Using behavioral insights to better segment customers

Rita McGrath
5 min readSep 13, 2023

This week, we’re launching a new guidebook series at Valize, designed to share core ideas about strategy today in a convenient online format for using with your team or on your own. The first one has to do with customer behavior and the all-important understanding of how traditional segmentation lets us down. Here’s a little taste.

https://www.valize.com/offers/ZE5qSo28/checkout

Traditional ways of segmenting customers — easy to do, compellingly quantifiable, and often strategically useless.

We’ve all been taught, and subjected to as consumers, that the most important things to know about customers are their demographics. How old are they? Where do they live? How much money have they got? Well, as we’ve learned from the relentless tracking of our search and other habits, advertisers and marketers are now learning that understanding behavior trumps understanding such characteristics.

As Shoshana Zuboff points out in her book Surveillance Capitalism, it’s “the unilateral claiming of private human experience as free raw material for translation into behavioral data.” As she points out, very few people would knowingly agree to give up so much personal information for the benefit of for-profit organizations that monetize it through advertisements.

The data-tracking companies have gone beyond just watching what we do to influencing what we do. As Zuboff puts it, “Surveillance capitalists now develop “economies of action,” as they learn to tune, herd, and condition our behavior with subtle and subliminal cues, rewards, and punishments that shunt us toward their most profitable outcomes.” As I’ve written about elsewhere, this can take the form of dark patterns in which our choice architectures are manipulated in a way that leads to people making choices that are not necessarily in their own best interests.

Change may well be afoot in these practices. Google reportedly pays Apple billions (that’s with a “b”) to be the default search engine on its phones. Billions to take advantage of people’s unwillingness to invest energy in finding a new search function — an operation that would take literally a few clicks. This arrangement is now drawing scrutiny in an antitrust suit against Google, arguing that it unlawfully…

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Rita McGrath

Columbia Business School Professor. Thinkers50 top 10 & #1 in strategy. Bestselling author of The End of Competitive Advantage & Seeing Around Corners.