Master Behavioral Segmentation For Explosive ROI

In this article you’re going to learn how to segment your customers based on behavioral segmentation to lower your customer acquisition cost (CPA) and increase customer lifetime value (LTV).

three ways to grow a business

There are only three ways to grow a business, they are:

1.) Get more customers

2.) Get current customers to spend more

3.) Increase your prices

You’ll learn how to achieve #1 and #2 in the next 2 minutes and 12 seconds through behavioral segmentation.

What is Behavioral Segmentation?

At face value the term behavioral segmentation may sound like something scary and complex, in reality it’s very simple.

In a nutshell, behavioral segmentation is the process of putting people into groups based on their behavior and interests.

For example, if you have a customer list, sorting your email list based on gender, age groups, location, average order size, number of total orders are all examples of behavioral segmentation.

What if you have no customers?

You can segment users based on pages they visited on your website, items they added to cart, emails read, videos watched or even by people who liked your Facebook.

Anything that can be tracked or measured or quantified can be segmented to some extent.

That’s great Mark, but what advantages are there to behavioral segmentation?

Good question complete stranger reading this blog post.

There are only two ways to make decisions for your business, they are as follows:

Assumption Based Decision Making

Meet Bob.

Bob is a small online business owner.

Bob loves to make assumption based decisions.

Assumption based decision making is where you guess what you need to do to grow your business.

Bob created a brand new website to promote his food delivery business and started to drive traffic through Facebook ads.

After spending a few thousand dollars, Bob generated zero sales.

Bob got sad.

Bob thought the checkout process was too complex and that was the reason why customers were not ordering.

So he simplified it the entire checkout process.

Bob spent a few thousand dollars more and still got no customers.

This is Bob today.

Assumption based decisions

Assumption based decisions aren’t the best if you want to grow your business in a world where your competitors are using data.  

Data-Driven Decision Making

Meet Jane.

Jane too runs an online food business like Bob.

She created a new website and drove traffic from Facebook ads.

A few thousand dollars later, she generated no sales.

Jane was sad.

Instead of guessing what may have went wrong, Jane decided to look into the data on her Facebook ad account and Google Analytics.  

Jane learned that her Facebook ads were getting a good click-through rate and engagement, but when prospects landed on her landing page, most spent less than 6 seconds before leaving.

Jane reworked her landing page by adding the unique selling points of her service and tried again.

A few thousand dollars later Jane was acquiring customers and her business started to grow.

This is Jane now.

data-based decision making

The point of this story is that whether you want customers at a lower cost or want to increase LTV, you’re going to need to use data-based decision making.

How to Gather Your Data

To segment any group of people using behavioral segmentation, you need data.

Primary source is data you collected yourself and the most valuable for behavioral segmentation.

Primary data sources include Google Analytics where you can gather information such as age, gender, interests and device type used:

Primary data sources include Google Analytics

In the image above Google Analytics shows that most mobile traffic for the website is from iPhone users.

Using this data you could prioritize targeting users only on iPhone devices, or if you were thinking of creating a mobile app, iOS would be a much better option than Android for this business.

You can also segment users by email.

Depending on the email tool you use, you can get data such as total amount spent, emails opened, overall engagement rate and even items they frequently buy.

For example, if you’re an online store and sending out a newsletter, you can exclude anyone who ordered in the last 48 hours as they will be less likely to order given they ordered recently.

1# reason for users unsubscribing from email lists is because they are sent too many emails.

1# reason for users unsubscribing from email lists

This sort of behavioral segmentation can reduce churn rate of customers to increase LTV.

You can also use data from your own Customer relationship management (CRM) system to segment users and send them the right offers and content emails based on their behavior with your products.

Gender Gap Grader is a free tool that will help you segment your customer information or employees by gender using their unique API. This is a useful tool if you have a large database as it can help you refine your marketing strategy based on gender.

But I’m a new business, I have no customer and no data, where should I start?

If you have no primary data, there’s a number of secondary data you can use.

Related blog: How to double your business without spending another cent.

For example, if you’re running ads on Facebook and aren’t sure who your target audience is, you can use tools like Audience Insights that provide data on people living in the areas you want to target:

Behavioral Segmentation using Audience Insights

Statista offers a wealth of free data, but requires you to pay a monthly fee if you want access to more detailed information. Google Trends can be useful to see if there is a growing or declining interest in your product or service:

Bitcoin

Poor Bitcoin ☹.

Second Measure is one of my favorite secondary data tools to see how others are doing in my industry and what I can learn from there. Second Measure is best suited for bigger brands that want to take their services to the next level than smaller e-commerce businesses that are bootstrapped.

You to collect primary data through surveys. I suggest giving away something everybody would love to have (like an iPad) and to enter to win they must complete your survey.

Blogs such as WordStream’s Facebook Ad Benchmarks for YOUR Industry, are useful resources to find out what the average CPC, CTR, CPM and conversion rate is in your industry if you’ve never ran ads before.

CTR Click through rate

How to Segment by Behavior Based on Customer Journey

The customer journey is the process a customer takes from start to finish when buying a product or service.

There are many stages, they are typically broken down into the following:

  • Awareness
  • Search
  • Research
  • Purchase
  • Loyalty  / Experience

You’ve been through this process a hundred of times whether you know it or not.

Just the other day I was looking for a yoga mat as I started doing hot yoga (please don’t judge me!).

I searched yoga mats for hot yoga into Google and the following was returned:

Google Search

All ads from Google.

I visited each website, reviewed their products and like I normally do when buying something, I also searched on Amazon.

I found one I liked on Amazon which was backed by lots of real reviews so I bought it:

Yoga Mats on Amazon

It was a great product and for sure I’ll be using Amazon again.

In this story I went through every step of the customer journey from interest, search, research, purchase and experience.

 customer journey from interest, search, research, purchase and experience.

To lower your CPA and increase LTV you need to segment customers at every stage of the customer journey based on behavior. Below are some examples of this at each stage.

Awareness

this is the easiest stage of behavior segmentation.

Example 1:  you have an online clothing store selling products for men and women. It wouldn’t make much sense to run the same ads targeting men and women together since the women won’t be interested in the men’s items and vice versa.

If you did do this, your ads cost would sore and your rate of engagement would be low. It would be much better to create individual campaigns for each gender serving items that or a brand story that compels their interest.

This is a form of behavioral segmentation.

Example 2: you’re a marketing agency generating leads for a real estate agent.

Using secondary data I know the average age of a home buyer in the UK is 30 years old:

 average age of a home buyer in the UK
It’s much easier to buy a home as a couple than individuals and I’d take it this segmentation one step further and in my target only target people who are in a relationship.

This is a basic form of behavior segmentation in action, but you won’t believe how many ad accounts I’ve seen that target users between 18-65+ thinking that everyone is their customer.

Search

The pain points and needs of each customer are different. Two or more customers can buy a product for different reasons.

For example, someone may use a meal service because they don’t have time to cook, while another may use it because they don’t know what healthy food is and needs help picking their food.

Example 1: A gym is offering four different services, they are: spin class, boxing, free weights and personal training.

Most people looking to join a gym want to get healthy but the way they go about reaching their goal will be different.

Some will want one-on-one personal training as if they train alone they don’t know what to do.

Some may not enjoy lifting weights and would prefer classes, while others would prefer to work out alone in the weights room.

Most businesses group all these prospects together and serve them the same message and content which is not ideal.

You can segment prospects who visited your website by creating a unique landing page for each service you offer. Each page has a sign up form that your email tool segments and serves them the appropriate content.

For example, if someone clicks on your boxing class and signs for a free class, through email they only receive information about boxing and not personal training or spin classes.

This form of behavior segmentation allows you to personalize the message increasing the chance of your new lead to come and take a class.

Research

The consumer has found your product or service and now wants to do research to see if your product is good fit for them (remember when I went on Amazon to do more research on yoga mats).

Example 1: to carry on with the gym example, you can send follow up emails informing them about your boxing, the benefits to do so, how long a lesson is, what areas of health they can expect to improve.

By segmenting them this way, you don’t run the risk of sending them a spin class or personal training email that they have no interest in. They stay on your list for longer, open more emails and want to know more.

Example 2: you manage an ecommerce store and a website visitor viewed a product but then left. Using website behavior targeting you can serve them an ad on Facebook or Google showing them the exact product they viewed or a customer testimonials of others using your product.

This is what Paleo Robbie do, if you visit their Meal Plan page but don’t place an order, you’re shown a video on Facebook and Instagram of a customer testimonial:

Paleo Robbie Meal Plan

They also offer a Grocery service and have a unique video for their grocery for anyone who visited their Grocery page:

 Grocery service

This is marketing behavioral segmentation and works really well to convert website visitors who didn’t checkout right away.

Purchase

Segmenting at this level is the easiest because when a customer makes an order – you now have primary data and it’s the best kind!

Example 1: your online store selling all kinds of sports equipment for tennis, soccer and mixed martial arts.

A customer buys a tennis racket. You now segment them as someone who has an interest in tennis. Next you cross-sell them with other tennis items such as bags, tennis shoes and clothing.

As they have ordered tennis gear already, they are more likely to order more of the same stuff.

I bought some men’s Levis jeans from their website and weeks later I get emails like this:

Advertisement Ads

To me this is borderline spam, why would you ask me to shop for women’s clothes?

This email would have done much better if they just showed me their collection of menswear.

Example 2: All customers weren’t created equal.

Some will spend more than others, in fact I bet around 20% of your customer make up to 80% of your revenue.

Once you have enough customer data you can segment your customers based on their:

  • Average order value (AOV)
  • Average order frequency (AOF)

Customers with a higher AOV and AOF are the most profitable and probably your biggest fans.  What you must do here is to find common trends with your best customers.

Are they of a similar age, demographic, have a similar pain point your product solves? Once you find out what they all have in common, you can refine your targeting at the awareness phase to find more customers who are like your top customers.

Facebook has a great tool for targeting called lookalike audiences. It lets you upload a customer list of your top customers based on LTV and it will find similar customers who match yours:

lookalike audiences

Loyalty

Customers who leave reviews or are raving fans and refer others are a sign of how loyal they are. You can turn customers into loyal fans through communication.

Example 1: Food brand Paleo Robbie sends customers who place 3 orders or more an email letting them know that they can refer their friends and get 500b credit for every friend they refer:

turn customers into loyal fans through communication

They clever;y ask for this on their 3rd order and not first because if a customer orders for a third time it validates that they like your product.

Example 2: Here’s Paleo Robbie again giving their customers a pat on the back for trying their service for a 5th time with a voucher as a reward:

 email tools

Most email tools show you how many orders a customer has made and can send automated emails based on their behavior.

Example 3: I flew with Bangkok Air recently and a few days later they asked me to fill in a survey for them to better improve their service, and in doing so I was entered into a raffle where I could win a free flight or points:

Flyer Bonus Raffle

You can do the same with customers asking them questions on their experience with your business, to find areas that can be improved.

These are just examples of segmentation at each level of the customer journey. You can segment many different ways at each stage depending on your goals and tools you have.

Tools Needed to Help You with Behavioral Segmentation

Here are my 5 favorite tools you can use to segment customers based on behavior.

Facebook Pixelthe pixel is one small snippet of code that can help you track everything from the items customers order from your Facebook ads, the items they add to your cart, the videos they watch to the pages they click.

If you plan to run ads then this tool is a MUST!

Must have Tools to run ads

Google Analytics – is a free tool that helps you understand how users interact on your website, where they come from, what devices they use and what they buy.

Google Analytics

Klaviyo – slogan is deliver smarter marketing. They are the most advanced email tool I’ve used and provides you with data on just about everything you can think of about your customers:

Klaviyo

Klaviyo is best suited for ecommerce brands, for startups with limited budget they may not be an option because they are quite pricey. A good alternative for startups with a limited budget would be SmartrMail.

Segment – is a service that lets you connect data sources such as Google Analytics, Salesforce, Facebook Pixel, email and 200 other tools to help you break down your raw data into actionable information.

Segment

It will track your first 1,000 users for free and after that there is a tiered pricing based on how many visitors your website receives.

HubSpot – remember the examples I gave earlier of creating bespoke landing pages for your services and then sending them personalized emails based on what they opted in for? Well Hubspot is a tool that will do all that and more.

HubSpot

HubSpot offers help with marketing, sales and customer support tickets.

Your Turn

See, I told you behavioral segmentation wasn’t scary.

It’s never been easier to start a business than today. With so many people fighting for the same customers, to get ahead and grow you need to be able to serve the right message at the right time to the right person.

If you don’t use behavioral segmentation in place at every step of your customer journey, you’re going to face problems each step of the way.

Companies our team has worked with: