October 24, 2018 | Authored by: Vindicia Team Blogs
Using psychographic data to predict, prevent and combat customer churn
Businesses traditionally rely on demographic data to help them make decisions that affect customers. Using details such as age, generation, location, income, education level, and more, companies can design products and prices that generate sales. They can also create marketing strategies that best resonate with target audiences. Subscription businesses, in particular, may define and bundle their products in ways that appeal to their consumers.
Essentially, this demographic data is used to make inferences about consumers. While these judgments can help marketing efforts, psychographic data provides more powerful insights and can help businesses better meet customers' expectations.
What is psychographic data?
It's not a new term, but it's one that has recently become increasingly popular among business and marketing professionals, especially in a world where social media reveals so much about a consumer's viewpoints and values. In short: Psychographic data measures customer's interests and attitudes rather than objective details. Instead of classifying a target market of female users from the midwest, for example, a company using psychographic data may market to people of all sexes interested in evening dramas and light-hearted television.
Using psychographic rather than demographic data can improve a subscription business's targeting efforts in numerous ways:
- Targeting interests help businesses more accurately create and offer products that match their base's intentions. While a business could assume, for instance, a 25-year-old college-educated male would be interested in a bundled OTT, internet, and phone package, assumptions aren't always accurate. Marketing to a person who fits this demographic but isn't interested in bundled packages is wasted money. Using psychographic data can tell businesses who would like a bundled package (or whatever their product maybe) better than assumptions based on demographics.
- Using psychographic data helps businesses target everyone who would be interested in a specific product. Limiting customer outreach to a specific set of demographic parameters ignores potential consumers outside those categories who are interesting in a specific product or service.
Psychographic data can unlock customer value or new opportunities
Still, interest isn't the only aspect of a customer purchase that businesses need to consider. They should also try to decipher consumers' intent.
The Harvard Business Review gave a great explanation as to why understanding intention is more important than knowing demographic details. Parents are often interested in tech products for their children, but their reasoning can vary greatly. This reasoning then affects their purchase. Those who feel comfortable giving their children technological freedom look for entertaining devices. On the other hand, parents who want to limit screen time tend to choose products that support education.
Knowing these differences can guide, for example, a maker of internet-connected devices to create two children's products with different selling points. Alternatively, they can market the same product in different ways: one strategy emphasizing fun, the other showcasing academic value.
With that in mind, a summary of the different types of psychographic data businesses can collect includes:
- Activities: What a person does for work or leisure says a lot about the products he wants or needs.
- Interests: Similar to activities, people buy different things depending on what they're interested in.
- Opinions and values: These two elements have a lot of influence over purchasing decisions. For example, people who value environmental protection are more likely to switch to clean energy.
How businesses can collect psychographic data
Tracking the interests, values, and activities of a customer base sounds incredibly difficult, but the internet - particularly social media and online shopping - has made this task incredibly easy.
Look at social media. Businesses, especially those in the B2C space, can easily observe their target markets' psychographic details through Twitter, Instagram, community forums, social media listening, and customer surveys.
The latter two may be the most effective from a return on investment standpoint, as they're easy to automate or outsource. Social media listening is the process of using automated tools to monitor various networks for mentions of specific brands, phrases, industries, topics, or other detail. Analyzing the context of these conversations can show businesses more about their customer base than demographics alone.
"Businesses have long-term relationships with customers, which produces a stream of psychographic data."
Similarly, the responses to customer surveys provide insight into a business's most engaged consumers. Though the answers may not reflect the ideas and opinions of the entire subscriber base (as only those who are highly engaged will respond to such a survey), they give great insight into how businesses can attract other potential super users.
Businesses that use a subscription billing infrastructure also gather psychographic data through the many ongoing communications they have with their various user base. Analyzing interactions, usage, behaviors, and other details clue businesses into motivators and other psychological features. Although this data comes from existing customers, it can be used to upsell subscribers on additional features and market to prospects who display similar interests.
This is just one more reason why subscription billing models can be so much more successful than pure purchase. Subscription businesses have a long-term relationship with their customers, which produces a stream of psychographic information that can be used to identify, target, and acquire new customers, as well as preserve, nurture and upsell existing subscribers.
Subscription businesses can get help with their psychographic data collection efforts by partnering with an established subscription billing service like Vindicia. We can add on to your existing billing infrastructure or create a new one from the ground up. With our services, companies can easily analyze transactions and extract valuable insights.
Furthermore, our years of subscription experience and the millions of transactions we've worked with have taught us best practices that we use to help optimize our clients' operations. We call this the Network Effect - our network of clients allows us to help each one on an individual basis. In this way, Vindicia is another source of psychographic data.
Interested in learning more about your customers and increasing average subscriber lifetime value? Contact Vindicia, the Subscription People, today.
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