Why a Mindset Segmentation Outperforms a Demographic Segmentation

In the dynamic world of market research, it’s paramount to avoid being in the dark about the nature of your audience. Traditionally, market researchers have relied on the flashlight of demographics-based segmentation to illuminate the categories into which consumers fall. However, the insights gained from demographics are often dim compared to the broad daylight of mindset-based segmentation. 

In this blog post, we will explore both mindset-based and demographics-based segmentations, and why mindset-based segmentation emerges as the brighter choice. In a nutshell: 

• Demographics-based segmentation involves categorizing consumers based on their age, gender, income, location, and other surface-level characteristics. 
• Mindset-based segmentation delves deeper into consumer behavior, focusing on attitudes, values, and motivations. 
• There are almost always real differences in mindset hiding in the shadows cast by demographics.
• While mindset-based segmentation can incorporate demographic elements, demographics-based segmentation cannot incorporate mindset elements.
  
  

Understanding demographics-based segmentation

Demographics-based segmentation has long been a popular way to divide customers into groups for targeted marketing. This approach segments audiences by surface-level attributes like age, gender, race, income level, and more. For example, a real estate company may target marketing toward women ages 25-35 with above average incomes, or a sports retailer may focus ads on men 18-30 based in urban areas. 

The general idea is to divide a target market (e.g., current customers) into homogeneous subgroups with similar demographic traits to better understand and target specific customer segments. As we’ll see, this flashlight approach does shed some light on the challenge but fails to illuminate the full picture.

Advantages

Demographic segmentations are a ubiquitous method in market research for a reason. Some advantages include:

• Targeting: Because demographic information is widely available through market research and customer profiles, establishing consumer segments clustered by those characteristics allows for companies and organizations to target their outreach with a high degree of confidence in which segment each consumer belongs.
• Simplicity: Depending on the measurement strategy, demographics-based segmentation can be simple to implement, provides a quick snapshot of your target audience, and does not necessarily require a survey to complete.
• Intuitiveness: If you’re reading this, chances are you are a human who understands basic facts about what different life stages and contexts can entail. So if, for example, a segment comprises primarily college students with wealthy parents, a certain amount of requisite innate knowledge about the human experience can help form some valuable contextual information about that segment. 

Limitations and Challenges

While demographics-based segmentation remains a valuable tool in marketing, it's important to recognize its limitations, such as: 

• Narrow focus: Demographics fail to provide insights into psychographic factors like attitudes, values, personalities and lifestyles. Otherwise known as the things we like to think make us who we are.
• Assumption of homogeneity: Demographics-based segmentations assume that individuals within the same demographic group have similar preferences and behaviors, which is often not the case. Despite what some Baby Boomers may believe, not all Millennials share the same mindset even if they were born in the same 15-year time frame. 
• Missed nuances: Demographics alone do not capture the complex underlying factors that drive consumer choices. People within the same demographic group can and do have diverse interests and motivations.

Understanding mindset-based segmentation

Mindset-based segmentation, or attitudinal segmentation, looks beyond superficial demographics to focus on psychological traits like personality, values, attitudes, and lifestyles. For example, an outdoor retailer could target segments based on mindsets like "nature enthusiast" or "adventure seeker" rather than just targeting a broad demographic like 20-30 year old males. 

This sophisticated method recognizes that consumers with similar mindsets and psychological profiles are more likely to exhibit similar purchasing behaviors and respond to marketing efforts in similar ways.

Advantages

Advantages of mindset-based segmentation include: 

• Deeper insights: By using behavioral and opinion questions as the source of segment differentiation, mindset-based segmentation provides a richer understanding of consumer motivations, allowing businesses to tailor their products and marketing messages more effectively.
• Enhanced Personalization: It enables businesses to craft highly personalized marketing campaigns that resonate with the values and aspirations of specific consumer mindsets.
• Flexibility: Mindset-based segmentation can incorporate demographics when necessary, offering a more comprehensive approach that goes beyond surface-level traits. 
• Adaptability: Unlike demographics, psychological profiles tend to be more stable over time in the aggregate, making mindset-based segmentation less susceptible to rapid changes.

Limitations and Challenges

• Need for a survey: To get the most out of a mindset-based segmentation requires a careful process of building a segmentation question battery designed to surface discrete mindsets that differ across key dimensions. Most organizations will need to hire survey experts for this part. You can check out our (slightly biased) recommendation for those experts at the end of this post. 
• Targeting: A survey is needed to establish the mindsets in the first place, and additional surveys are needed to accurately place individual consumers into segments. In other words, while mindset segments are much richer and more actionable than demographic segments, it can be more difficult to accurately assign segments to individuals because psychographic information is not as readily available as demographics.

Why mindset-based segmentations are superior

Mindset-based segmentation offers several compelling advantages over demographic-based segmentation, making it a superior choice in today's dynamic market landscape. One of the key reasons why mindset-based segmentation stands out is its ability to uncover the deep-seated motivations, values, and attitudes that drive consumer behavior. While demographics provide a surface-level understanding of consumers, mindset-based segmentation delves into the psychological factors that truly influence purchase decisions.

Demographics-based segmentation often falls short because it can inadvertently mask crucial underlying differences among individuals within the same demographic group. For instance, assuming that all consumers within a particular age or income bracket share identical preferences can lead to missed opportunities and ineffective marketing strategies. These assumptions can have consequences in terms of wasted resources, misguided product development, and failure to tap into niche markets that don't conform to typical demographic stereotypes. 

There are real consequences to missing underlying mindset differences within demographic segments. Brands risk alienating potential customers with blanket messaging misaligned to their values. They also waste marketing dollars by failing to pivot strategies when demographic factors prove poor predictors of behavior. For example, if an athletic wear company ignores that the demographic segment “Millennial women” can have very divergent attitudes—perhaps some care mostly about style and trends while others are performance-focused athletes—failing to account for this mindset difference would lead to tone deaf, irrelevant messaging.

Mindset-based segmentation not only addresses this limitation but also offers the flexibility to incorporate demographic information when necessary. This means that marketers can create highly targeted campaigns by combining psychological profiles with demographic data. However, the reverse is not true; demographics alone cannot capture the intricate nuances and varied motivations that mindset-based segmentation reveals. This adaptability allows businesses to tailor their marketing efforts more precisely while still retaining a broad understanding of their target audience.

In a competitive business landscape where personalization and understanding consumer needs are paramount, mindset-based segmentation offers a more comprehensive and effective approach. It empowers businesses to connect with consumers on a deeper level, align their messaging with consumer values, and ultimately, drive better results and long-term customer loyalty. As consumer preferences continue to evolve, adopting mindset-based segmentation becomes essential for staying ahead in the market.

Could your business use a mindset segmentation to knock your competitors out of the park? Your friendly neighborhood segmentation experts have you covered.