The whole market can be segmented in a number of different ways. This article is about behavioral market segmentation.
The most common profilers used in customer segmentation include the following four: behavioral market segmentation, geographic market segmentation, demographic market segmentation and psychographic market segmentation.
Behavioral market segmentation
Behavioral market segmentation divides the market into groups of customers based on the way they respond to the product. It assumes that people know about the product from different sources, shop for the product in different ways and use the product differently from others. Behavioral factors include outlet type, occasions, usage loyalty and benefits sought.
Outlet type
This factor determines where a product is purchased by customers. This includes traditional ways of shopping such as in-store shopping and direct selling as well as the modern ways of online shopping on E-Commerce platforms and shopping on social media.
Example 1: The development of online shopping in China has helped Alibaba-owned Taobao.com, the 8th most-visited website globally according to Alexa rank, to personalized the shopping experience to over one billion customers in China. The platforms targets different groups of customers with different offers at the most appropriate time based on the shopping history and purchasing habits.
Occasions
This factor describes when a product is purchased and/or consumed. While some products can be used individually, other products need to be used with other products such as cars needing gasoline or a game console needing games. Certain food items such as birthday cakes or wedding dresses are only utilities during special occasions such as during birthday parties or wedding receptions.
Example 2: Cereals have traditionally been marketed as a breakfast-related product. Kellogg’s have been encouraging consumers to eat breakfast cereals on the 'occasion' of getting up in the morning. More recently, they have tried to extend the consumption of cereals by promoting the product as an ideal, anytime snack food.
Usage
Some markets can be segmented based on usage rate. Customers can be categorized into a light user group, medium user group and heavy user group. Heavy users are the most engaged using the good or service the most frequently whereas light users purchase and use the product much less often, sometimes even as rarely as only once. Understanding the behavior of the light user can help the business to target customers to incentivize usage on days when they otherwise would not use the product.
Example 3: Daily commuters to the office who do not own a car will be using the ride-hailing services such as DiDi or Uber. Hence, they might be considered as a heavy user group as they use the service from Monday through Friday.
Loyalty
This feature can be categorized as High Loyalty, Medium Loyalty and No Loyalty. Loyal customers are the most important to the business and cannot be overlooked. They are valuable to the firm because they buy one brand all the time or most of the time, thus generate repeated sales revenue. Many companies will segment their markets into those where loyal customers can be found and retained compared with segments where customers rarely display any product loyalty. To increase customer loyalty, the business can establish a rewards program
Example 4: The mass holiday market of overseas tour operators has very low levels of customers loyalty. Companies such as Thomson Tours or Airtours plc need to find customers again every year. Compare this with specialist niche operators such as Laskarina which provides holidays to undiscovered regions of Greece which has customers who have traveled with the brand in each of the last 20 years.
Benefits sought
Searching for specific product features to fulfill particular needs and wants is an important form of behavioral segmentation. Benefit segmentation requires marketers to understand and find the main benefits, which will become the driving factors, customers look for in a product. Some customers place high value on certain benefits while others look for something completely different most applicable to them.
Example 5: An excellent example is the shampoo market where research has found main benefit segments including packaging size, cosmetic (volumizing, oil reduction, etc.), medicinal (dry scalp, damaged hair, etc.), scent and price.
Behavioral market segmentation variables help marketers to gain deeper practical knowledge about the customers actually using the product. Based on customer behavior, firms will be able to modify and improve current products as well as invent new products based on detailed feedback from real product users.
