This post was originally published on Hurree.co
Segmentation is a marketer’s best friend. Did you know that campaigns that are segmented based on user’s behavior have a unique open rate that’s 12.23% higher than unsegmented campaigns?
Long-gone are the days where brands and marketers would have to guess the needs of consumers. Big data has changed that. Now we are able to gather consumer data in huge volumes and analyze it to build bespoke, valuable, engaging content, that sees brands connect with consumers on a more personal level.
Before we go any further, let’s rewind and clarify…
What is market segmentation?
Market segmentation is essentially the process of dividing and creating subsets or groups of users based on commonalities and identifying characteristics. There are (generally) four different types of market segmentation, such as…
- Demographic Segmentation
- Geographic Segmentation
- Psychographic Segmentation
- Behavioral Segmentation
In this blog, we’re going to look at behavioral segmentation with a couple of examples from the big-dogs in branding.
But first, what is behavioral segmentation?
Well, as the name states, behavioral segmentation entails dividing and grouping consumers based on their behavior. Behavior counts for both online and offline actions, but in this blog we will mostly focus on digital behavior, so let’s take a look.
Behavioral segmentation, in the digital world, means segmenting users based on their online actions, i.e. behavior on a website or app. This normally includes things like the amount of time they spend on your website, or ‘dwell time’, bounce rate, whether they’re new or returning users, how frequently they interact with your brand, which items are looked at or added to their basket or playlist, and this list goes on. Behavioral segmentation does what it says on the tin, and it’s an essential tool for marketers in all fields.
Did you know that organizations that use customer behavior data to generate behavioral insights outperform peers by 85% in sales growth and more than 25% in gross margin? You can’t ignore those statistics!
A (very) brief history of segmentation
Segmentation in marketing has been around for decades. Market segmentation became a part of marketing practice around the 1950’s, in the form of demographics, and has continued to grow in use, popularity and relevance ever since. The 60s and 70s mostly focused on census data, the 80s favoured segmentation based on financial data, and the 1990’s embraced psychographic data to the fullest. But it wasn’t until 2000 that marketers’ focus really became dominated by behavioral segmentation.
How did we get so much data and how do we analyze it, though?
The boom in data is essentially a direct result of the internet boom of 1995–2000. This boom saw a massive increase in internet-based companies and start-ups, including the birth of social media.
However, data-driven segmentation has only been possible on such a large scale since the inclusion of Artificial Intelligence (AI) in marketing. Thanks to AI, marketers are able to deliver more relevant, personalized content that aims to be different for each targeted segment of consumers.
Marketers today are spoilt for choice when it comes to deciding on which segmentation type(s) to use in their strategy. And that’s all thanks to the huge pool of data currently available which, compared to years ago, is unparalleled.
So now that we know what behavioral segmentation is, how it came about and why we use it in the business world, let’s take a look at these 3 case studies: Coca-Cola, Airbnb and Netflix.
First up is Coca-Cola
Coca-Cola is the largest soft drink company globally, and is one of the most valuable and recognizable brands in the world. Coke own a colossal number of other soft drink brands, organise community events, foundations, partnerships and promotions.
So how do Coke do it? Coca-Cola center their segmentation strategy on consumer behavior, both online and offline. The carbonated-conglomerate focus on a number of different aspects when segmenting their customers:
- Website analytics and social media data analysis
- Loyalty status — how strong or weak consumers’ loyalty is to Coca-Cola (which tends to be analyzed using social data and data gathered from the activity on Coke’s website).
- Occasions — The most popular occasion for consumers to drink coke — this could refer to seasons, events, or simply meal times.
- Benefits Sought — what consumers are looking for when they purchase the product. This could be the refreshing taste, product uniqueness, coolness of the brand or its promotional benefits.
Related: Try Hurree
Basically, Coke can be seen as an unrivaled market leader. They have truly loyal customers that are likely to never switch to another brand due to their unparalleled love of Coca-Cola. This loyalty is undoubtedly a result of Coke’s impressive marketing strategies. Their utilization of consumer data allows Coke to behaviorally segment their users. From here they tailor their products, content and messages so accurately, that they now have the luxury of being one of the world’s most recognized brands.
Next, we’re looking at Airbnb
Airbnb is the world’s largest accommodation-sharing sites. The concept of paying to stay in a complete strangers house could be considered odd by some but, nevertheless, Airbnb can proudly say that they’ve made it. They’re super successful. Some of their success can definitely be attributed to innovation, diverse pricing and experiences offered. But business success rarely comes without intelligent marketing strategies, and that’s where Airbnb’s clever segmentation and targeting comes in.
Airbnb uses machine learning to generate insights from user reviews, which are then displayed at the top their webpage. These insights will likely be one of the first things prospective users see or click on when visiting the site, which will encourage users to book as well as encouraging dwell time on Airbnb’s page.
Airbnb also use consumers’ behavioral data and preferences to, essentially, pair hosts and guests. They do this by noting the preferences and online behavior of potential guests and the preferences of the hosts, and then produce coefficient listings.
That makes sense, right? But how do they actually do it? Airbnb achieve this ‘perfect match’ with their specialized search algorithm. The algorithm takes and analyzes data from both Airbnb hosts and guests and offers matches based on their similarities.
Along with matching via their algorithm, Airbnb use split testing to discover how website changes may affect consumer behavior. Airbnb go even further by using cookies, and other tracking-tech, to hold information from previous searches and booking decisions. Then, with this new information, they are able to adjust and personalize the content that users see when browsing the website. That’s not bad for a company that’s only around 10 years old!
And last, but not least, we have Netflix.
Netflix is the world’s leading entertainment streaming service, and is arguably the most proficient brand when it comes to behavioral segmentation.
Netflix has got it all sorted: the personalization efforts begin as soon as a user creates an account with Netflix and streams even just one TV show or movie. Once they do this, Netflix’s behavioral segmentation efforts are clear (and usually welcomed).
So how do they do it? Netflix use an algorithm which allows them to consistently and accurately A/B test and experiment with viewer preferences. Netflix’s algorithm dictates everything — the homepage layout, the recommended content, and even the visuals, or landing cards, for each piece of cinema. No, I’m not making this up. Netflix actually personalizes the image you see based on the actors, actresses or genres that it thinks you like. And it works!
The effort that Netflix has gone to to behaviorally segment their subscribers shows how dedicated they are to personalizing experiences. Did you know that more than 75% of Netflix user activity is driven by its recommendation system, and that the recommendation system saves them a whopping $1Billion per year? It’s clear to see, then, how segmentation has helped Netflix succeed so quickly, and why behavioral segmentation is a central part of their marketing strategy.
It’s Netflix’s combination of big data, algorithmic personalization and huge content investment that are likely to keep us glued to the screen for the foreseeable future.
Conclusion
So, we’ve covered a couple of brands who use behavioral segmentation, and use it brilliantly. Brands such Amazon also use behavioral segmentation to recommend you products; Spotify analyze users’ behavior to bring you your ‘Recommended Daily Mix’, and that’s just to name a few.
Basically, behavioral segmentation is a great way to stay relevant to your consumers. And market segmentation is an essential tool in today’s data-driven business landscape. In order for brands and businesses to truly understand their user’s different and specific requirements, they must rely on valuable data analysis and segmentation. Especially if they want to keep up with competition. And with constant advancements in technology, it’s now possible to gain real, actionable insights from that data that will help you better understand your customers, and in turn provide them with engaging content and unparalleled experiences.
Do you have any thoughts on behavioral segmentation, or is there anything we’ve left out? Feel free to comment below!
Find out everything you need to know about personalization with our free guide: The Naked Truth of Personalization. If you’d like to learn more about market segmentation, don’t hesitate to get in touch via stevie-rose@hurree.co. I’d be more than happy to answer any questions you might have.
