Bellomy Research Blog Psychographic Segmentation: Understanding The 'Why' of Consumer Behavior

Psychographic Segmentation: Understanding The 'Why' of Consumer BehaviorPsychographic Segmentation: Understanding The 'Why' of Consumer BehaviorUnlocking Insights into Consumer Buying BehaviorIn today's hyper-competitive environment, understanding your customers requires going deeper than surface-level demographics. Enter psychographic segmentation, a powerful tool that explores the attitudes, interests, lifestyles, and values of consumers. For businesses aiming to create strategies to meet the nuanced needs of their target audience, psychographic segmentation is essential. Psychographic Segmentation and its Significance to Business Segmentation is a cornerstone of creating effective growth strategies and can serve as the north star in the development of innovative products, services, and marketing messages that meet current and anticipate future needs of your most valuable consumers. Psychographic segmentation involves categorizing consumers into groups based on characteristics such as personality, values, beliefs, lifestyle, attitudes, interests, activities, and class. Sometimes referred to as attitudinal segmentation or lifestyle segmentation, the psychographic segmentation method goes beyond traditional demographic factors, such as age or gender, and focuses on understanding the psychological aspects that influence consumer behavior and preferences- Why consumers purchase a product or service Why they are loyal to certain brands Why they enjoy specific activities Why they choose certain travel destinations Why they choose specific entertainment options (e.g., music over movies) This approach yields information that allows businesses to see consumer behavior in a new light, revealing why consumers make certain decisions. The Value of Psychographic Segmentation to Business Psychographic information helps businesses gain a deep understanding of consumer motivations, needs, and values, allowing for targeted marketing strategies that resonate with consumers on a personal level. Incorporating psychographic elements into segmentation research can help businesses create detailed buyer personas, personalized marketing campaigns, improve advertising effectiveness, increase brand loyalty, target innovations to specific segments, and enhance overall customer engagement and reach their target audience more effectively. The information on customer needs revealed through psychographic segmentation is so valuable that companies often incorporate it into overall strategic direction. The Customer Segmentation Research Method Gathering information about things like hobbies, interests, beliefs, activities, and professional affiliations directly from customers with quantitative research instruments like surveys and questionnaires is typically the most effective means of researching psychographic attributes. Cluster analysis is commonly used to separate customers into distinct groups when values-based data (including psychographic attributes) informs the model. In the simplest terms, this statistical method groups data points most like each other while highlighting differences between groups. It's a key data analysis technique when identifying consumer behavior patterns or relationships within data that can potentially reveal valuable insights. Real-world Psychographic Segmentation ExamplesBrands commonly use psychographic variables like personality, lifestyle, social status, and activities, interests, and opinions to influence their interactions with customers. A mobile phone brand might target a high-income, elite customer segment that values customization and exclusivity by segmenting based on social factors, attitudes, and personality. The organic food industry might target a segment that values healthy eating, environmental consciousness, and sustainability. Coca-Cola engages a broad, diverse customer base by appealing to their emotions, values, and lifestyle preferences. Nike, on the other hand, appeals to multiple segments - the Air Max for the fashion conscious and outerwear for outdoor enthusiasts. Companies choose to collect different psychographic information, with focus areas often based on industry, but like fingerprints, no two companies, even in the same industry, will have the same customer segmentation profiles. Limitations of the Psychographic Approach, Overcoming Challenges to Reach Your Target Audience Effectively While psychographic segmentation undoubtably yields valuable information, be aware of its challenges and drawbacks. Psychographic data is largely self-reported and subjective, which can tend toward bias and inaccuracies and the potential for misleading insights. It can be can be labor intensive and costly to collect psychographic segmentation data. Psychographic data can be limited or with a restricted range of variables, making it a challenge to define clear segments. Psychographic information can be difficult to analyze and interpret and compare across studies. For reliable results, aligned objectives and carefully designed research are key. Holistic Approach and Perfected Process in Psychographic Segmentation VariablesThrough extensive segmentation experience, Bellomy has created a thorough, holistic process that addresses the challenges inherent in segmentation efforts and ensures actionable results. Recognizing that purely psychographic and behavioral segmentation efforts can both result in limited actionability, our approach marries the two into a single solution that is both attitudinally differentiated and operationally typable. We have conducted related research for brands from a range of industries, profiling target market audiences and their needs, exploring nuances between groups, and identifying opportunities to act on insights. We don't just use best practices - we use better practices to deliver unparalleled results. Our solution includes three phases: discovery, segmentation, and activation. Discovery Phase During the discovery phase, the project team engages in a series of activities to gather essential information. They begin by conducting an information inventory, carefully reviewing relevant previous research and secondary sources to gain a comprehensive understanding of the market landscape. Following this, the team conducts stakeholder interviews with key players to explore desired outcomes and objectives, establishing strong relationships critical to project success. Additionally, focus groups are organized with customers to collect qualitative data and insights that inform the design of questionnaires. These activities lay a solid foundation for the project, guiding the team in identifying key priorities and aligning their approach with stakeholder needs. Segmentation Phase In the segmentation phase, the project team conducts various activities to categorize customers effectively. The process develops as follows: The team collects survey data and coordinates with the client's data team to access operational data. Next, they use convergent, clustering and ensemble analysis (CCEA) to generate several potential solutions based on actionable distinctions derived from operational metrics, attitudes, needs, values, and complex buying behavior.After a series of steps to reduce potential solutions to the best two or three options, they present the remaining solutions to the key stakeholders in a collaborative workshop before determining the winning solution. Typing tool(s) are then created to predict each customer's segment based on operational and/or attitudinal variables. Lastly, the team creates personas to bring the psychographic segments to life. Comprising photos, key facts and quotes, the personas help the client conceptualize the segments in a relatable way. Activation Phase Socialization and activation of research results marks the final phase. Essentially, this means ensuring that employees throughout the organization understand and accept the segmentation's results (socialization) and uncovering/ideating related strategies and initiatives to promote its widespread use (activation). Because research is valuable only when it's used, this phase is critical to project success and ensuring that our clients get maximum value from the segmentation solution. During this phase, the project team focuses on fostering cross-functional engagement and promoting a common understanding of the solution across the organization, and activities include workshops tailored to specific functional areas. Bellomy's Research Cloud: A Key Differentiator Post segmentation, Bellomy's industry-leading technology allows client-partners to deeply explore and engage with research results, discovering the insights waiting to be activated within their segmentation data. The tools in our ai-powered research cloud breathe life into segments, illuminating subtleties of consumer opinions and behaviors and connecting client-partners with segments on a personal level to unlock the full potential of their profiles. Going far beyond traditional data interpretation methods, these tools guide users in effectively addressing, informing, and responding to consumers fear, needs, and wishes and making informed decisions that will truly resonate with their market. Our AI Analytics for Text tool facilitates a deeper understanding of each customer by enabling clients to pose questions and receive in-depth answers, essentially putting a virtual focus group at their fingertips and adding a powerful layer of understanding to each customer profile. The ability to analyze qualitative and quantitative data simultaneously delivers a full understanding of the segmentation data's "what" and "why." Crosstabs examines quantitative findings like size, scope, and identify consumer behavior while users can work with the AI assistant to delve into unstructured data looking for qualitative nuggets, including querying specific segments on topics that reveal insights on value, the customer experience and product feed