Demand-response programs can help utilities manage rapidly evolving electric grids, but these programs are subject to the complexities of human behavior. This paper explores a novel method for uncovering heterogeneity in households. We use a machine-learning method known as a Conditional Inference Tree (c-tree) algorithm to categorize households based on their energy behavior characteristics collected via smart meters, and explore how this translates through into heterogeneity in their real-world response to a DR program. Using data from randomized controlled trial, we generate estimates of the changes in energy use caused by the program within each household group. Our results show that the c-tree approach differentiates households by their energy-use characteristics in a way that increases the spread in enrollment rates and critical peak reduction among household groups, compared with the spreads achieved via several conventional segmentation methods. Thus, the c-tree analysis enables the most tailored targeting of major potential energy savers and could provide the greatest increase in cost-effectiveness of household recruitment into DR programs. Our results also offer fresh insights into the relationships between household energy behavior characteristics – such as peak energy use and “structural winningness” (the ability to save money under a DR program without changing energy-use behaviors) – and household decisions about enrolling in DR programs and reducing energy use. Our research also demonstrates the potential of smart meter data, combined with machine learning and econometric methods, to provide significant value to utilities, program implementers, researchers, and other stakeholders.