Can Psychographic Segmentation Help Financial Services Companies?

Why Is Market Segmentation Effective?

By now you’ve most likely come across the idea that instead of using the “blanket” approach for marketing by using demographic or geographic data, you and your marketing goals can be better served by identifying your ideal customer and then focusing and tailoring your marketing campaign towards that consumer.  This is achieved through a high-quality segmentation study and persona development, as was the case with the “Strivers” and “Empath” personas in our Banner Bank and Capital One case studies, respectively.

To sum it up, when we developed a brand model identifying “Strivers” as the primary segment Banner Bank should focus on, they were able to not only meet but also exceed all key Striver product targets system-wide after two years of implementing the program.  Also, we recommended Capital One focus their brand campaign efforts for a personal investment mobile app on the pragmatic thinking type “Empath,” resulting in a highly successful new product introduction.  You can learn more about these two case studies and how great research can help financial services companies here.

By recognizing your profit-optimal customer through market segmentation, a financial services company can effectively focus its marketing efforts and resources, optimizing or helping drive down costs, while at the same time engaging more efficiently with the consumer, enhancing satisfaction and loyalty.

But what if we tell you that you can also segment your financial services market so you target not one but different groups of customers? 

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Single-segment Focus vs. Multi-segment Strategies

“Now hold on a minute,” you might say in your mind as you read that last line.  “Didn’t you just say at the beginning of this that identifying your best customer is better than the ‘blanket’ approach?” 

Yes, we did say that but no, this is no “blanket” approach.  The main reason a financial services company wants to complete market segmentation research is so they can gain actionable insights into how to sell more of their products or services.  With high-quality segmentation studies, breaking down your financial services market into different groups uncovers a variety of insights allowing you to craft and leverage different marketing strategies toward these segments.  With this data-driven approach, customer segmentation helps financial services companies decide how to offer a customized journey to different kinds of consumers.  It also provides the opportunity to tap into niche segments, which are usually smaller groups with considerable potential.

Think of it this way: instead of a blanket, what you have is a different set of marketing playbooks for your various customer segments.  The blanket covers primarily the “who” of your market; each of your playbooks identifies not only “who” they are for but also deep dive into answering questions like “what” type of buyer behavior they have, “why” they behave this way, and “how” best to approach and engage them.

Copyright Gerd Altmann

Why Use Psychographic Segmentation?

Generally, four types of market segmentations can provide a financial services company with actionable segments: Geographic Segmentation, Demographic Segmentation, Behavioral Segmentation, and Attitudinal or Psychographic Segmentation.  Out of these four, we’ll be focusing on Attitudinal or Psychographic Segmentation, as it is often considered the most useful way to segment an audience.

Attitudinal or Psychographic Segmentation separates customers by how they think and feel, their attitudes and values.  Essentially, it aims to become a window into a buyer’s thought process.  It is often considered the most useful segmentation approach because it provides the clearest actionable steps for a company to take as they try to target each segment.  

Not only do you gain a deeper understanding of who your customer is, but your financial institution can map out the customer journey more effectively and efficiently with Psychographic Segmentation.  It also allows the financial services company to recognize opportunities to offer different or new products/services in response to changes in consumer behavior.  In addition to improved customer satisfaction and retention resulting from a client feeling valued, a financial institution that effectively engages with its consumers can also enjoy increased brand perception, helping with word-of-mouth and referrals as well as stand out from the competition.

Segmentation study data can come from several sources including survey data, observational data, public panel data, customer relationship management (CRM) databases, and even large-scale public databases such as Data Axle (previously InfoUSA), Experian, LiveRamp (previously Acxiom), and the like.  It’s also possible to append demographic and behavioral data to your company’s house list.  A financial services company is already sitting on a large pool of customer data; while it’s easy to go down the route of Geographic or Demographic Segmentation when analyzing all that information, converting those data into actionable insights with Psychographic Segmentation would lead to more personalized and meaningful buyer experiences.

Whether it’s for single or multiple segments, Psychographic Segmentation studies can tell you why a particular marketing or messaging approach to a particular segment is likely to be profitable.  They can also tell you how to make adjustments toward more effective approaches when the standard approaches are not working.  There are many  financial services companies that tried demographic targeting and were disappointed with the results, then switched to psychographic targeting and found that their messaging strategies produced much higher rates of response and conversion.

Copyright Andrea Piacquadio

Cascade Strategies combines the most advanced AI and machine learning tools with market research expertise from over three decades of experience.  Let us help your financial services firm convert your customer data into valuable, real, and actionable business insights.  Don’t settle for a simple breakdown of your customer data; our experienced team strives for genuine breakthroughs by imaginatively interpreting all that complex quantitative segmentation data.  We can also develop creative briefs that can be used for your advertising and website strategy based on the segments we discover, as well as tackle practical tasks, such as predicting the likely revenue to flow from campaigns directed toward specific consumer segments and measuring the actual monetary effectiveness of such campaigns.  Contact Cascade Strategies today to see how our approach to segmentation studies can give you real business insights.