing campaigns, etc.

Brands can use a combination of these different types of audience segmentation to deliver truly personalized marketing. For instance, a dog-walking app might want to reach dog owners who live within a certain metro area (geographic segment), who have a certain income level (demographic segment), who work full-time (demographic segment), and who have downloaded the dog-walking app but haven’t booked a service in 30 days (behavioral segment).

What Is Behavioral Segmentation?

Behavioral segmentation is a type of audience segmentation that marketers create and use to target groups of customers based on the actions they take, the behaviors they exhibit, and the interactions they have with their brand.

What are some examples of behavior segmentation?

Examples of common actions customers take that brands often create behavioral segments for include:

• Interacting with a brand’s app or website
• Referring a friend
• Completing a registration
• Answering a survey
• Searching for an item
• Completing a new level
• Favoriting an item
• Adding an item to their cart
• Submitting a rating or review
• Purchasing a product or service
• Interacting with (e.g. clicking on, opening, or converting from) a brand’s marketing campaigns (via email, push notifications, SMS, in-browser and in-app messaging, etc.)

Why Is Behavioral Segmentation Important?

Effective use of behavioral segmentation (as well as other types of customer segmentation) offers a variety of business and customer benefits. Companies that use behavioral segmentation and other types of segmentation to tailor their marketing campaigns have the opportunity to:

• Gain deeper customer insights into individuals’ wants, needs, browsing preferences, actions taken, and brand interactions
• Achieve more impactful marketing personalization by delivering relevant content, experiences, products, and services, based on these customer insights
• Minimize over-targeting or over-messaging users because switching from a batch-and-blast approach to segmented outreach means customers should receive only relevant messaging, not every campaign a brand creates
• Strengthen their relationship-building through improved, more personalized campaigns
• Deliver gains in marketing campaign performance, such as improving conversions and user retention, as a result of enhanced personalization efforts

What’s the Difference Between Behavioral Segmentation and Segmentation by User Attributes?

Behavioral segments are created based on shared actions users have taken or behaviors they’ve demonstrated. Brands can also segment sub-groups of users by common user attributes, such as gender, location, age, etc.

On the other hand, demographic segmentation, psychographic segmentation, and geographic segmentation described above are all different types of segmentation that are based on user attributes.

The following are some examples of common user attributes brands use to create segments and sample events, behaviors, and actions taken (also known as “Events”) that marketers can use to create behavioral segments.

3 Behavioral Segmentation Use Cases

There are countless ways your brand can use behavioral segmentation to deliver results, from increasing customer activation to boosting monetization and retention. Here are 10+ campaigns your company can enhance using behavioral segments—and drive more successful onboarding, deeper engagement, increased sales, higher customer lifetime value, and stronger loyalty.

#1: Using behavioral segmentation to increase customer activation

Behavioral segments can be used to encourage more users to become active—or more active—with your brand.

Some classic examples of how behavioral segmentation can be used to increase customer activation include the creation of:

• Free trial campaigns: These can be sent to customers who have taken a specific action—such as starting the process of signing up for a paid account, consuming the limited amount of free content available to non-paying subscribers, or viewing a catalog of content or features available to paid subscribers—to encourage them to take advantage of a free trial.
• App rating campaigns: These types of campaigns are more effective when used with behavioral segmentation—brands often send these campaigns to groups of users who have taken a high-value action, such as completing a purchase or spending a certain amount of time in a company’s app.
• App download campaigns: Brands can drive deeper engagement with these campaigns by leveraging behavioral segmentation. Certain segments of users may be especially primed to download your company’s app, such as mobile web visitors who have visited your website a certain number of times, and targeting these campaigns appropriately can drive more of these key conversions.
• Abandoned onboarding campaigns: When users begin the sign-up process but drop off along the way, companies can send targeted onboarding campaigns to this segment of users reminding them of the value of completing what they started.
• Referral campaigns: When customers take actions that demonstrate interest, engagement, and loyalty (such as converting from a free trial user to a paid subscriber or rating an item purchased), you can incentivize them to engage further by offering a reward to them for referring a friend.

#2: Using behavioral segmentation to increase monetization

Savvy brands leverage behavioral segmentation to boost sales, average order sizes, conversions from free users to paid members, subscription renewals, repeat purchases, customer lifetime value, and more to increase monetization.

Some classic examples of using behavioral segmentation to increase monetization include creating:

• Abandoned cart campaigns: Brands send these campaigns to a behavioral segment of users who have taken the same action—abandoning their cart before completing their transaction—to encourage them back into the checkout flow and recapture potential purchases.
• Free-to-paid subscription campaigns: Companies can trigger these campaigns to be sent to segments of users who take specific actions—such as attempting to consume or use premium content or features—to encourage these customers to unlock access by upgrading to a paid subscription.
• Cross-sell campaigns: By leveraging data on customers’ past purchases and browsing activity, brands can send targeted product recommendations to cross-sell effectively to customers, driving purchases and customer lifetime value.

#3: Using behavioral segmentation to increase retention

Data-driven marketers take advantage of behavioral segmentation to foster customer loyalty, encourage more frequent engagement, and extend customer lifetimes.

Some classic examples of using behavioral segmentation to increase retention include creating:

• Loyalty enrollment campaigns: Ideally these types of messages, which encourage customers to join a company’s loyalty and reward program so they engage and spend more often with the brand, should be sent to specific segments of users after they complete a high-value action, such as favoriting an item, using a promo code, or completing a profile.
• Reward and perk campaigns: By using behavioral segments based on customers’ time spent in the app or their purchase amounts, brands can send targeted rewards to top-tier users in recognition of their activity, potentially furthering their loyalty over time.
• Customer feedback/NPS survey campaigns: Companies can evaluate customer loyalty and encourage users to share valuable insights by sending customer feedback surveys and Net Promoter Score (NPS) surveys after users engage with a brand in a meaningful way, such as after making their first purchase or complete a first session in a company’s app. By gathering this data, your brand can gain new learnings that can be used to drive retention.
• Lapsing user campaigns: By using event data such as the date a customer last read an article, purchased an item, or engaged with a campaign, your company can create a behavioral segment of lapsing users and send targeted campaigns that give these users a reason to come back and get more value from your brand.
• Win-back campaigns: As with lapsing user segments and campaigns, marketers can generate segments of already lapsed users based on the date of their last interaction with their brand, and create tailored messaging designed to get them to re-engage.
• Continue-your-streak campaigns: When members of your audience start—or continue a streak—this is the perfect opportunity to recognize and gamify this behavior, which is associated with strong engagement and loyalty over time.

For even more examples, check out the Braze Inspiration Guide.

3 Examples of Companies Leveraging Behavioral Segmentation

Wyze, a security camera and smart home product company increases marketing conversions using behavioral segmentation

The smart living products and services company Wyze offers any customer who purchases one of their Wyze Cams a two-week free trial of the brand’s paid subscription program, Cam Plus. This premium service’s features include unlimited full-motion event recordings, person and package recognition, and fast forwarding, all for $1.99/month. The company wanted to increase conversions from the free trial to a paid subscription and decided to focus on making gains during the onboarding process.

Recognizing the opportunity to educate and engage different types of users based on the actions they take using the Cam Plus system, the growth marketing team built unique behavioral segments of users, such as customers who open the app a certain number of times or watch a video recording with a certain type of object detected. Next, the brand created tailored emails, push notifications, and in-app messages to educate these different types of users about the benefits of Cam Plus.

Introducing behavioral segmentation made a huge difference for Wyze: Conversions jumped by an impressive 56% for these targeted behavioral segments, illustrating how crafting a campaign around user actions has the power to better resonate with customers, generate an uplift in engagement and conversions, and drive financial outcomes as a result.

Lifesum, a digital nutrition program, achieves stronger user retention using behavioral segmentation

The healthy eating platform Lifesum offers tailored nutritional guidance at scale to over 50 million global users. To improve the company’s personalization efforts, the team decided to create unique behavioral segments based on actions Lifesum users take in the app, such as when customers track their food, water, and exercise. Next, the team set up a recurring campaign to keep users informed about their individual progress, sending personalized email reports summarizing members’ activity over the previous week.

After introducing this targeted campaign, the brand saw engagement rates take off, with 74% of users coming back to the app and 65% of users continuing to track their activity in the app over the next 30 days, as a result of receiving a personalized email summary.

Showmax, a South African online video streaming service, uses smart segmentation to increase subscribers by 204%

Leading South African online video subscription company Showmax wanted to get more of the company’s free-trial users to become paying customers, boost retention rates, and increase win-backs among their segment of lapsed subscribers. To achieve these goals, the brand decided to lean into customer segmentation—sending targeted campaigns based on customers’ viewing history and other subscriber actions.

By introducing this tailored, data-driven approach, Showmax increased its ROI by 37%, subscribers by 204%, and win-back rate by 12%. They also achieved an impressive 71% retention rate, 4.4% conversion rate, 19% activation rate among dormant viewers, and an uplift in the brand’s proportion of highly engaged users to 39%.

Finding the Right Technology to Support Behavioral Segmentation

When looking to source a customer engagement platform that supports behavioral segmentation, be sure to opt for solutions that offer:

• Real-time stream processing of customer data, to enable in-the-moment, dynamic segmentation, and personalization
• Built-in data privacy and compliance, in line with standards and regulations set by SOC 2, GDPR, HIPAA, and CCPA
• The ability to create segments using almost any characteristic captured via a customer engagement platform or CRM
• Insights and analytics on segment performance, including lifetime revenue generated per segment
• A/B and multivariate testing capabilities to measure the impact of various segmentation strategies

Final Thoughts

It pays to invest in personalization efforts like behavioral segmentation. Researchers have found that personalization efforts can boost revenue by 10 to 15% on average, and by as much as 25%, depending on the industry. Furthermore, fast-growing companies that outperform the competition when it comes to personalization yield 40% more revenue from their efforts compared to laggards.

The challenge for brands is to successfully execute. Only 35% of businesses feel like they’re able to deliver personalized experiences across channels. Meanwhile, less than half of brands are personalizing the experience based on real-time customer data.

To see what your team can do to take your brand’s personalization and segmentation efforts to the next level, check out the Braze guide: The Power of Personalization. Inside, you’ll find resources for implementing segmentation and other effective personalization tools.

Behavioral Segmentation FAQs

What are some of the most common types of segmentation?

There are four main types of segmentation: behavioral segmentation, demographic segmentation, psychographic segmentation, and geographic segmentation.

What’s dynamic segmentation?

Dynamic segmentation uses real-time data processing to create continuously updating segments or groups of individuals with shared traits or characteristics. This is what enables marketers to deploy personalized marketing in the moment.

What are some of the benefits of behavioral segmentation?

Brands that successfully incorporate behavioral segmentation to power their marketing personalization efforts can benefit from gains in:

• Sales
• Order sizes
• Conversions
• Purchase frequency
• Customer lifetime value
• Retention
• …and more

Featured Behavioral Segmentation Resources

• Activating Your Data Warehouse for Segmentation and Personalization
• What Smart Segmentation Looks Like
• Embracing Accurate Segmentation to Drive Real-Time Connected Communications and Higher ROI
• Gain a Holistic Understanding of Audience Behaviors With Braze Segment Insights