What is Psychographic Segmentation

PESTLEanalysis Team
PESTLEanalysis Team
Table of Contents
Table of Contents

Psychographic segmentation is how marketers and companies understand the motivations behind consumer buying decisions.

Psychographic segmentation uses several variables to tailor product offerings. All customers have characteristics which define what, when, and how they buy products. By segmenting people based on lifestyle, social class, interest, and loyalty, selling products are much easier for companies.

The top reason why most companies should be using this segmentation is because understanding what individuals want (and when) will increase profits. It’s why psychographic segmentation in marketing is so popular – it’s a strategic move all companies can take advantage of.

Psychographic segmentation variables used in marketing

Many variations of psychographic segmentation exist, but the most commonly studied are lifestyle, social status, opinions and interests, and brand loyalty. Depending on where each individual fits on this list, a company may change how they market a product or service.

1. Lifestyle

Patterns originate from our lifestyle choices. It influences what we buy and why we buy products. For instance, your current stage of life determines your needs at the moment.

As a child, the only thing on your mind is when you’re going to get the next coolest toy. As a teen, you’re focused on your individuality and likely want clothes to demonstrate this. And as an adult, you’re trying to make a place in the workforce, find a comfy place to live and enjoy your freedom.

Your desires shift based on your lifecycle, and companies adjust promotions and offerings based on this information. For example, banks. When you’re heading off to college, banks offer a “college” or “young adult” checkings account with limited features. But when you’re forty, you need credit cards, bonds, and savings account too. The bank wouldn’t offer the forty-year-old the young adult offering, because it’s not adequate.

Lifestyle is one of the biggest psychographic segmentation variables. Out of all the ones on this list, this one should be high up on the list to study.

2. Social status

Naturally, your status impacts what you can afford. If you’re upper class, you’re likely tuning into luxurious advertisements. But the middle and lower class won’t be buying a BMW or yacht any time soon. Companies don’t waste resources promoting to the average consumer who can’t afford the luxury. However, some are offering inexpensive product options to reach different crowds.

For instance, Tesla now offers a cheaper vehicle (Model 3) which middle-class consumers can afford. These people desire the luxury afforded by the Tesla brand. But until recently, it wasn’t an option.

By understanding customer social status, they can tailor current or introduce new products to the appropriate audience.

3. Opinions and interests

Unlike the first two psychographic elements, opinions and interests are a wide range. Everything from religion to politics, to artistic issues, can be included. By recognizing these hobbies and interests, companies and marketers can tailor the product to fit the person.

For instance, someone who is devout will respond to an ad quoting the Bible, but less likely to answer to an ad with cursing or nudity. Or someone who regularly plays spots will be more interested in a flexible knee brace than someone who spends hours at home reading. This segment will require companies to learn all they can about a person’s habits and opinions before making an offer.

4. Brand loyalty

Brand loyalty is how loyal a customer is to a brand. These are consumers who’ve stuck by the company and strongly believe in the products. Which means, when releasing a new product, they’re more likely to buy or even pre-order it. No extra convincing needed.

It’s important to nurture this relationship because customer retention is cheaper than customer acquisition. By understanding why the customer is loyal, the company may retain the customer for years to come.

There are varying degrees of loyalty – there’s a difference between a customer who has stuck by a company for ten years versus someone who has stuck by for one. Too many companies don’t offer specific VIP-like options to maintain this loyalty, which will be more costly in the end.

Now that the common variables of psychographic segmentation have been addressed, let’s take a look at a couple of examples.

Examples of psychographic segmentation using real companies

Companies that use psychographic segmentation gain strategically sell products to the right people at the right time. When selling the same product to different types of people, it’s necessary to understand the psychological traits behind each person’s buying behavior.

Let’s take a look at a couple of psychographic segmentation examples to see how this is achieved.

First, there’s the iPad from Apple. There are several variations of this product, and it’s often marketed to graphic designers and students. The models with the Apple pencil allow for precise drawing, as well as note-taking. However, Apple also offers a cheap version of the iPad. It’s perfect for the average strapped-for-cash student.

The same cheaper version can also be sold to graphic designers. But instead of focusing on price, Apple will emphasize the smoothness and ease of drawing on the iPad screen. They’ll also mention other artists who use the iPad for illustrations. Thanks to psychographic segmentation (specifically, understanding the lifestyle and interests of consumers), Apple can sell the same product to many types of people. Simultaneously.

Another example is Samsung. This company offers several types of phones to the public. Often, when one phone is developed, an “upgraded” or “pro” version comes next. The average consumer, who only uses their phone for simple tasks, has no need for the pro version of the phone. However, those who use their phone as much as they do a computer, will be enticed by the extra and improved features of the upgraded model. Samsung understands the needs of both demographics and offers two variations for both.

In conclusion…

Psychographic segmentation is how marketers and companies understand the motivations behind consumer buying decisions. The point is to tailor marketing to individuals based on their greatest needs.

Although there are several variables of psychographic segmentation, the most common involves understanding interests, lifestyle, and social status. Consumers can fit into more than one section. If this is the case, the marketing must be tailored even further to address all needs. This type of marketing is specific and time-consuming, but worth it when done correctly.

Image by Gerd Altmann

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