How to use Psychographics to improve Demographic market segmentation

in General Business Marketing

Marketers use demographics to segment customer groups by various physical or tangible characteristics. In B2C companies marketers would typically use demographic characteristics such as age, gender, income, geography, home ownership, marital status, etc. to define market segments or demographic profiles of target buyers – e.g. single males, 18-35 years old who live in urban areas and don’t own a home.

B2B companies would typically use demographic characteristics of industry classification, revenue, employee count, etc. to similarly define market segments or demographic profiles of businesses who would be target buyers.

Marketers have depended on and used demographic market segmentation forever. There are demographic data available from many sources to slice markets into infinite possibilities of demographic segmentation relative to target markets for various products and services.

But, does demographic data really provide the most relevant analysis to find and target specific groups of buyers? Probably not as well as many businesses and marketers would like.

That’s where Psychographics comes into play to better analyze and classify target buyers by psychological attitudes such as aspirations, interests, attitudes, opinions, lifestyle, behavior, etc. Demographics provides information on who typically buys or will buy a particular product or service based on tangible characteristics.  Psychographics provides more insight into who is most likely motivated to buy. Using the previous demographic target example of single males, 18-35 years old who live in urban areas and don’t own a home, psychographics may indicate that people who read business books and attend skills development courses are more likely to buy that product or service. Combining the demographic and psychographic views can provide much improved targeting and effectiveness for marketing and sales.

From a marketing perspective, demographics define what buyers commonly need whereas psychographics define what buyers want. Psychographics identifies aspirational behaviors that are much more powerful drivers than physical demographics. Although someone is a store clerk earning $30,000 which classifies them in a particular demographic, their aspiration to be a store manager earning $100,000 will play a more significant role in their purchase decisions. Just marketing and selling to the clerk’s current situation would be a weak demographic. But marketing to their aspiration to be a store manager relative to their current situation would be much stronger.

Similarly a small company in the electronics industry may have aspirations to be a market leader for a particular type of high power capacitor. Again marketing and selling to the aspiration within their current context would be more effective than treating them like just another small electronics company.

You can’t readily buy psychographic data from public sources like you can for demographic data. You will need to do some research to obtain psychographics relevant to your business and market circumstances. This research doesn’t have to be a major undertaking or expense – a well constructed survey of your customers and recent buyers can provide good psychographic data. Social media participation with your customers is another excellent source for gathering psychographic insights about your customers and prospective buyers. Doing some research yourself provides valuable data and analysis to differentiate you from competitors and connect more specifically with customers and buyers in target markets, rather than just using the same demographic data everyone else does.

How to use this information to benefit your business

  • How does your business segment customers and buyers for marketing and sales? How do you use this data and how effective has it been?
  • Adding psychographics to typical demographic data will significantly improve the effectiveness of your marketing and sales efforts.
  • Doing your own research to gather psychographics relevant to your business/products/services can yield valuable insights to improve you marketing, sales and competitive effectiveness.
  • Whenever you meet with customers or buyers always think about their psychographics:
    • What are the psychographic influences that made them buy or will make them buy?
    • What psychographic data or insights can you take away to use for better marketing and sales targeting?
  • Whenever you’re reviewing demographic data about your customers or buyers, always consider the psychographics as a potentially more powerful driver of buyer motivation and behavior.

Copyright © 2009 Ingistics LLC and Marketance™ www.marketance.com

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{ 1 comment… read it below or add one }

Keith November 9, 2011 at 04:13

Great site. Smart!

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