BrainTrust Query: Adding Psychographics to Your Demographics
Through a special arrangement, presented here for discussion is an excerpt from a current article from Insight-Driven Retailing Blog.
At Crosstalk, Oracle Retail’s user’s conference, renowned wine guru Gary Vaynerchuk told the story of researching a first-time wine customer and finding out he was an avid Chicago Bears fan. To thank him for his first purchase (which was fairly large), Gary’s team sent the man an autographed jersey they bought on eBay. So impressed, the customer said he’d only buy from Gary’s wine store.
Progressive auto insurance offers customers the option of installing a device in their cars called the Snapshot. It records driving habits such as hard braking, quick acceleration, and speed driven for a set period. Based on the data collected, Progressive can offer good drivers up to a 30 percent discount on their premiums.
What do these two seemingly unrelated stories have in common? In both cases we’ve moved beyond demographics and looked more closely at individual traits, like loving a sports team or a having a particular driving style.
Demographics — such as white, male, age 35-45, married, employed — can help with targeting at a gross level, but to continue moving the needle we must incorporate psychographics — such as college football fan, mountain biker, boy scout leader and fiscal conservative. Today’s population shares personal information via social networks, and tomorrow’s population will continue to be less concerned about privacy.
This presents an opportunity for marketers to collect activities, interests and opinions that help hone marketing, which benefits both retailers and consumers.
Today, technology can process so-called “big data” to create profiles that contain both demographic and psychographic data about consumers. In many cases, consumers will give up this data voluntarily in exchange for a better shopping experience.
Retailers need to start extending their CRM systems today to house such information so they are able to compete as shopping gets more personal.
Discussion Questions
Discussion Questions: What’s the likelihood that marketing will increasingly move beyond demographics to build campaigns driven by psychographic data? What are the challenges of making that transition?
Psychographics has been around for decades, and certainly used today. Maybe not as much by retailers as by consumer goods companies.
Psychographics are more telling than demographics in certain retail classes, channels, and product categories. I agree that retailers need to start extending their CRM systems today to house such information so they are able to compete as shopping gets more personal. Psychographics are a more accurate tool to drill down to the targeted consumer.
First of all, the Progressive Snapshot offer isn’t a psychographic tool–it records how you drive, not what or why you think.
Secondly, retailers currently do a poor job of demographics as it is. It isn’t enough to know the house at 1234 Main Street is owned by a J. Garcia and conclude it’s a “Hispanic” household. It’s critical to know other demographic data, i.e., is Garcia a married or birth name?; how many generations ago did the first Garcia immigrate?; is J. Garcia a man or a woman?; do they have a life partner?; etc., etc.
Before we run out and do a poor job with psychographics, let’s try to do a better job with basic demographics and then EXECUTE against what they tell us.
It’s probably inevitable and has already been happening for quite a while with internet cookies tracking users’ web browsing habits for targeted ads, etc. Retailers need to be sure to respect basic consumer privacy and also not creep out customers by getting to know them “too well” without advance permission.
The power of marketing is its ability to open the door to timely individual data. Demographics have served that purpose and demographics are prepared to share the quest for deeper individual consumer knowledge with psychographic data.
Challenges to any transition: There are over 300 million American consumers to be psychologically unveiled and accurately cataloged. That represents lots of work for retailers like Gary’s wine store or any local bike shop. Of course, there is help available for that work. So let’s march forward.
An aside: As for Progressive’s auto insurance and its Snapshot insights, as well as other insurers in the auto insurance fraternity, every insurer already promises each car owner big savings over every other advertising insurer. Makes me wonder who is that unknown high price insurer that every auto insurer is pricing against?
I think this has been the holy grail for a long time…but we never really had the customer data to build them granularly enough. The beauty of all-channel retailing is that in any direct selling channel, you get the customers’ info. That’s invaluable. Certainly better than a phone number or zip code.
It’s going to happen for sure.
Marketers should look online to see the benefits and risks of going down this path on a large scale. Cookie-based targeting already gets at a lot of behavioral characteristics and for online offerings (where clicks convert to sales–and thus one can measure true ROI) the benefit is easily measurable in a test. However, the recent press has also highlighted privacy concerns. I’d expect that the benefits, the risk, and also the cost of collected and maintaining data at scale in a chain retailer (rather than just at a single store level) are all far higher offline than online.
Just a quick note to keep this focused. Psychographics has a very specific definition, i.e., “The study and classification of people according to their attitudes, aspirations, and other psychological criteria, esp. in market research.”
This isn’t the same thing as using cookies to trace purchase patterns or trigger marketing campaigns. Just because you know what somebody did on my laptop (and that somebody doesn’t even necessarily have to be me) doesn’t mean you know anything about my psychographic makeup.
Ditto for social network research. In this case you don’t necessarily know who I am you just know the persona I let you see.
As Paula correctly notes, it takes a ton of GOOD data and some very sophisticated tools to even begin to think about doing psychographics correctly. And, it’s not a good area for amateurs or marketers chasing the latest tool du jour.
Some of the information captured is already available on a person’s Facebook page if they have one. It is impressive that this can be a futuristic happening. If the retail population is able to manage this in-house; it is a workable program. If they have to outsource it; it has to be quite affordable.
With life stage data and behavioral research readily available, it’s already easy to be much more targeted than simply 25-35 male, married, income $X. Folks like Acxiom routinely create segmentation and models for narrowing consumers down to some pretty small segments with higher propensities for certain behaviors. Add to that an understanding of more likely personal characteristics — e.g. active in charity work, avid outdoor sports enthusiast, etc. And with today’s household/individual addressability of digital media, you have everything you need to deliver much more relevant, “personalized” messaging to exactly the right audiences.
As a practical matter, not sure this will ever come down to 300 million segments of one consumer each, but clearly opportunities to get closer to that than traditional, broad demo’s. Consider, for example, 30 “profiles” to work from to develop messaging targeting 10 million consumers each who you know you can get to specifically–i.e. not wasting the message (marketing $) on the disinterested.
Don’t think it’s really new thinking but the current state of digital marketing, right down to my mobile phone and GPS-based location-specific marketing, offers the tools that make it possible.
The challenge will be to step back from traditional marketing strategies and tactics to re-think and plan accordingly to take advantage of this approach.
Most media outlets describe viewers/subscribers/clickers by demographics. Therefore, identifying demographics is important. The problem is that not everyone within a specific demographic characteristic responds the same way. Demographics alone are not a solution which is one reason demographic research is not always an accurate predictor of sales. There is no one size fits all solution and there is no easy solution.
Like many have said before me–this is “good stuff”–but the industry has to learn to crawl before it can walk, never mind run. Of course, after you know that I am middle-aged, listen to rock music, attend lectures on current events, rarely participate in religious services, subscribe to the paper-based Wall Street Journal and the online newszine retailwire.com–do you really know whether I am likely to buy Coke or Pepsi or Dr Pepper on THIS trip (or ANY trip for that matter)?
We are moving closer to the ability to predict or anticipate purchases (and persuade or influence) with greater certainty, but we are still playing with correlations and not causality. It is the best we can do, but it is not fully dialed to bright just yet.
I definitely think psychographics are important and useful. And, they are an improvement over demographics alone; but there is still the missing piece (or pieces) that remain to get at “what am I thinking, needing, wanting, pursuing RIGHT NOW as I enter the store?”
The (psychographic) horse left the barn a while ago, thus all of the talk about shopper “missions” and “occasions” and it will only accelerate as ethnic and age-based definitions continue to blur. What’s new on the scene, and getting retailers in a froth, is the previously-unplundered unstructured data that is a natural outcome of social media. Texting, comments, tweets, reviews, letters-to-the-company…these get to the heart of psychographics and, if retailers are the first to figure out how to unlock the potential, they will share…at a price.
There is absolutely no option for marketers except to move beyond demographics. Demographic profiling worked when the general population conformed to more rigid norms in terms of family composition, employment, marital status etc. Demographic clusters are increasingly difficult to identify and categorize and consequently can be misleading.
To be honest, I think we’re actually moving beyond psychographics as well.
Social networks and mobile applications are increasingly giving consumers the power to declare their own interests, tastes and preferences. The consumer is speaking…it’s up to marketers to listen!
There’s less need than ever for marketers to categorize and psychologize consumer needs–they’re increasingly right in front of us.
It already has. As I teach my advertising students, demographics are the least useful way to describe a target market when you are creating communication.
Perhaps your deeper question here is the likelihood that we will be able to get accurate and useful psychographics on a consumer by consumer basis. My guess is that research companies won’t hesitate to offer these. And a huge portion of the tech business is based on the idea that they’ll be able to track actions to learn huge amounts about consumers.
In reality, though, I think it’s a 50/50 proposition. We will be inundated with these. But will they be truly the useful information we need? Most of the time, probably not.
In a nutshell, the layer of psychographic data is what we are able to add through loyalty programs in a much more effective manner than through surveys, focus groups and other forms of primary research “in the wild.”
This layer of qualitative data, if used properly, can create a defensible competitive advantage that transcends the behavioral (transaction based) data that is the core of the direct marketing business.
The intent to collect this data exists by most brands. It has been the willpower and commitment to measure and act upon the data collected that has been at issue.
As a footnote, I view collecting and employing this type of customer data as anything but invasive. Well used, it should make the brand more relevant to the customer and deepen relationships through expression of transparency and building of trust.
How well that all turns out is based on execution.
Behavioral and attitudinal segmentation have been around for a while; life-stage/life-style groupings are routinely applied today at a geo-specific level; and experienced marketers comprehend why simple demographics are often inadequate for decision support due to a large number of confounds.
What seems to be new here is the promise that gigantic social media flows will somehow be mined and correlated with the rest of consumer data to the benefit of marketers. To the extent that its use can deliver enhancement to the shopping experience, it is likely to be embraced by some households.
This “big data” sounds like “big money” to those who hope to purvey it. My instincts tell me there are pitfalls ahead for the pioneers. Personalization has been a topic of conversation for 14 years in our industry. Experience so far indicates that delivering is much more challenging than theorizing.
The distinction that needs to be made in this discussion is the difference between using psychographics in marketing vs. the increased ability to gather psychographic data. Marketing psychographics were in common usage when I got my first ad agency gig in the early 80s, so it’s not a new idea. But today’s data mining in such rich new veins is an amazing way to implement it.
However, I balk at the idea of CRM, Customer Relationship Management. Customers don’t like to be “managed.” I don’t. Do you? Instead, I’ve been involved in the development of CMR, Customer-Managed Relationships (I’m told I coined the term – maybe so, I don’t remember). In this marketing approach, social media presents an extraordinary means for customers to define and control their retailer relationships. They’ll call the shots. The possibilities are endless.
Psychographics are nice but hard to get precise information. People do not have an incentive to provide accurate information. Behaviors offer more potential for segmentation and analysis. However, there must be incentives to provide this, too (like the “snapshot: discounts). Just consider how many loyalty club members are named Donald Duck or Mickey Mouse, what zip codes customers say when asked where they live, or how many social media accounts a consumer might have.
I’ve got to jump in here one more time to respond to emails from some of you. “Doc, how can customers manage their retail relationships” [paraphrasing]? Glad you axed. The key to CMR, Customer-Managed Relationships, is MYM, Minding Your Mirror. In this marketing initiative, proactive retailers would provide each customer with a very specific, perceived, mirrored reflection of their shopping needs and habits and then allow the customer to actively modify, correct, and fine-tune that reflection. “This is how you perceive me? Well, this is how I prefer to be perceived.” It’s as simple, and complex, as that, made easier with social media. “How should you love me? Let me count the ways.” (With apologies to William S.)
A number of people have questioned the terminology here, and while I normally am all for semantic purity, I think we can all agree the main issue is the (perceived) ability of technology to offer more tailored marketing, whether this is through data base mining, spycams or social networks.
Many people, particularly–though not exclusively–those who sell such services, see the likelihood with a big “yes.” My own view is you get out of it what you put into it: a carefully thought out approach will produce results, a simplistic one–if you listen to Chopin you must like pirogies will not…GIGO.
What we’re really talking about here is personalization, and customers have already indicated that they love the idea, within boundaries. Will retailers be able to execute?
I hate to make a blanket statement about the retail industry, however, the far majority of retailers barely optimize insights on demographics, let alone psychographics, even though both views have been around for a long time. The data has been out there. Analytics is the challenge. New technologies have come into play that help ease the pain of the analysis, however few retailers employ these technologies today.