Nanalyze

Psychographics: What is It and How Does It Work?

Remember the days when marketing was simply getting a plastic Made-in-China toy in your Happy Meal or watching a busty supermodel and an unshaven dude with a six-pack sell soft drinks, beer or whatever? Sure, advertising has grown more sophisticated over the years, often involving the study of such things as demographics (like age or gender) to understand a certain segment of the population in order to sell them isht (or a message) that they probably don’t need or want. While the Fourth Industrial Revolution will bring many benefits – like instant weather forecasts, lab-grown meat and a trip to Mars – there are some downsides to our brave, new digital world. Chief among them is the wholesale peddling of our privacy and data. One cautionary tale that emerged earlier this year involved a concept called psychographics and the now-defunct British firm Cambridge Analytica.

What is Psychographics?

Most readers are probably aware of the thumbnail details from the Facebook-Cambridge Analytica story: Some shadowy company with Illuminati-esque layers of secrecy and subterfuge got a hold of a ton of Facebook user data, which it was able to turn into actionable fodder for the 2016 U.S. election. Whatever your political leanings – and we don’t care if you’re a Flat Earther or a fathead politician – it has to be a little unnerving to think that every time you “like” a cat video you’re ticking some box on Dr. Freud’s sliding scale of schizophrenia. More specifically, psychographics is the pseudoscience discipline of studying people based on their interests, behaviors, activities, etc., and then figuring out what appeals to them. Today, that’s largely accomplished through the use of what we at Nanalyze call data exhaust or the digital fingerprints that you leave all over the internet like a six-year-old let loose in Wonka’s chocolate factory.

History of Psychographics

While it might seem that the concept was just pumped out of a Silicon Valley think tank on future for-profit dystopian societies, the term psychographics has been around since at least World War I. That’s according to the self-proclaimed father of psychographics, Emanuel H. Demby, who The New York Times once described as a “consumer researcher who took the industry beyond demographics to psychographics and christened the ‘creative’ and ‘passive’ consumers.” In what could be described as a psychographics retrospective written in 1989, Demby described how an American writer around World War I used psychographics to describe a method of classifying people by their physical appearance. In the 1920s, the term more resembled its meaning today, as a “technique for classifying people by certain attitudes.” But then 10 years later, someone else used psychographics in a mystical context.

The term psychographics has been on the upswing in 2018.

The term psychographics has been on the upswing in 2018. Credit: CB Insights

Demby coined the current use of psychographics in 1965 (interestingly, a decade of both science and mysticism) when he used it to describe his research on how income status beyond the usual numbers might affect “an individual’s reaction to products, communications, and even choice of media.” He figured there would be enough variety within an income level that the data could be used to build special marketing segments. Apparently, the mashup of demographics and psychographics came to Demby on the spur of the moment during a 1965 meeting at a Detroit ad agency.

A Definition of Psychographics

It seems only right to use Demby’s definition of psychographics for our purposes here. Psychographics is …

“… The use of psychological, sociological, and anthropological factors, such as benefits desired (from the behavior being studied), self-concept, and lifestyle (or serving style) to determine how the market is segmented by the propensity of groups within the market – and their reasons – to make a particular decision about a product, person, ideology, or otherwise hold an attitude or use a medium. Demographics and socioeconomics also are used as a constant check to see if psychographic market segmentation improves on other forms of segmentation, including user/nonuser groupings.”

Or the shorter, somewhat paraphrased version: Psychographics is “a psychological profile of a population” in order to sell them more stuff.

Big Data and Psychographics

As we noted earlier, the big difference between those early days and now – aside from weed being a lot stronger than in the 1960s – is the breadth and accessibility of big data. Demby actually anticipated the role big data sets could have in advancing the field of psychographics, as the computer age was just kicking off. He wrote back in 1989, “The importance of being able to use large samples, which is a feature of psychographics, is that the study of a total population could finally be done with samples projectible to millions.” Thanks to voluntary and involuntary sharing of our data through social media and other online behaviors, psychographics now has millions of data points on which it can build psychological profiles of various population segments.

demographics vs psychographics

Credit: CB Insights

We’ve covered the many ways that companies are already using big data exhaust to make money. There are companies like Palantir that hoover up disparate data sources in order to do James Bond-like sleuthing against terrorists and other bad guys, connecting dots that no human could. In fact, plenty of startups out there are building platforms for what they call data analytics, often employing artificial intelligence or sophisticated software to provide unique insights from the piles of information just sitting around. Even Coca-Cola does it now. Social media is a particular gold mine for companies like Dataminr, which uses social media listening tools to identify important news events right before they happen, giving an edge to everyone from hedge fund investors to cops.

Does Psychographics Work?

Does it work? We have no idea. One could argue that Cambridge Analytica enjoyed some success before it was exposed over its ill-gotten data from Facebook. The company reportedly based its business model on the academic work of a psychiatrist named Michal Kosinski whose personal webpage makes it clear he had no connection to Cambridge Analytica other than the name – he attended the University of Cambridge Psychometrics Centre. Kosinski and his co-authors wrote a paper in 2013 that said, “We show that easily accessible digital records of behavior, Facebook Likes, can be used to automatically and accurately predict a range of highly sensitive personal attributes including: sexual orientation, ethnicity, religious and political views, personality traits, intelligence, happiness, use of addictive substances, parental separation, age, and gender.” Can you imagine the insights they could gain from your porn-surfing history?

Research from Michal Kosinski et al on psychographics and Facebook "likes."

Research from Michal Kosinski et al on psychographics and Facebook “likes.” Credit: Private traits and attributes are predictable from digital records of human behavior

Some people are skeptical, including the writer of a piece in Wired about psychographics and Cambridge Analytica who basically argues (rather weakly, we thought) that if psychographics is so great, why aren’t more people using it? It is a good question to ask, since it seems like there is some research behind it. The big brains at data research firm CB Insights, for example, did their own deep dive into psychographics recently and quoted a 2009 study that said, “psychographically informed behavioral targeting increases click rates by 670 percent.” Another study claimed psychographic marketing outperformed traditional advertising by a factor of two to one, as measured by clicks.

Psychographics Startups

It certainly does seem like a niche industry with a handful of companies offering services based on the psychographics model. Let’s briefly take a look at a few of the startups, gleaned from the CB Insights deep dive and Crunchbase, to understand about its real-world applications.

Click to go to company websiteFounded in 2013, Austin, Texas-based People Pattern raised $4.5 million the year it was started, so apparently, it hasn’t needed anymore cash in the last five years. The company uses machine learning and other technologies such as natural language processing (NLP) to turn social media chatter into psychological profile segments. Clients that use People Pattern can understand what motivates their customers, even who influences them, and then leverage that information for their customer relationship management programs. Even McDonald’s uses it apparently.

A sample of how PeoplePattern works

Psychographics helps companies to get to know their customers in intimate ways. Credit: People Pattern

Click to go to company websiteFounded in 2016, Boulder, Colorado-based CaliberMind has raised $4.4 million to build psychographic profiles, also using machine learning and NLP, for B2B software marketing purposes. As CB Insights explained, “psychographic insights – as well as behavioral and demographic data collected – allow CaliberMind to build out buyer personas that clients can then leverage in their marketing and advertising strategies.”

Click to go to company websiteFounded in 2013, New York-based StatSocial has raised $3.4 million. The company claims it has modeled the entire U.S. population into 200 unique clusters based on “billions of inputs” across demographic and household types, personality traits provided by IBM Watson, and people’s interests based on their social activities online. These clusters include titles like “Angsty Monsters & Super Freaks” (seems to be made up of teen personalities who are into young adult horror) and “Backwood Basketball” (mostly young dudes living in the country who like basketball and comedian Kevin Hart). You can see how this would be invaluable consumer insight for marketing purposes. If you do, please explain it to us.

Conclusions

While the concepts behind psychographics are nothing new, the era of big data has certainly given it greater power, like warmer ocean waters helping strengthen a hurricane. Whether that wave will wipe out (metaphorically speaking) civilization as we know it, seems unlikely. It is, however, yet another sign of how our data exhaust is helping fuel the field of data analytics. Perhaps one day Amazon will just ship us stuff before we even consciously know that we want or need.

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