We Think You Think You Will Buy That

What is psychographic segmentation? Is it: 

  • An evil plot to manipulate gullible people into voting for terrible candidates and causes, or 
  • A marketing technique to understand how people think before selling them something they may unknowingly want?

The real answer is the latter, of course. The reader can be forgiven for choosing the first option, as this was how the public got introduced to the topic, thanks to now defunct research firm Cambridge Analytica. 

“The Cambridge Analytica scandal caught the industry by surprise because the firm had used seemingly innocent quizzes as a means to gather data for its segmentation.” explained April Mullen, director of consumer-first market adoption at Selligent Marketing Cloud.  Cambridge Analytica had figured out how to reverse-engineer segments based on 100 or so likes on Facebook, rather than relying on questionnaires and focus groups.

What the consulting firm did is not new. Psychographic segmentation has been around for decades, and has been used gain insights into how people think. That knowledge can then be used to convert a prospect into a customer, with the right message at the right time — which is what marketing is all about.
Finding the “Why behind the buy”

To find a group to sell to, you have to separate the cynics from the optimists, the liberals from the conservatives, the cognitives from the rigid thinkers, seek out the sophisticates and the self-confident. “Administer a series of questions designed to polarize the responses,” said Jeffrey Anderson, president of Jeff Anderson Consulting. “You bring the most-alike together, but significantly different from other groups.” Asking divisive questions should produce distinct groups. Cross-check respondents with their purchasing histories, then develop marketing campaigns that respondents can relate to, Anderson explained. 

From a marketing perspective, “the flexible are early adopters,” Anderson said, more likely to buy a new product. But for rigid thinkers, “you have to prove it works for them. They do not take risks.” Sophisticates enjoy complexity; you can pitch them a fine dining experience. Their purchasing decisions “make clear statements about themselves”, Anderson said. 

“Psychographics provides a much needed behavioral dimension which includes personality traits, activities, interests, and opinions.” added Art Weinstein, Professor of Marketing at Nova Southeastern University. “While two individuals may appear to be similar demographically, they may be think very differently which will impact their personal decisions and purchase behavior. Good personas now go beyond demographics and incorporate lifestyle factors and behavioral preferences.”

“For example, a luxury subscription clothing service might want to target women with household incomes of $100,000 or more in the NYC area.” Mullen said. “The brand might then want to look for women that are career-driven, therefore, short on time. The overlap of those two segmentation types gives us a lot more depth into what the target customer should look like.”

The use of psychographics is not limited to the business side. PatientBond is a cloud-based platform that crafts messages and approaches to patients undergoing treatment. The firm recently ran a program for the American Heart Association, identifying five different groups of patients with different health needs, and crafting unique outreach and messaging to reach each group. 

Segmentation was done through a simple 12-question test that takes about 60 to 90 seconds, explained Brent Walker, senior vice president of marketing and analysis. “You are framing a proposition to help them understand what you are asking them to do, on their own terms,” Walker said.  “Psychographics is not manipulation…You are not tricking someone into living better.”

A lot of work — for a lot of reward

Surveys  and focus groups are still useful tools for developing psychographic profiles. You can add AI, data mining, and social media analytics — but even here, limits exist and judgment must be exercised.

Big data alone “doesn’t really answer the ‘why’?” Anderson said. Sometimes the data clusters overlap, and you have to go back and talk to people to find out “why they fell that way,” he said. “I think it is a little complex for widespread use.”

Mullen disagreed. “Gathering data for psychographic segmentation is a laborious effort. It has traditionally been a luxury only to companies with heavy resources of both time and money. The use of AI and machine learning, though, will help lift some of the operational burden of analyzing responses and organizing segments.” she said.  “Because of that, we’ll see more applications of psychographic segmentation.”

Psychographics is still beyond the means of small- and medium-sized businesses, Weinstein noted. “I do think that it will be used more in the next few years as innovative syndicated providers (likely web-based information service firms) offer more affordable services that serve as proxies to large scale, custom studies.” he said.  “HubSpot, GoDaddy, and others, currently do a nice job serving the SME market and could offer psychographic products.”

Still, the gain is worth the pain. “These companies are richly rewarded, resulting in a 24% increase in business performance compared to firms not using psychographics as a segmentation dimension” Weinstein said. (See a paper by Weinstein in the Journal of Strategic Marketing).

In PatientBond’s case, ROI results from preventing costs from being incurred. By reaching cardiac  patients with useful information on diet and exercise, the firm hopes to cut re-admissions that occur inside a 30-day window, a hard hit for hospitals with diminished Medicare reimbursements, Walker explained. So far PatientBond has helped the American Heart Association cut 30-day re-admissions by about 80-90%, where each re-admission costs anywhere from $12,000 to $30,000. 

“Psychographics has captured the imagination of consumer marketers and most major research studies about customers now incorporate this approach into their analyses.” Weinstein said. To this end, psychographics can be a useful adjunct to the demographic approach marketers know so well. 
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