Leveraging Transactional and Relational Response Differences with Demographic and Psychographic Segmentation

By: Manfred F. Maute  

General/observable approaches to market segmentation are commonplace when more is known about the age, income and social class of customers than the motivations and needs that reside behind their purchasing behavior. Although less accessible, product-specific/unobservable approaches to segmentation based on values, attitudes and life styles are useful or segmenting customers distinguished more so by how they feel about and respond to particular brands/vendors than their demographic characteristics. Using data from a nationally representative consumer panel, demographic and psychographic segmentations of credit card customers are developed with agglomerative and k-means clustering and the effects of segmentation on transactional and relational response differences are examined with multivariate analysis of covariance. Novice customers segmented on household size, age of household head, income and consumer debt differed systematically in terms of overall and co-branded credit card purchases. Segmenting long-tenured customers on product-specific risk, money savviness, debt and deal-proneness values had a significant, but somewhat less powerful effect on relationship satisfaction and cross-buying. However, when household size and income were accounted for in the psychographic segmentation, the effect on relational response differences was magnified threefold. Implications for segmentation theory and practice are considered.

Segmentation, Demographics, Psychographics
Knowledge Management
Paper Presentation in a Themed Session

Dr. Manfred F. Maute

Professor, School of Administrative Studies, York University, Canada
Ontario, Canada