What Is Lifestyle Segmentation?

Zero in on the Tastes and Needs of Your Clients and Customers

Older woman with children.
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Lifestyle segmentation is a business practice that divides and categorizes information about customers into subgroups. It is an ongoing process because demographics shift and change, and tastes can vary over time. New trends and social changes determine what the public will do or want next, so it's important to keep a keen eye on such changes and continuously make adjustments to your marketing approach.

Identifying Subgroups 

Subgroups are based on how customers live and what they like. They stem from the sum of all customers who are important to your brand or organization. They must be identified so that you can learn what they need, what they want, and what they hope to get from you or your company—all information that's integral to your success.

Using all sales information based on past campaigns, data can be analyzed to show the bestselling years, the highest selling units, and the most sought-after services.

Customer loyalty programs are a common example of a way to track demographic information. Customers will be motivated to join if they receive a benefit, such as a small discount, and you can collect basic information such as birthdate, gender, address, and more. This allows you to track who is making purchases and identify trends.

Using the Data

Products and services can be improved to better meet the needs of the subgroup that uses it, and marketing tactics can be directed at that audience. In turn, these subgroups will become more loyal to the brand as the brand continues to meet their needs. It's a symbiotic relationship that greatly benefits both partners.

Lifestyle segmentation pinpoints a need and you strive to meet it. 

Putting It into Practice 

As an example, imagine your retail establishment sells exercise gear and workout clothing for women. You have racks upon racks of revealing spandex products that cover all necessary body parts but not much more. They're of excellent quality, they're name brands, but they're just not selling. Why?

Because your customers live in the suburbs and they're more likely to get their exercise practicing with their kids for a competition than they are to drive to a gym. They have families to care for. They work. They're constantly on the go.

None of this means they don't want to look good, but they also just want to feel comfortable.

That's why they're not buying your tiny spandex leggings and sports bras. That's why they're going to your competitor to buy attractive, fleece-lined jogging pants instead. They might have to run straight from their child's practice to the grocery store, and who wants to be seen in the grocery store dressed in minimal workout gear, no matter how attractive it is?

When you know who your customers are, you know how to assess this kind of a problem.

The Customer Loyalty Factor 

The loyalty factor, also known as the "retention rate," is applied in nearly every field that's aimed at predicting how likely current customers are to remain true to a brand. This involves analyzing the consumption of goods and services that are offered.

Ask what segment of your consumers contribute the highest percentage of your sales. What particular demographic segment contributed to what specific revenues? According to data, which segments keep coming back? Which segments respond the most to new sales ads and campaigns?

People want to be heard, your customers included. When you listen to them and meet their needs, they'll come back. 

Different Types of Lifestyle Segmentation

Segmentation can be as varied as customer demographics, but four key groups are typically considered when analyzing lifestyle data. 

  • Geographic data: Where are the focal groups located? Where are they buying and using the products?
  • Behavioral: When are the groups more likely to buy and under what circumstances? How do they choose to consume or use the product?
  • Demographics: What are the races, genders, age groups, and marital statuses of your customers/consumers?
  • Psychographic: What makes them unique? What are their personal preferences and lifestyle choices?

Find out what these people do in their precious spare time. What products do they purchase to free up more spare time? How do they see themselves and their communities? Identify careers, opinions, what clubs they belong to, and their income parameters. Then put it all together.