Behavioral Analytics: Definition, Examples, and Best Practices

The right time to start collecting customer behavioral data is on day zero.

If you’re building a product (or working on a new release), you need to be prepared to measure how people use it.

Behavioral analytics gives you insight into how your customers use your product. This information not only helps you see how customers are using your product but it gives you the dataset you need to measure the outcomes from your product releases.

What is Behavioral Analytics?

Behavioral analytics provides the data you need to personalize your product experience and drive your desired business outcomes.

Behavioral analytics help track and analyze user behavior to better understand what customers want from a product or service. This data also provides insight into how users interact with your product and can help you make decisions about your product and its future iterations.

The data generated from behavioral analytics facilitates improving your product, satisfying customers, and boosting key performance indicators. How you use behavioral analytics will depend on your goals — but metrics like conversion,engagement, and retention, are universally essential.

Third-Party Data Vs. First-Party Data

Third-party data is aggregated by other companies or enterprises and then sold. For example, third-party demographic data like age, occupation, and location can identify users with identical demographics and can assist you in building audiences for marketing purposes.

First-party data on the other hand is the information you collect directly from your customers. First-party data captures your customer’s specific  interactions with your company and can offer insight into how a user engages with or experiences your product.

3 Ways to use Behavior Analytics

With the behavioral data you collect, you can run various types of behavioral analyses, tests, and experiments for different reasons and desired end results.

Before you get started with behavioral analytics, you first need to figure out what you're trying to improve and then determine how to measure it.

Sounds easy, but depending on which part of the funnel you're looking at, you could be improving different parts of the customer journey.

• Are you focused on acquisition and trying to understand where your best customers come from?
• Are you getting people to the site but struggling with converting them into users?
• Are you converting visitors to users, but you’re not activating enough of them?
• Are you looking to improve or build new functionalities that improve retention?

No matter what your focus is or the type of behavior analytics you’re collecting, user data helps you improve your product and iterate the process again and again until you have the product your users want and expect.

1. A/B Testing Helps With Conversions

Struggling with conversions? A/B testing can help measure impact, allowing you to make product decisions confidently.

Consider the following: you want to improve your rate of converting visitors into users. Or maybe you want to build a new product feature but are uncertain of the exact user experience that will resonate most with your customers.

Presenting users with different product versions  and measuring the results can determine your next and best courses of action.

Tangible user data generated from customer behaviors enable big-picture and sometimes small-picture adjustments that can improve your customer experience without taking unnecessary risks.

2. Funnel Analysis Reveals Customer Journey

Funnel analysis allows you to learn how your users move through your product. A funnel analysis tracks your users' steps to perform a key action.

These insights show where the steps your users take when they succeed or where they fail. This gives you a precise picture of your customer's journey.

Funnel analysis offers event-level and granular data, such as what buttons were clicked and what pages were visited.

As your product evolves and your business grows, you will have more and more funnels to maintain and optimize. The best way to perform funnel analysis continuously is to automate as much of the data capture as you can using a customer data platform. The right platform will create centralized customer profiles that tell you who’s using your product and how.

3. Segmentation Leads to Personalization

Segmentation is powerful because it permits you to group users based on specific activities or demographic information.

Within these segments, you can build cohorts, view their user base, and find their commonalities to tailor your product to best meet that group’s specific needs.

Users can be segmented based on any behavior. For example, a product team for a music app might want to segment users who skipped songs. Or, if you’re a B2B SaaS product, you can track free trial starts that convert to demo requests.

In isolating specific actions, you can find user behavior patterns and trends. Based on these patterns, you can improve your product to suit the wants and needs of your users.

4 Behavioral Analytics Best Practices

Startups and scaleups are testing at least one hypothesis at any given moment.

In fact, to survive past the startup stage, you’ll find yourself testing as many hypotheses as possible. The challenge is making sure you’re measuring the right things at the right times and validating your hypothesis for each change.

Best practices in behavioral analytics — defining your goals, identifying the metrics, remaining flexible, and iterating — keep your product development moving fast.

1. Define Your Goals

Defining your goals and objectives before you begin thinking about what to measure is essential. This way, you can ensure you’re tracking the right events and are tracking the most useful KPIs.

For example, if you struggle with conversion rates, measure each process step from one stage to the next. From signup to download to purchase, if one stage has a relatively lower conversion rate than the others, that stage may need attention. For example, if your users are signing up but not downloading, your immediate objective is the conversion rate from signup to download. You’ll be set up to measure results from any tests you run to improve that funnel step.

2. Identify the Metrics

Clear goals will help you define your metrics, which is the only way to know if your product changes are successful.

Let’s say your business is ecommerce based, analyzing user behaviors can help you:

• - Improve the onboarding process
• - Drive retention for paying customers
• - Increase checkout funnel conversion
• - Minimize abandoned carts

Bottom line — the metrics you choose will depend on the objectives you have, so before you decide what metrics to track, you need to define your goals.

3. Be Flexible

Once you have your goal and the right metrics, the next step is to remain flexible.

In the real world, that means you must focus on your short term goals without getting locked into processes and measurement methods that may not scale or change with you as you grow.

As your product and user base grow, you’ll have to iterate on which customer behaviors you’re measuring to reflect on the ever changing goals and challenges you’re trying to solve for.

4. Iterate the Process

Goals and metrics are defined, you’ve left room to scale, and now you’re prepared to iterate the process.

Insight into customer events helps you understand what users care about the most, where you can double down on user action, and when it’s time to build new features.

The best way to collect and use behavior analytics is to follow four steps.

1. Identify a goal and the metrics and begin data collection.
2. Analyze the data to determine the next thing you can work on for your product.
3. Make that change.
4. Measure the result.
5. Iterate the process all over again.

Behavioral Analytics and Freshpaint: Next Steps

At Freshpaint, we believe that the future of customer behavioral data is a world where people who don't write code can use a mouse to set up their event tracking and easily connect that data to the tools in their tech stack.

Freshpaint’s Customer Data Platform (CDP) automatically captures user actions and sends the data to more than 100 business tools. This helps you get insights into user behaviors faster, make data-driven decisions, and offer excellent customer experiences.

With Freshpaint, you can instrument your site without writing a single line of code. Once installed, Freshpaint automatically captures page views and clicks across your product and site.

Added benefits to using Freshpaint are:

1. It scales: As an analytics platform and solution, it can scale with you. Freshpaint delivers lifetime value that is future-proof because it not only helps you get data faster by automatically tracking actions across your product and site, but as your analytics stack matures you still have the option to precision track events. Freshpaint is a data infrastructure that frees up your engineers to focus on core product tasks, your product managers to focus on making informed decisions, and your marketing teams to focus on delivering timely touchpoints. Freshpaint is a solution that helps you move faster.
2. It’s HIPAA compliant: For health tech companies concerned with HIPAA compliance, Freshpaint can help. Signing a BAA (business associate agreement) with Freshpaint saves the time and money of signing a BAA with every vendor in your tech stack because Freshpaint has a complete toolset to help you manage PHI.

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