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Behavioral Segmentation

            This type of segmentation system is based on behavioral data, which emphasize what customers have purchased. Companies with a comprehensive customer database in place have the best possible source of data for a behavioral segmentation. Because all purchasing data is already in the customer database the hit rates will be 100%.
             Behavioral-based segmentation systems are the best fit for product-driven organizations where product line managers call the shots. This type of segmentation is not as useful for individual customer value development. When new customers are acquired, the organization has to wait for them to define themselves via their purchases. Depending on the type of business and its characteristic frequency of purchase and/or seasonality, it could take quite a while to obtain enough purchase information to correctly classify a customer.
             The frequent flier programs offered by the airlines is probably one of the most obvious marketing tactics based on behavioral segmentation. Driven by customer loyalty status, travelers are entered into an airline's database and given a number, which will allow both the traveler and the airline to track that person's travel habits. Since their inception in 1981, frequent flyer programs have caught on with more than thirty airlines worldwide, ten hotel chains, various rental car companies and two credit card companies (not to mention the various credit cards backed by airlines) have followed suit, allowing for more than 80 million people participate. This makes frequent flyer programs the most pervasive and successful marketing programs ever developed. And in the process, the frequent flyer mile has attained the status of a universal currency. American Airlines, however, was the pioneer company for frequent flyer programs. .
             In May 1981, American Airlines (AA) introduced AAdvantage, the first frequent flyer program, with the goal of retaining AA's most frequent customers by rewarding them for their loyalty.


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