The basics of psychographic segmentation are pretty straightforward, and I particularly like how NetMBA defines the term:
Psychographic segmentation groups customers according to their lifestyle. Activities, interests, and opinions (AIO) surveys are one tool for measuring lifestyle. Some psychographic variables include:In the broader realm of marketing and advertising, psychographic segmentation focuses on identifying the likes, opinions and attitudes of a particular group of people and creating messages that cause people to identify with those ideas. This is distinct from demographic segmentation strategies like sociocultural and socioeconomic targeting, which look at customers based on age, gender, etc. (for example, Wal-Mart's recent announcement that they would design the store experience around certain key demographics). If we were in academia, I might mention how the concept of "archetypes," or prototypical ways of representing larger (and less homogeneous) groups, has a long and storied tradition in the field of human cognitive psychology, starting with the work of Carl Jung in the early 20th century, and leading up to many of the most prevalent models for learning and memory in use today. Unfortunately, one of the main academic arguments against archetypes, namely that you need large numbers of them and a deep level of detail for each one, can also limit their practicality in the advertising world.
Despite these challenges, properly applied psychographics can play a powerful part in developing effective digital signage content and other in-store advertising techniques. At-retail media is dynamic and visually-oriented, and digital signs in a high-traffic location may be viewed by hundreds or even thousands of individuals from any number of different demographics. Individual target specificity in this scenario is impossible, and demographic targeting could be very difficult as well. However, what if the content were able to address multiple demographic constituencies by addressing their psychographic commonalities? Sound like a bunch of psycho-babble? Here's an example of how it might work in the store:
Imagine that you want to advertise a packaged rice side dish on digital signs in a national supermarket chain, where the customers span multiple disparate demographic groups. Instead of creating separate versions of a commercial spot focusing on demographic differences (e.g. showing different races, different ethnic foods on the table, different social classes, etc.), you might instead create a single version of the ad using images catering to a particular psychographic profile. For example, across multiple demographic groups there is a feeling that homemade meals are more valuable or somehow better than a pre-packaged or takeout meal. Home-cooked meals require effort on the part of the cook, and therefore represent not only sustenance, but also the value of the cook's time and their care for the meal being delivered.
In this example, our target customer is someone trying to recreate these positive feelings in their home, regardless of that shopper's age, gender, family size, or how much time they have to prepare dinner. To reach them, we might utilize a group of images (featuring different demographic groups) showing the product being cooked, featured as part of a larger home-made meal, and bringing a family, a group of friends, or a couple on a dine-in date closer together. By associating the product with concepts, attitudes and opinions that are popular across many demographic groups, a single spot can do the work of many. This technique also reduces the amount of content that needs to be developed and managed, which in turn helps to rein in costs and reduce complexity (an important but often overlooked detail of large retail networks).
There are some who put psychographic segmentation in the same category as phrenology or psychoanalysis - popular theories that seemed to be confirmed at one time, but haven't held up over subsequent decades of more careful study. I think that most of the dissent comes up when trying to use psychographic segmentation to create artificial archetypes of the "average" consumer, family, etc. The thought here is that if you fill your product packages with images of totally unremarkable, average people engaged in the desired activities (and hence sharing the same interests, etc.), the product will be able to resonate with the widest possible buying audience. You won't necessarily be compelling the strongest identification with your product, but instead you'll cast a very wide, shallow net. That's the theory, anyway.
In practice, and as illustrated by this great entry at Design Observer, this method doesn't really work very well, especially not in such an ethnically and racially diverse country as the US. Instead of images of "average" people, we instead get creepy images of bland, blank-staring, and wholly unremarkable people that seem "permanently arrested in an incessant state of euphoria," as Design Observer so accurately notes. Some of these images are even computer-generated, using an algorithm designed to blend the traits of various ethnic groups into a single portrait. That creepy kid on the front of a box of Life cereal? Yeah, I'm willing to bet that's supposed to be a psychographic archetype.
Fortunately, the tendency to use psychographics as a generic, thoughtless substitute for demographic segmentation seems to be going away, and more savvy marketers are successfully employing psychographic techniques to communicate values, ideals and opinions to the right group of shoppers. And while demographic segmentation will likely continue to be the primary means for creating targeted messages on large digital signage networks, the proper use of psychographics offers the opportunity to do more with less. By building the imagery of different ideals and opinions into content that can appeal to multiple demographic groups, an in-store advertising campaign can be expected to deliver greater relevance to consumers, lower production cost, and higher incremental sales lift for marketers.