How Psychographic Market Segmentation Improves Targeting and Personalization

Psychographic market segmentation acknowledges, and leverages, the fact that consumers’ interests, values, opinions and other attitudinal traits are relevant to their purchasing decisions. Also known as attitudinal segmentation, psychographic segmentation categorizes audience members by why they opt for one brand, product or service over another, then tailors marketing to each cohort.

Let’s say demographic research shows that most of a salad dressing brand’s customers are suburban married mothers ages 35-44 with a household income of $75,000-$100,000. So, the company markets its dressing via channels most popular with those mothers that age, promoting the dressing’s flavor. What it doesn’t realize, however, is that many of those customers choose the dressing largely because of the brand’s charitable efforts. Another significant portion, concerned about the health impacts of plastics, buys the dressing because it comes in glass bottles. By failing to conduct psychographic market segmentation, the brand is missing the opportunity to personalize its messaging to strengthen the loyalty of these altruistic and the health-conscious cohorts – and to gain more altruistic and health-conscious customers outside of its core demographic.

Pros and Cons of Psychographic Market Segmentation

The above psychographic segmentation example makes clear one of the tactic’s benefits: It enables more relevant targeting and personalization. Yes, demographic segmentation does that to a degree. But having a deeper understanding of who their customers are helps brands narrow their messaging and marketing tactics.

For example, a company selling baby formula would not want to spend resources marketing to people who aren’t parents or parents-to-be. But to more effectively market to new and soon-to-be parents, the brand could use psychographic market segmentation to appeal to specific parent segments. They could emphasize the convenience of its products to consumers driven largely by ease of use or call out recommendations from pediatricians when marketing to safety- and health-motivated parents.

To effectively attract new customers and strengthen the loyalty of existing ones, brands need to understand their audience’s drivers and then appeal to them accordingly. The baby formula brand might think convenience is its prime differentiating quality, and perhaps it is. But messaging that aspect alone won’t convert parents whose prime motivator is ensuring their baby gets the healthiest possible start in life.

Psychographic market segmentation allows for more precise targeting and messaging that resonates both emotionally and objectively with each cohort’s purchase drivers. It also helps brands allocate resources more efficiently and optimize hyper-fragmented marketing channels such as CTV. Yet another benefit is that the research involved in psychographic segmentation often reveals new markets and products that brands can pursue to address unmet needs. It can also suggest product features and services that can be honed to better serve those cohorts.

So why don’t all organizations conduct psychographic market segmentation? For one thing, the data collection and analysis involved is more complex than that of other segmentation methodologies. Focus groups and one-on-one interviews, two frequently used qualitative research methods, can be time-consuming and expensive. They’re also open to bias, and the data gleaned from social listening and surveys can be interpreted in a subjective, rather than objective way. Also, improperly designed surveys, with vague or leading questions, can create faulty results. And self-reported surveys often reflect what consumers think they should say rather than what they really believe or feel; for instance, more people might say they prioritize net-zero travel when choosing an airline while ticket price is actually more of a driver. Skillfully conducted interviews and focus groups can reveal such differences.

Another potential drawback to psychographic segmentation is the potential to lean on stereotypes when trying to appeal to psychographic cohorts. And, as with certain other types of market segmentation, there’s the risk of oversegmentation. Creating too many segments or segments that are overly defined can result in a marketing plan too complex to implement or too inefficient to generate ROI.

None of these potential drawbacks should prevent an organization from implementing psychographic market segmentation, of course. They do, however, underscore the importance of doing so knowledgeably.

Components of Psychographic Market Segmentation

When creating psychographic segmentation cohorts, researchers, analysts and marketers need to consider the following five key variables. They should also determine which variables are most and least relevant to the brand and the use case.

• Activities, interests and opinions (AIO). Knowing the hobbies and interests of consumers can help brands calibrate their messaging and channel mix of to reach certain cohorts. It might seem counterintuitive for a cruise line to advertise on cooking websites, for instance – unless their research has revealed a cohort of potential cruisers are avid cooks.

• Attitudes. Some people consider their cats their children; others own cats primarily for their mousing skills. Psychographic market segmentation would take into account these different attitudes so that a pet food company could take a more sentimental approach when marketing to the former and a more pragmatic one when reaching out to the latter.

• Lifestyle. There might be some overlap here with activities and interests, as well as with certain demographic factors. But lifestyle also takes into consideration people’s habits and priorities. For instance, a brand might want to promote a new higher-price option to people who are more likely to dine monthly at an upscale restaurant rather than those who eat out weekly at a casual restaurant, even if both groups of people fall into the same demographic segment.

• Personality. When marketing to those with an adventurous personality type, a pain relief brand might feature rock climbers and sky divers; when marketing to more-cautious personalities it might show people gardening or playing with their kids. Introversion vs extroversion, passive vs assertive, routine-oriented vs free-spirited – these are among myriad other personality aspects that psychographic market segmentation can address.

• Social status. This goes beyond people’s actual income and wealth to how their attitudes and behaviors reflect their self-perceived status. Famed investor Warren Buffett is a case in point: He’s worth more than $150 billion, yet he typically buys used cars and eats breakfast at McDonald’s. Trying to sell him a Bugatti or a Lamborghini would likely be a lost cause.

How Material Can Help You Benefit from Psychographic Market Segmentation

It’s clear that when properly conducted and applied, psychographic market segmentation significantly improves a brand’s personalization and targeting efforts. This in turn boosts sales, brand loyalty and market share.

It’s also clear that psychographic segmentation can be complicated and, if implemented poorly, a waste of resources that might well damage a brand. At Material we have decades of experience designing and activating psychographic market segmentation – both on its own and in conjunction with other types of segmentation and marketing strategies. Our experts consider each client’s unique offering, audience and goals, from acquiring new customers to strengthening brand loyalty. Contact us today to learn how we can help you leverage market segmentation to help grow your business

FAQs

Can psychographic market segmentation be used in all industries?

Yes, brands in nearly every industry, including B2B sectors, can benefit from psychographic segmentation. This is because attitudes, lifestyles and other psychographic variables influence why individuals purchase everything from candy bars to computer systems. Even when there is a straightforward reason for a purchase – like a warehouse needing a new forklift to replace a broken one – psychographic aspects, such as the warehouse manager’s level of risk aversion could determine why they opt for one forklift over another.

How does psychographic market segmentation differ from demographic segmentation?

Demographic segmentation categorizes an audience by its characteristics, such as gender, age, race, education and household income. In other words, it tells a brand who makes up the market based on quantitative, objective criteria. Psychographic segmentation categorizes a market based on why members make (or don’t make) purchases. Are they motivated by a product’s convenience because they have an active, overscheduled lifestyle, for instance, or are they driven by the product’s perceived reliability because they are cautious by nature?

How does psychographic market segmentation differ from behavioral segmentation?

Behavioral segmentation creates audience cohorts based on their purchasing behavior. How frequently they buy certain products, how they use the products, whether they purchase at specific times of year, whether they’re increasing or decreasing the amount they spend. This information helps brands identify where consumers are in their customer journey so that they can communicate with them accordingly. With its focus on activities, lifestyle and similar subjective variables, psychographic segmentation can help better define the motivation of consumers within each behavioral segment for even more-effective targeting.