Behavioral segmentation is the process of grouping customers according to their behaviour when interacting with a product or service.  Simple behavioural segments frequency and size of spend, and many customer loyalty schemes were developed on this basis. A very successful example was the Tesco Clubcard as it passed all 3 segmentation tests. It enabled Tesco to understand a lot more things about customers such as what they bought, how often, what products they bought with other products or on what occasions and what offers they were most responsive to. The Clubcard was perfect for passing the second test and customers could be reached individually with tailored communications. In the early years of Clubcard the regular mailshots with personalised offers were particularly successful. 

In more recent years more sophisticated behavioural segmentation approaches have focused on things like different product or service benefits or different levels of customer engagement.

American skincare brand Olay used benefit segmentation when creating its Skin Advisor. The artificial intelligence beauty tool collects data from customers by asking them five to seven quick questions about their skin. The advisor then reveals the true age of the customer’s skin and recommends products accordingly. By asking the customer questions based around their skincare routine, and their preferences, Olay can collate data that can influence its product development, allowing the brand to bring out products that are most sought after and most relevant to customers. For example, through its Skin Advisor app, Olay understood that many of its consumers wanted fragrance free products, an idea not even considered by Olay’s development team. Olay now has a very successful range of fragrance free moisturisers and creams.