Behavioral Segmentation 101: What It Is & How to Get Started

Develop a deeper understanding of your customers based on their digital actions and preferences.

Best Practices
November 18, 2021
Image of Carolyn Feibleman
Carolyn Feibleman
Principal Product Manager, Amplitude
Behavioral Segmentation 101

You can get to know someone in the span of a 20-minute conversation, but what people do is much more telling than what they say. In order to truly get to know someone, you have to witness their behaviors over and over again. If you want someone to consider you a casual friend, science suggests you have to spend at least 30 hours with them—140 hours to be “real” friends and about 300 hours to be best friends.

If businesses want to deeply understand their audience and learn how to solve their problems, they need to focus on their behaviors. By focusing on actions, businesses can segment their customers to reveal specific insights. New findings can then inform improvements to each stage of the customer lifecycle, from early subscribers to long-term power users.

What is Behavioral Segmentation?

Behavioral segmentation is the practice of grouping your audience into separate categories based upon their actions. Actions that do or do not take place within a digital product, mobile app, or webpage reveal what your users find valuable. Clicking a CTA, sharing a link, buying credits, or abandoning a cart are examples of notable behaviors.

This behavioral information, otherwise known as first-party data, has eclipsed the use of third-party demographic data. Third-party data is no longer the Rosetta stone it used to be. Before regulatory acts and changes in Big Tech, consumers were unknowingly tracked by internet cookies. This revealed things about consumers like location, age, gender, and occupation.

Demographic info is still important, but it won’t aid you in understanding how to improve things like conversion and retention. For example, two prospective users may share identical demographic data, but they will likely interact with your product or service in completely different ways. If you can capture these individual preferences, you can adapt your product to be exactly what your users are looking for.

What Are Behavioral Cohorts?

At Amplitude, segmented groups based on actions and preferences are called behavioral cohorts. Groups of users are followed based on behaviors within a chosen time frame—such as three days (top-funnel) or two years (bottom-funnel). This gives you the unique ability to understand exactly what your customers are up to throughout the entire customer lifecycle.

Here are a few examples of possible behavioral segments or cohorts:

  • Users who purchase a certain kind of product or item
  • Users who create wish lists, playlists, or set reminders
  • Users who skip songs, abandon carts, or ditch a show after the first episode

However you decide to use behavioral segmentation, the goal is to understand why a user is interacting with your product. If you can answer that question throughout the customer lifecycle, you can make appropriate changes to increase acquisition, engagement, and retention.

Use Behavioral Segmentation Throughout the Customer Lifecycle

The customer lifecycle is the path customers take as they engage with your business; its product, website, application, or support system. How you segment your behavioral cohorts is dependent on your goals and key performance indicators (KPIs). Each phase of the customer lifecycle presents different opportunities to implement behavioral segmentation.

Acquire: Convert With Tested Tactics

Acquisition is the first stage of the customer lifecycle—this is where potential customers discover your product and potentially convert to a user. You can start using behavioral segmentation to understand the reasons why prospects choose your product or service.

One way to increase conversion is to look for similarities in how groups discover your product or service. Was it from a social media advertisement? Did a friend send them an activation link? To learn more, let’s say you create two groups—one group downloaded your app because of a free trial offer received through email. The other group downloaded your app because a friend sent them a free activation link.

Follow both groups to find out what they do and how long they interact. If you’re noticing more conversions from the folks who received a free link from a friend, perhaps you can find a way to incentivize link sharing to increase conversion.

Similarly, you can look at each group’s actions. Which features do they engage with most frequently (or not), especially when they finally sign up? This will help you decide what to improve or get rid of entirely. After you retain users for a long enough period, you can uncover the very first actions of your most loyal customers. Then you can compare those findings to how the majority of users interact with the product.

If those long-haulers all share a link, edit a photo, or create a wish list within the first three days, you might be able to increase conversions by putting those features front and center for new users.

Engage: Personalize the Customer Experience

After your prospects have converted into customers, it’s important to increase engagement and generate user behaviors as much as possible. Without behavioral data, you won’t know which characteristics of the product experience are valuable or expendable. Free trials or discounts might get folks in the door, but you’ll need a seamless user experience to keep them subscribed and engaged.

Engagement and personalization go hand in hand, and it will be difficult to produce one without the other. If your product offers an intuitive and personalized experience, engagement will rise. By segmenting groups based on behaviors, you can find out which actions are the best predictors of engagement.

Follow segmented groups throughout the product experience to isolate which actions are the prevailing winners. A/B testing with cohorts enables more than just minor tweaks to features—it can drive big changes by confirming or disqualifying ideas about how to improve the product.

Perhaps you’re wondering how to increase engagement for your subscription video on demand (SVOD) app after users subscribe. Based on previous cohorts, you know that if a new user starts recording content, they’ll be more likely to return to the app. The key is to get them to record their favorite shows.

You create two behavioral cohorts to conduct a test—one cohort receives a small notification to record an upcoming sports game. The other cohort receives a tutorial video via email on how to record. You may discover that many users don’t know how to record or that the feature is hidden. Making the record function more accessible gives users the power to personalize the experience, which increases engagement.

Retain: Discover Long-Term Behaviors

If you can understand what keeps your customers coming back for more, you can adapt your product to these preferences and increase retention. Superficial metrics that try to quantify growth and retention can take your eye off the ball. Metrics like daily active users (DAU) or monthly active users (MAU) are useful, but they don’t tell you why your users stick around.

For example, your newly released photo app is taking off. Rapid growth is generating a wild amount of data. After your first month, DAU and MAU are high. If you’re not careful, you could get distracted and miss moments where users put the app down for good. By creating behavioral cohorts, you can discover who your most loyal users are and what they do. Then, you can encourage those same behaviors so that others find the ultimate value of your product.

Perhaps you find out that your app’s “aha” moment is getting users to share an edited photo. After a year of your new app on the market, you notice that your most loyal users share a common long-term behavior—they all share edited photos. Using behavioral segmentation, you create two groups: one that mostly shares photos and one that mostly edits.

After looking at the two groups, you realize that it’s not sharing the photo that matters; it’s editing the photo first and then sharing it. That’s your “aha” moment—the earlier in the funnel they edit a photo, the more likely they are to stay subscribed. Now you can direct your attention to changing your product. Based on the retention rate of long-term users, perhaps this alters the direction of the entire app. Instead of becoming a photo storage app, you’ve decided to morph into a photo editing app.

Metrics Matter, But Good Questions Are Better

When you meet someone new, asking open-ended questions is sure to stimulate better conversation. Rattling off a list of personal facts might not get the ball rolling. If all your attention is placed on hitting reporting goals, you might miss opportunities to improve your product.

What’s the best way to get a user to fill out their profile? (Let them design an avatar). Why does every user skip over the most valuable feature of the app? (Broken UI). Should we focus on daily content consumption or weekly content consumption as a predictor of retention? (Neither, it turns out it’s monthly).

If you want to improve conversion, engagement, and retention, be curious. Use behavioral segmentation to find answers to good questions. You might be surprised by the answer.

Use Amplitude to apply behavioral segmentation to your product-led growth strategy today. Request a custom demo to learn more.

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About the Author
Image of Carolyn Feibleman
Carolyn Feibleman
Principal Product Manager, Amplitude
Carolyn Feibleman is a principal product manager at Amplitude, where she focuses on helping companies adopt digital analytics to build better products and experiences.

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