Psychographic segmentation: Definition
Psychographic segmentation is defined as a market segmentation technique where groups are formed according to psychological traits that influence consumption habits drawn from people’s lifestyle and preferences. It is mainly conducted on the basis of “how” people think and “what” do they aspire their life to be. Any organization which intends to understand their consumers’ thought process can divide their target market according to this segmentation method. Psychographic market segmentation is one of the most effective segmentation methods other than demographic segmentation, geographic segmentation, and behavioral segmentation.
Examples of such traits are social status, daily activities, food habits, and opinions of certain subjects. For example, to monitor the sleep habits of people, a sleep survey is conducted. The sleep survey template consists of various questions about the sleeping habits of a respondent which help in drawing conclusions about what habits impact sleep and the factors that cause sleeplessness.
A product/service based organization has to keep its customers in mind as these products are created for the customers’ consumption. Customer demands and expectations play a pivotal role in designing and developing a product. These demands and expectations evolve with time and customer understanding also evolves with an increase in family income or age or any other demographic examples. An organization will be able to perform better if it understands its customers’ psychology and it will be able to provide market-driven products.
The power of big data influences most of the decisions made for psychographic segmentation.
- When a customer approves an application to access personal information or a cookie on a website, they start leaving their digital chain that is usually tracked to observe purchasing habits, and they are used to analyze attitudes, personalities, lifestyles, etc.
- Organizations can access psychographic information precisely by tracking a user’s activity on social media, online platforms, online product purchases or use of mobile applications.
- A significant amount of detailed information about a user is accessed by social media websites, search engines, and mobile applications.
- Big data not only allows the collection of details about the applications and devices used by a customer but also provides real-time access to personal information such as access control data or personal characteristics along with phone numbers, private messages, social media presence and other data saved on a user’s phone.
- User’s online behavioral pattern, time spent on each of the sites, reviews posted about restaurants or hotels, visited locations along with any payments done online are tracked using big data.
- Digital platforms access this information to create detailed plans for psychographic targeting and also influence online behavior. It is safe to say that with big data, they know who their visitor is, what does this visitor does online, and also why they do what they do.
- Organizations can implement big-data methods such as linear or logistic regression to understand and map psychographic traits to customize their website layout, color theme, and products according to the tracked psychographic qualities.
Psychographic segmentation variables
Conducting psychographic market segmentation is a critical task for business development and thus, needs special attention. Every individual has varied demands and opinions. Brands must focus not only on dividing the market based on psychographics but also to connect with their target market on the basis of psychographics.
There are five psychographic segmentation variables on the basis of which homogeneous segments can be prepared for proper research – Personality, Lifestyle, Social Status, AIO (Activities, Interests, Opinions), and Attitudes.
Personality: Market researchers can conduct a segmentation based on personality to form a group of people with similar personality traits. New products/services can be launched to cater to various personalities and new features also can be developed for the analyzed personalities. A few defined personalities are: creative, emotional, friendly, opinionated, introvert, extrovert, etc. help organizations to filter their customers in a systematic manner.
Customer personality and purchasing habits are strongly related. For businesses to develop products that add value to customers based on their habitual needs – is key towards creating a successful product/service
An organization can use this psychographic segmentation variable to develop products according to most of the customers’ personalities which can help in boosting sales. In the past, many liquor, laptop, car, perfume brands implemented their customers’ personalities for better marketing activities.
A market researcher should ask this question: “In general, what personality would your prospective consumers have?” to understand which product/services would work better with their target market and develop marketing strategies accordingly.
Lifestyle: Various resources have to be invested if multiple products are to be created for multiple markets. But, product resources can be saved if segmentation is done on the basis of lifestyle, product development can be made more credible.
For example, if a shoe manufacturer intends to design shoes for various sections of the market such as athletes, office-goers, students etc. Dividing groups according to customers whose lifestyle revolves around cycling or running, those individuals who prefer formal shoes and similar other segmentation. This way, the manufacturer can produce shoes the cater to every lifestyle, i.e. likes or dislikes, and which in turn will help in building a brand that develops shoes for every market segment on the basis of lifestyle.
Social status: In most cases, the social status of people primarily decides the products they use and their preferences (in general). Each social class has their choice of clothes, shoes, food, cars, electronics etc. For example, elitists would generally prefer solitaires, luxury cars, holiday homes etc. A luxury car brand would target only the elitists and not the middle-class of people. This segmentation type can be helpful for brands that have a niche product/service to offer which will not be helpful to all social classes.
Activities, interests, and opinions: This psychographic segmentation is based on what activities are the customers inclined towards, which topics are they enthusiastically interested in or what are their opinions about specific matters. These parameters are called AIO (Activities, Interests and Opinions). There are some viewers who love watching stand up comedies and there are some who prefer Narcos or Wild Wild Country – be it thriller or comedy, the common activity here is watching online shows. Depending on the preferred activity, a researcher can determine preferred products and services and build marketing strategies to cater to varied activities, interests, and opinions.
Attitudes: An individual’s attitude is molded by the way he/she was raised and their cultural background. Each prospective customer will have a different attitude which can be a variable for psychographic segmentation.
Groups are created by dividing customers on the basis of thoughts and attitudes. Attitude is an intangible parameter which provides insights into the basic nature of a customer. Each customer exhibits different attitudes – a person belonging to a high-income group will prefer dining at premium restaurants and drive a Mercedes Benz and a middle-class individual will be bothered more about saving a few extra bucks and not on luxury. A marketer has to keep these points in mind while deciding the target market for an upcoming product feature or a new product.
Psychographic segmentation examples
Here are a few examples of psychographic segmentation:
- A common example of psychographic segmentation is a luxury mobile-manufacturing brand that specializes in customization.
- These mobiles are not available for people from every class. A certain standard of living and family income is essential to be able to purchase an expensive mobile that is customized for each customer.
- By using psychographic market segmentation, the marketing team of this mobile-manufacturing brand can divide the target market according to their social status first and then on the basis of lifestyles, attitudes, or personality.
- They can also evaluate the same variables for their competitor’s target market as well for the better selection of a market for their branding activities.
This example can be extended to other markets as well. The organic food industry is one of the fastest-growing industries that focuses on a specific target audience. Here is again where psychographic segmentation can play a major role.
Psychographic segmentation advantages
Here are the advantages of psychographic segmentation:
- Understand customer concerns by analyzing their personalities, lifestyles, or social status.
- This segmentation type is important when customization of products and services is involved.
- As it provides details about factors such as lifestyles, interests, opinions, etc., it is much more effective than geographic or demographic segmentation.
- It is an extension of behavioral segmentation and offers options to divide the population-based into attitudes or opinions as well.