One of the key points of a successful marketing process is to understand the target audience or the consumers very well. Every organization is aware of the importance of consumer insights. Even then, most of the times, they fail to look beyond the common demographic profiling such as geography, age, household income, marital status, affluence level, etc. No wonder these are absolutely essential for customer segmentation and targeting. But with so much marketing stimulus hitting the consumers, there are deeper behavioral and psychological differences among consumers which demarcate a noticeable change in pattern in the way they choose the products or brands. That is why a psychographic customer analysis is becoming more and more important in order to map the behavioral segmentation of the target market.
Psychographic segmentation is a powerful tool which can be used to differentiate the consumers into behaviorally heterogeneous groups or segments which are homogenous within. The word “behaviorally” can refer to:
While the former requires a meticulous consumer research or so to say a survey approach, the latter can be derived from the Point-of-Sale or any other transactional data existing in the eco-system of the organization.
For example, when a global CPG giant wanted to explore a business opportunity in retailing car care services, as a first step it segmented the consumers based on attitudes and value system along with their claimed purchase history using the survey approach to gauge if the segments with a professional car care mindset are sizeable and sustainable. Similarly, when a leading payment processing company wanted to understand its huge base of customers for specific targeting based on internal transactional data, consumer market segmentation provided insightful results. Ideally you might want to use the dimensions for a holistic understanding, but you can still hope to get effective results with transactional data, loads of which lie unutilized in any organization and which may come very much handy in understanding customer insights. The figure below illustrates the key questions answered through behavioral segmentation.
This technique of psychographic segmentation provides organizations with the ability to get consumer insights through customer analysis. They are now able to view the consumers as real people or entities and it can be applied anywhere – customers, partners, stores or employees. Once the segmentation process is over, an organization gets to know its consumers better and thus acquire the power to make appropriate changes to the 4Ps of the marketing mix, so as to increase market depth or width. But the segmentation exercise needs to have a well-focused objective of what it is trying to find out, in order to achieve the most effective results. Is it the blue sky approach to explore business opportunities or is it very focused to identify specific opportunities for activities like cross-sell or up-sell.
Normally, the segmentation process is exercised once in 3 to 5 years depending on the pace at which a category or the consumers are evolving. Some industries like telecom or banking need to map their market dynamics at the right time as consumer migration might lead to immediate consequences.
In concluding, it is worth mentioning that there are no water tight compartments of right or wrong in segmentation. This is an ongoing process and as such organizations need to push the agencies to focus on the consumer market segmentation which is most relevant and actionable to their target market. After all it is not an academic pursuit, but a stepping stone to increase profitability. So as an organization, if you are looking for that breakthrough innovation it’s just a matter of tying up with an agency which can work magic with your data.