Psychographic Segmentation: Understanding the ‘Why’ of Consumer Behavior

published on April, 2024

Unlocking Insights into Consumer Buying Behavior

In 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 Information 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 Examples

Brands 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.  

Colorful threads being woven into a thicker strand to illustrate the concept of a holistic approach to psychographic segmentation.Holistic Approach and Perfected Process in Psychographic Segmentation Variables

Through 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. Another important part of the activation phase is typing the segmentation to the client’s database for more targeted messaging, a deliverable that's critical to most clients and one where Bellomy excels thanks to our customized typing algorithm.  

Bellomy’s Research Cloud: A Key Differentiator 

image of light refracting through a prism to illustrate how Bellomy's AI-powered research cloud illuminates the subtleties of psychographic dataPost 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 feedback.

  • Our topic-modeling feature puts AI at the beginning of the process, with our tool analyzing the data input and then generating the topic model in real time, revealing themes and topics within consumer conversations and breathing life into segments and personas. By recognizing recurring topics across different segments, this feature can serve as the foundation for a targeted and effective marketing efforts. 

  • The tools tap into segment personalities, with the impact scoring model illuminating what’s driving customer opinion, sentiment analysis helping to understand consumer attitudes, emotions, and text analytics picking up on consumer opinion trends with a multi-faceted view of their audience. 

Case Study 1: Building A Foundation for Better Patient Care 

Business Challenge 

A large regional hospital needed a foundational segmentation study among current and potential patients within their footprint. This would identify patient needs and spending by segment and inform how best to respond to those needs. They also needed to significantly increase patient understanding among all areas of internal staff.  

Bellomy Solution 

Using a large sample of current and potential patients within their footprint, we fielded an online survey to evaluate respondent attitudes, needs, and behaviors. We segmented respondents and profiled each segment in detail. Further consumer behavior analysis identified the unique drivers of choice for each segment and differentiators across attitudes and behaviors. Each segment was sized, and a spending analysis was completed. 

image of father and son playing under a modern windmill to illustrate the positive outcomes of SRP's psychographic segmentation projectBusiness Result 

This study ignited a strategic shift to becoming a more patient-centric organization. Segment usage behavior and spending capacity proved especially helpful to patient targeting and communication initiatives. The results were shared with the internal staff through a series of presentations designed to improve patient care and satisfaction. 

Case Study 2: Future-proofing And Improving CX 

Business Challenge 

A large utility wanted to future-proof against the changing market landscape and provide value to customers beyond simply being a utility provider. They needed a clear line of sight to create amazing customer experiences during every interaction, as well as strategic guidance around product and service innovations. 

Bellomy Solution 

Bellomy conducted a multiphase segmentation, beginning with stakeholder interviews and an online collaborative chat with customers. These insights were seeded into the survey that resulted in seven consumer segments that were mapped to the utility’s entire customer database. A multi-day activation workshop crafted unique experiences across divisions, helping each solve a real-world problem through adoption of the segmentation solution. 

Business Result 

This segmentation provides strategic guidance around new products and services and is integral to supporting corporate-wide initiatives. As the segmentation gained traction across the organization, the utility saw cultural change and new ways of thinking. Segment-specific needs and motivations are referenced when discussing new products and service development across divisions. 

Bellomy: Your Trusted Partner for Research Success 

Founded in 1976 in Winston-Salem, N.C., Bellomy is a privately owned, full-service market research firm recognized for engaged collaboration, expert guidance, and advanced technology that empowers client-partners to foster stronger key relationships and make strategic decisions with confidence. We are an AMA gold report top 50 firm, and our client-partners represent a broad range of industries, including utilities, healthcare, financial services, CPG, and retail.  

We distinguish ourselves as a high-touch, high-tech consultancy, and our record of success makes us the ideal partner for businesses seeking to leverage segmentation research to drive growth and customer engagement. We function as a trusted extension of the client-partner team, and our client-partners benefit from the industry-leading insights technology developed by our in-house engineering team. 

To discuss solutions for a business challenge, initiate a consultation at www.Bellomy.Com/consultation