How can behavioral segmentation improve product development?

How Behavioral Segmentation Helps Product Development

Behavioral segmentation groups customers by their actions, like how they buy and use products. This helps companies make better products by learning about their customers. Here’s how it helps, using examples from Nike and Starbucks.

Key Parts of Behavioral Segmentation

1. Usage Rate: How often people use a product. This shows which features are popular and which need improvement.

2. Benefits Sought: Different customers look for different benefits. Knowing this helps make products that meet specific needs.

3. User Status: Identifying if customers are new, regular, or potential users helps create strategies for each group.

4. Loyalty Status: Measures how loyal customers are. This helps create programs to keep loyal customers happy.

5. Occasions: Looks at when and why customers use a product. This helps tailor the product for specific events.

6. Purchase Behavior: Analyzes how often and what type of products customers buy. This helps in planning inventory and meeting demand.

7. Engagement Level: Tracks how much customers interact with a product. This shows areas for improvement or new features.

8. Feedback and Reviews: Collecting customer opinions gives direct insights into what customers like or dislike.

Framework for Using Behavioral Segmentation

1. Collect Data: Gather data on customer behavior, like purchase history and feedback.

Nike Example: Nike collects data from its app and online purchases, tracking transaction amounts and product categories. They also gather feedback from reviews.

Starbucks Example: Starbucks uses its app to track purchase times and items, and collects feedback through surveys and reviews.

2. Define Segments: Create groups based on behavior patterns, like “Frequent Shoppers.”

Nike Example: Nike defines groups like customers who buy running gear, athletic shoes, or sports accessories.

Starbucks Example: Starbucks creates groups like morning customers, afternoon visitors, and occasional buyers.

3. Analyze Behavior: Look into each group to understand their habits and preferences.

Nike Example: Nike finds that running gear buyers shop mostly on weekends and spend between 100 and 150 euros. Shoe buyers prefer sales events.

Starbucks Example: Starbucks sees that morning customers buy coffee and breakfast, while afternoon visitors go for snacks and cold drinks.

4. Personalize Marketing: Tailor marketing to each group with specific messages and offers.

Nike Example: For running gear buyers, Nike sends weekend emails with discounts on purchases over 150 euros. For shoe buyers, they send notifications about sales and early access.

Starbucks Example: Starbucks offers morning promotions on coffee and breakfast combos, and sends push notifications for afternoon happy hour deals.

5. Iterate and Improve: Keep monitoring and refining segments as customer behavior changes.

Nike Example: Nike adjusts weekend campaigns and discounts based on customer feedback and purchase data. They also refine sales strategies for shoes.

Starbucks Example: Starbucks changes promotion timing and content based on customer feedback to keep offers appealing.

Examples of Behavioral Segmentation

1. Nike - Running Gear Segment:

- Data Collection: Nike collects data on purchase amounts, product types, and customer feedback.

- Segment Definition: Identifies customers who frequently buy running gear and spend 100-150 euros.

- Behavior Analysis: Finds most purchases happen on weekends.

- Personalized Marketing: Sends weekend emails offering 20% off on purchases over 150 euros.

- Iteration: Adjusts offers and product focus based on data and feedback.

2. Nike - Athletic Shoe Buyers:

- Data Collection: Tracks purchase frequency and types of shoes bought, and collects reviews.

- Segment Definition: Identifies customers who buy shoes mainly during sales.

- Behavior Analysis: Notices high response to sales notifications.

- Personalized Marketing: Sends notifications about upcoming sales and early access to new releases.

- Iteration: Refines timing and content of notifications based on performance and engagement.

3. Starbucks - Morning Customers:

- Data Collection: Tracks purchase times and items, and gathers feedback through app surveys.

- Segment Definition: Identifies regular morning customers who buy coffee and breakfast.

- Behavior Analysis: Finds customers prefer quick service and value combos.

- Personalized Marketing: Offers morning promotions on coffee and breakfast combos.

- Iteration: Adjusts promotions based on response and feedback.

4. Starbucks - Afternoon Visitors:

- Data Collection: Collects data on afternoon purchases and customer preferences from reviews.

- Segment Definition: Identifies customers who visit in the afternoon for snacks and cold drinks.

- Behavior Analysis: Finds customers like happy hour deals.

- Personalized Marketing: Sends notifications about afternoon happy hour deals.

- Iteration: Monitors engagement and adjusts offers to boost appeal and sales.

How Behavioral Segmentation Helps Product Development

Behavioral segmentation helps companies make better choices about product development. Here are the benefits of using behavioral segmentation for product development:

1. Higher Customer Satisfaction: Products meet specific needs, leading to happier customers.

2. Focused Product Features: Development centers on features that different customer groups value most.

3. Better User Experience: Knowing usage patterns helps improve the product experience.

4. More Loyalty: Products that meet customer needs keep them coming back.

5. Smart Resource Use: Development efforts target areas that have the biggest impact.

6. Stronger Market Position: Products are made with a clear idea of market demands and trends.

For example, Nike can improve their running gear by looking at weekend buying habits, while Starbucks can add new afternoon snacks based on feedback from afternoon visitors. This approach makes sure product improvements are based on real customer actions and preferences, leading to more successful products.