Psychographic Segmentation: Advantages and Limitations


Posted on 24 April 2020 Catherine Chipeta


Unlike most other forms of segmentation, psychographic data explores the unique personal factors which drive consumers’ decisions. This article outlines how psychographic segmentation works, and its practical potential and limitations.

Psychographic segmentation

Psychographic segmentation is one of the four main market segmentation types, working alongside geographic, demographic, and behavioural segmentation to provide more robust consumer profiles which, in turn, allows businesses to better address the wants and needs of specific customers as opposed to a broader market.

Many marketers believe it provides a more holistic view of audiences when used in conjunction with other segmentation data. It is important to note that whilst psychographic segmentation is a powerful marketing tool that reveals greater insights into a wider range of customers, it still does not grasp the entirety of information required to fully understand buying decisions.

What is Psychographic Segmentation

Psychographic segmentation involves categorising people by activities, interests, and opinions (AIOs), personality, social class, and lifestyle. It serves a purposeful role to marketing efforts as it uncovers the traits of those most likely to buy products or services, meaning marketers can adjust their product features and messaging to better fit their target audiences.

Psychographics vs. Demographics

Unlike demographic segmentation, which groups people by factors such as age, gender, income, and marital status as a means of classification, psychographic data gives us a more insightful look at the reasoning behind buyers’ decisions because we find out why they make them. The below example shows how psychographic information complements demographic information to provide a more holistic consumer profile:

“The Eco Guru”

Demographic Profile

  • Gender: Female
  • Age: 25 – 30
  • Marital status: Single
  • Family: No children, lives alone
  • Income: 80k+

Psychographic Profile

  • Outgoing
  • Environmentally conscious
  • Animal lover
  • Plant-based diet
  • Enjoys live music
  • Communicates mostly through social media

Whilst the demographics provide a general categorisation for consumers, psychographics provide more insight into the characterising factors of each audience. From the above example, we now know who the Eco Guru is (demographics) but also how they interact and what influences their choices (psychographics).

Psychographics vs. demographics

Psychographic segmentation variables with examples

By understanding what drives consumers in broader aspects of their daily lives, businesses are better equipped with an understanding of how this affects consumers’ purchasing decisions.

There are several psychographic characteristics which can be used to group people for segmentation.

Personality

What behavioural traits define the consumer? Personality covers how the consumer naturally interacts with their environment and others. For example, introverts are more likely to keep to themselves and enjoy solo activities, whereas extroverts are the opposite.

Activities

What does the consumer like to spend time doing? Activities are what the consumer enjoys doing and as such, is willing to spend money on. For example, a film enthusiast is the most likely to pay for a yearly cinema pass.

Opinions

Opinions are the consumer’s beliefs and values which determine how the consumer perceives the messaging of products and services. For example, political and religious views will often play a major role in consumer choices

Interests

Interests are what the consumer derives satisfaction from and what motivates their buying decisions. For example, consumers who enjoy home cooking might be interested in fresh, quality ingredients versus cheaper options.

Social class

Social class often affects how and why consumers spend money in terms of their motivations to buy. For example, upper class are often driven by luxury, whereas the middle to lower classes are more motivated by value for money.

Lifestyle

Lifestyle is defined by the consumer’s occupation and daily routine, encompassed by their means to a living. For example, a full-time employee will have a more fast-paced lifestyle with less downtime than a retiree, who has more time for leisurely pursuits.

How to collect psychographic data

Psychographic data is initially collected through quantitative research and used to create segments. The most straightforward way to do this is through survey research. Online surveys are an increasingly relevant way to gain consumer insights, as the majority of the world now has access to the Internet , marked by a major shift towards mobile Internet usage. Using online panels helps deliver fast and accurate and ensuring question content clearly addresses the relevant information required for psychographic segmentation is crucial to the success of the data collection process. Likert scales are often prominent in psychographic surveys as they are a suitable way of determining consumer values and beliefs. The quantitative research is often followed up by qualitative research, such as one-on-one interviews or focus groups to eliminate bias and develop more accurate segments.

Psychographic data collection

Limitations of psychographic segmentation

Like other forms of segmentation, psychographic segmentation unlocks vital information for understanding target audiences but is not without its limitations.

1. Complex setup process

Psychographic segmentation is harder to perform than other types of market segmentation, such as behavioural and demographic because it requires participation in specific psychographic surveys.

2. Requires clearly defined standards

Clear interpretation standards must be in place for analysis as psychographic segmentation can be ambiguous and inconsistent.

3. Relies on assumptions

Developing questions for psychographic surveys can be difficult, as it is common to be assumptive about the target market.

4. Could be misleading

It is commonly believed that psychographics indicate why customers buy your products, which is not entirely true. It’s a good indicator but not necessarily a direct cause.

5. Costly to get insights

Meaningful psychographic segmentation usually requires both quantitative and qualitative market research methods, which can prove quite costly.

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Advantages of psychographic segmentation

1. Creates better understanding of the consumers

Psychographic segmentation helps to build a more holistic picture of consumers when used in conjunction with other forms of market segmentation.

2. Reveals hidden attitudes

It uncovers unseen motivations and attitudes behind buyer decisions.

3. Allows for more targeted messaging

Creating psychographic segments enables clearer, more targeted messaging as “fuller” insights into consumers’ lives are uncovered.

To test consumer attitudes towards claims based on different segments, Conjoint.ly’s Claims Test reporting can be displayed segment by segment.

4. Creates opportunity for product repositioning

Consumer profiles created through psychographic data can allow businesses to reposition the same product to various audiences.

Conclusion: Should you use psychographics for segmentation?

Identifying psychographic segments allows you to gain valuable insights about your target market that other forms of segmentation do not cover, unlocking personal contributing factors to purchasing decisions. However, you should consider its limitations such as high costs, and the potential inconsistencies with analysis which may arise if not proactively addressed before conducting psychographic research.

Use segmentation in your reports

Include segmentation in your reports to see how your established segments react to pricing or claims.

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