It is common practice for organizations selling a product to divide potential consumers into segments to allow them to target those most likely to buy their products. Two broad approaches to market segmentation can be delineated. The most common approach relies on segmenting by demographic variables (e.g., age, gender). The second approach (known as “psychographics”) identifies market divisions in terms of psychological variables such as values, attitudes, and personality traits. There has been little research comparing the efficacy of the two approaches. Based on analyses of over 45,000 participants, the present research empirically compares the effectiveness of the two approaches among segmentation variables ranging from cell phones and lottery tickets to newspapers and television shows. Overall, both approaches explained surprisingly small amounts of variance in consumer behavior. Nonetheless, for the variance that was predictive, the relative contribution of demographics and psychographics varied dramatically across consumer behaviors; for some behaviors (e.g., electronic purchases), demographics had superior predictive potential but for others (e.g., television shows) psychographics were more useful. Therefore, an approach that integrates both methods is recommended.
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