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Psychographic Segmentation In Practice

Markets consist of buyers, and it is common sense that those buyers differ in one or more respects. They may differ in how they want a product delivered, where they want to buy it, their available resources, their buying needs, or their location. Any of these variables can be used to segment a market.

Psychographic variables have been a popular segmentation variable, particularly in consumer marketing of fast moving goods. In psychographic segmentation, buyers are grouped according to variables such as Social Class, Lifestyle, or Personality. Marketers infer or research differences in the approaches of buyers to their products based some elements of these factors.

Social Class

In the US, the broad social classes are described as Lower lowers, Upper lowers, Working class, Middle class, Upper middles, Lower uppers, and Upper class. In Western societies, class is determined mainly by personal income or wealth, occupation, education, and family background. At face value these would seem like factors that would have a strong influence on the amount and form of consumption of a particular product. The equivalent UK classification is:

            A        Upper Middle Class         Upper managerial, admin, or professional
            B        Middle Class                  Intermediate managerial, admin, or professional
            C1      Lower Middle Class         Supervisor, junior managerial, admin or professional
            C2      Skilled Working Class       Skilled manual workers
            D        Working Class                Semi- and unskilled manual workers
            E        Subsistence                  State pensioners, widows, casual workers

Certain product areas have been found that are strongly influenced by social class and background. These include cars, home furnishings, leisure activities, and reading/media habits. There is  convincing data to show that social class is a good predictor of market behaviour in these product categories.

There are several problems for the practical marketer attempting to using these class distinctions:

1 They are fluid over time.

Particularly in post-industrial societies, the increase in incomes in many of these categories has blurred the differences between the classes. In addition, people are defining themselves less in these terms than they did in the past.

2 They are less discriminating than they were.

In the US, the majority of the population describes themselves as middle-class, and while sociologists may find it useful to produce sub-segments of this large group of people, in practice this does not help marketing decision making. So, the car brands purchased by upper, middle and lower class people are certainly different. However, with so many people in the middle class, this is not a useful discriminating factor.

3 The world has moved on.

In post-industrial markets, everyone demands and can often afford most of the products that are available. There are still some exclusive brands around, but the trend this century has been towards mass prestige - stylish brands that are within the reach of most of the working population, even at a slight stretch. Also, as markets globalise, marketing directors need segments that will work globally. This Anglo-Saxon view of society has no relevance in China or India.

So Social factors may play some role in psychographic segmentation, they can be of limited practical use in consumer marketing.

See We're all middle class now - London Times

Lifestyle Factors

Peoples interest in various products can be determined by their lifestyles, and indeed people can often express their lifestyles through the goods that they consume. There are several companies who conduct large scale surveys of consumers and then predict the lifestyle classification of people by the postcode  in which they live. Here are some examples.

The Insight Value Group has produced a classification of people based on a survey of their outlook and their social values. The classification draws heavily on Maslow's hierarchy of needs. The groups are:

      Self actualisers             Focused on people and relationships, individualistic and creative,
                                       enthusiastically exploring change, 'in a framework of non-prescriptive   
                                       consideration for others'.

      Innovators                   Self-confident risk-takers, seeking new and different things, setting
                                       their own targets to achieve.

      Esteem seekers            Acquisitive and materialistic, aspiring to what they see are symbols of
                                       success, including things and experiences.

      Strivers                       Attach importance to image and status, as a means of enabling
                                       acceptance by their peer group, at the same time holding onto
                                       traditional values.

      Contented conformers    Want to be 'normal', so follow the herd, accepting of their
                                       circumstances, they are contented and comfortable in the security of
                                       their own making.

      Traditionalists               Risk averse, guided by traditional behaviours and values, quiet and
                                       reserved, hanging back and blending in with the crowd.

      Disconnected                Detached and resentful, embittered and apathetic, tending to live in
                                        the 'ever-present now'.

The National Readership Survey (NRS) in the UK has had a similar classification of consumers in the past. I has now moved to a more granular system which provides data each of the following lifestyle attributes of readers.

       Marital status               Single, married, divorced, separated

       Children in household     0-23 months
                                        2-4 years
                                        5-10 years
                                        11-15 years
                                        16-20 years
                                        21+ years

       Education                    Terminal education age, Highest Qualifications achieved

       Tenure on home            Owned outright
                                        Mortgage/loan
                                        Rented from Council
                                        Rented from someone else
                                        Rent free/tied house

       Motoring                      Numbers of cars, owned, company, leased

       Travel                         Number of holidays, destinations, business travel

       Future Plans                 Getting married
                                         Having a baby
                                         Retiring
                                         Moving job
                                         Moving home
                                         Buying a new car
                                         Spending 500 or more on home improvements

For more details visit the NRS site

If you are lucky enough to be marketing to people getting married or retiring, then this data will help you to target your customer segment very effectively through media advertising. However for much of FMCG marketing, getting effective data is a much more complex task and it requires the collection and mining of masses of data to match heavy user segments to various combinations of lifestyle factors.

In the UK CACI classify all 1.9 million postcode using its ACORN tool. This tool looks at a combination of the demographic and lifestyle characteristics of the people living in a postcode and uses this data to classify them. In all, ACORN examines 125 demographic characteristics and 287 lifestyle variables to produce the classification.

There are three levels to the classification. At the highest level, the groups are:

                                         Wealthy Achievers
                                         Urban Prosperity
                                         Comfortably Off
                                         Moderate Means
                                         Hard Pressed

The second level contains 3-4 sub-divisions, and the third level can contain 6 further categories. To see the full map visit the CACI website.

This is a complex classification and is expensive to use, but it is very discriminating between customer targets and it allows you to target customers and prospects in a way which is unusually granular.

Personality

The concept of personality based segmentation is that marketers endow their brands with a personality that matches the personality of the consumer. There is some data from the advertising industry that suggests that this has worked successfully in categories such as cosmetics, cigarettes, insurance and alcoholic drinks. However there is also research form the car industry in the US to suggest efforts to use personality segmentation have been a failure.

Brands do have personalities and they do attract different types of people, but that is not segmentation, targeting and positioning in the way that it is generally understood and operated. There are several proprietary tools available on the market that will segment markets by personality type, but there is a general lack of practical case studies to support the approach.

Conclusion

Psychographic segmentation has demonstrated its use as a practical marketing tool in consumer markets. In general more than one type of variable is used to build the segments, and demographic data is usually needed, mixed by psychographics. Social class can be a strong discriminating characteristic when mixed with other factors. Large scale schemes, like the ACORN classifications are extremely useful, if expensive and complex. There is less convincing evidence about the use of personality as a practical segmentation variable. Psychographic segmentation suffers from the drawbacks of any a priori segmentation. The most serious problem is that consumers are constantly changing, so the segmentation framework needs to change to keep up. For example the ACORN classification above is different to the one that they used four years ago. CACI have to conduct a significant amount of research to update the model regularly. So what happens when there is a significant change like the economic downturn? Peoples attitudes and circumstances change quickly and it is difficult for fixed segmentation frameworks to accurately reflect this. On the other hand, behavioural based schemes can capture the results of these changes as they effect buying patterns, allowing the marketer to respond. Of course behavioural segmentation is not practical in every market and a priori methods such as psychographic segmentation become the only practical approach.




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