Personalization is key to conversion optimization.

It is clinically proven that personal interactions matter. The question is, how accurate and relevant can we get our offers. Can we do more than gauge intent through age or location? Is it possible to tap into the true emotional drivers of purchase?

Investing in psychographic segmentation will uncover the true reasons customers buy from you. It will dramatically change how you communicate, educate, motivate, and ultimately compel your customers to action.

In this article, we will break down what psychographic segmentation is, possible options for your store to use.

• What is psychographic segmentation
• Psychographic variables, and how to implement in your store
• Case Study: How to lower CAC and increase profits with psychographic segmentation 

What is psychographic segmentation?

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In "Marketing Strategy", O.C. Ferrell and Michael Hartline explain that psychographic segmentation "deals with state-of-mind issues such as motives, attitudes, opinions, values, lifestyles, interests, and personality."

Other segmentation techniques, such as demographics, deal with outward physical traits. Example variables include location, gender, and age.

In short, demographics deal with the quantitative. Psychographics deal with the qualitative. In other words, demographics deal with who you are. Psychographics deal with what you want, and why you want it.

As marketers, we want to understand our customer’s psychographics. In the past, the only way to do this was through proxy.

In the past, we used demographics because is was the best indicator we had.

That’s changed.

Tracking technology and website behavior allow us to create metrics that are much more powerful than demographic data like age.

How to Use Psychographic Segmentation Variables in Your Store

Over the years, numerous methods have been developed to help companies understand psychographics.

Because of this, there is some overlap between the variables used. However, it is still helpful to look at all methods.

Each one asks you to view your customer in a slightly different way. Ultimately, one method may prove more insightful for others for your particular industry and product.

Let’s begin.

According to MBA Skool, there are six major sources of information to consider.

Activities

What actions do your customers make? Activities can range from what your customers do at work, to hobbies, club memberships or even social events. Less frequent activities can be equally strong signals -- such as vacations and entertainment decisions.

Interests

What things do your customers care about? Interests can include societal dimensions (such as family, home life, work life, and community) to product categories such as fashion, hardware, or food items.

Opinions

What positive or negative associations do your customers have regarding themselves, social issues, your business, industry, or even specific products?

Lifestyle

How does your customer act on a daily basis? As Louis E. Boone and David L. Kurtz explain, “Lifestyle segmentation typically encompasses other psychographic factors and compiles them under one name.” These factors income a customer's motives, perceptions, and attitudes along with a hard look at what influences a customer on a regular basis (such as family dynamics and cultural aspects).

Personality Traits

There are a variety of personality segments eCommerce stores use.

One of the most popular personality tests used is the Myers Briggs, which segments people across 16 specific personality types.

While diving into the fundamentals of Myers Briggs is outside the scope of this article, it is helpful to explore the test at a high level to illustrate how personality tests are done.

A Myers Briggs’ test looks at four major questions.

1. Where do you focus your attention? Do you focus more on the outer world, or do you prefer to focus on the inner world? (Extraversion or Introversion)
2. How do you take in information? Do you focus on external stimuli, or do you prefer to interpret outside information for meaning? (Sensing or Intuition)
3. How you make decisions? Do you rely on logic or do you look to individual people and circumstance? (Thinking or Feeling)
4. Finally, how you deal with the world? Do you tend to set things in stone, or do you want to keep things open to new options? (Judging or Perceiving)

Values and Attitudes

One popular method to identify the values and attitudes of your customers is called "Values and Lifestyles Research". Values and Lifestyles Research was developed by Arnold Mitchell. It is based on Maslow's hierarchy of needs. As this article explains, there are three primary motivations to explain a consumer's attitude.

• Ideals - your customers base their buying decisions on knowledge and principles.
• Achievement - your customers base their buying decision based on what their peers see as successful
• Self-expression - your customers base their buying decision based on their personal desires for activity and interaction

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Learn How to Lower CAC and Increase Profits with Psychographic Segmentation

Ok. We know psychographics are important. We also know a variety of dimensions we could use.

Now, how do we put it all together and benefit our stores?

To illustrate, we collected a case study in the financial industry currently using psychographic segmentation to improve marketing ROI.

Case Study: How Leaders Credit Union Uses Psychographics to Increase Conversions

Leaders Credit Union analyzes past purchases to understand spending habits of its members. Leaders Credit Union uses this information to chart each customer's buying stage.

As Josh McAfee, Vice President of Marketing, explains, "When prospecting for new accounts in our external markets, we use Fiserv Bank Intelligence to narrow our focus...uses P$YCLE segmentation presented by Nielsen, along with census data to paint as accurate a psychographic picture of the target customer as possible."

Leaders Credit Union creates highly relevant, powerful call to actions based on this psychographic segmentation. For example, one psychographic segmentation they have identified is what they call the "payoff stage". These customers are in the process of paying down debt.

So far, the most successful offer for this psychographic is related to low interest rates.

CUES, an education platform dedicated to developing credit union CEOs, shows how psychographics can multiply a Credit Union's conversions.

"Well-defined digital consumer personas and profiles help a credit union lower the total cost of acquisition for new members while increasing product adoption and overall profitability of current members.

Imagine how many loans and new accounts credit unions could close if they knew which members were shopping for cars this month, or if they knew the kinds of cars members prefer. Think about the increased number of products or services a credit union could effectively offer to a member as part of an on-boarding or cross-selling process if they knew more about each new member's life.”

Next Steps

Personal offers work.

Personal offers require accurate, data driven segmentation. Tools like Barilliance give you the power to segment customers on a much deeper level than demographic data.