What is behavioral segmentation?
Behavioral segmentation is the practice of dividing all users into segments based on actions they share (e.g., frequency of visits, clicks, time on site, and conversions).
The better teams are at segmenting their users, the more they can tailor their approach for each group. With behavioral segmentation, you can optimize for varying journeys and create messaging for precise targeting. The more quickly you can discover what’s true about your most valuable users, the easier it will be to attract more of them.
Why behavioral segmentation is important
Grouping users by their behaviors is the clearest way to understand how value or obstacles are met within your product. Any digital action users take can be tracked and count as a behavior. A media site may consider every click, refresh, and share valuable, whereas a SaaS company may only be interested in the paths users take through the app (known as a user journey). Teams can use behavioral segmentation to identify their most valuable groups such as repeat visitors, power users, or high-spenders. Once this group is defined, you can learn which features, factors, and content are correlated with higher engagement to surface new ideas for attracting more of these users. A fitness app might find that users who share their workouts with friends have a higher likelihood than the average user to work out more frequently. The team could A/B test whether nudging users to invite friends to work out together leads them to work out more often. Behavioral data allows product, analytics, marketing, and customer service teams to make better decisions and allows the team to: Understand why users aren’t converting By tracking your users’ actions at every step of the funnel you can see who isn’t converting–and why–and how this varies by behavioral segments. By knowing high- and low-performing user segments you can optimize your product to encourage the desired behavior, leading to higher conversions over all. Focus on products and features that matter By knowing the most popular products and features among your users you can prioritize where your team should spend its time. Ultimately, you want to keep your most valuable customers happy; by understanding their favorite features, you can continue to invest, develop, or improve products with these users clearly in mind–and potentially attract others. Create a better user experience Uncover what’s causing your users to drop off and how it varies by behavioral segment to optimize the top paths to key users actions. Kaplan Test Prep used Mixpanel user analytics to test a hypothesis—that adding a sign-on option for new users who downloaded its app would increase successful sign-ups. The change confirmed their theory and improved Kaplan Test Prep’s conversion rates by 40 percent.
How to segment users by behavior
Many companies rely on data scientists or analysts to glean insights on user behavior using manual analysis (e.g., CSV, BigQuery) or Business Intelligence/in-house tools. These methods are cumbersome, require deep technical skills and are time consuming. With a user analytics solution you can easily and quickly segment your customers and uncover deep insights in a way that is simple, regardless of your technical abilities. Mixpanel offers you the ability to:
- Track user engagement
- Identify segments based on business priorities
- Make changes based on segments
- Use analytics to generate reports
Whether pulling data manually or with a tool, teams must determine the events they wish to track specific to their product. It’s important not to track too much, otherwise the noise from less useful data can drown out the behavioral signals. Teams should focus on quality, not quantity. Activity metrics such as views, visits, clicks, and taps occur frequently, but don’t necessarily indicate that something valuable has occurred. Track events and actions that can be tied back to bottom-line metrics and KPIs, such as sign-ups and revenue, to ensure the team is tracking and encouraging profitable user behaviors. Here are a few examples of common behavioral segmentations:
- New vs. returning users
- Frequency of return
- Conversion goal
- Time on site
When in doubt, an easy win for teams that are new to behavioral segmentation is to establish a conversion funnel, or the steps most users take toward a goal event, and look for areas where there are drop-offs, or many users exiting the product. Exiting is generally an undesirable behavior, and teams can explore that page or stage to identify why the drop off is occurring, and fix it. Companies can use behavioral segmentation to understand users on a deeper level than behavior alone. Behaviors are real-time indications of whether users are on the cusp of upgrading or moments away from churning, and allow teams to adjust their product, marketing, and customer service to retain and grow their most profitable customer cohorts.
Success with behavioral segmentation
Lemonade increases conversions by 250 percent The insurance company Lemonade used Mixpanel to understand why more newly acquired users weren’t completing its sign-up process. With Mixpanels Funnels, the team discovered a sizable drop off right after new users requested a quote. “We tested the placement of features, order of different sections, and even the copy,” explained Gil Sadis, Head of Product at Lemonade. After the changes were made, Gil’s team increased the number of people who viewed a quote and then purchased by 250 percent. Read the Lemonade case study. DocuSign converted 5 percent more paid users The global e-signature provider DocuSign used Mixpanel to track the behaviors of both paying and non-paying users and tested which features they offered to each group. The team saw a 5 percent lift in conversions and purchases when they exposed paid features to non-paying users. Read the DocuSign case study.