What Is Lifestyle Segmentation?

Definition & Examples of Lifestyle Segmentation

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Lifestyle segmentation is the process of dividing a market of potential buyers into different groups of people with similar ways of living.

Understand how it works through an example and the types and benefits of lifestyle segmentation.

What Is Lifestyle Segmentation?

Lifestyle segmentation is the business practice of breaking down an overall market of potential or actual buyers into groups known as market segments based on lifestyle variables such as buying preferences. The goal is to use one or more lifestyle segments as the target market for your marketing mix.

A marketing mix is a combination of elements including the product, price, promotional campaign, and distribution network.

How Lifestyle Segmentation Works

When a business employs targeted marketing, their aim isn't to attract every buyer in the market as they would with mass marketing. Instead, they divide the overall market (be it the consumer, industrial, or reseller market) into different segments with shared needs and desires. As a follow-up to this market segmentation, they assess the profitability of pursuing each segment and choose one or more segments to target with a unique marketing mix. The market they ultimately choose to serve is known as the target market.

You can segment a market along four main dimensions: geographic, demographic, behavioral, and psychographic. Lifestyle segmentation is a type of psychographic segmentation that involves gathering insights about potential customers' habits and preferences (through surveys or past sales or loyalty program data) and then partitioning a market into segments based on how they spend their time, the items in their surroundings, and what's important to them.

As an example, imagine that you sell wine and want to start selling monthly wine subscriptions. Instead of targeting the entire consumer market in your marketing mix, you opt to target a smaller market.

First, you conduct a survey to gauge customer needs and desires. Based on those insights, you divide the market into segments of people with different buying preferences. One segment represents "survivors," cautious consumers who stick with familiar products. But the other, which represents the majority, comprises "innovators" who are active buyers who pride themselves on their cultivated tastes.

As the survivors are unlikely to be a profitable market for a dynamic product like a wine of the month, you target the "innovator" lifestyle segment and develop a unique marketing mix catering to those customers. As such, you choose prestige pricing and place ads in the upscale areas where your customers are most likely to frequent.

Customer loyalty programs are a great way to collect insights about your customers and define segments for your target market. Customers will be motivated to join if they receive a benefit, such as a small discount on products, and you can collect information such as their birth date, gender, address, and more. This allows you to track who is making purchases and identify trends.

Types of Lifestyle Segmentation

Major lifestyle profiles by which to segment your market include:

  • Innovators: These are take-charge consumers who lead lives of variety, seek upscale or niche products that satisfy their desire for the finer things in life, and have the financial resources to buy them.
  • Thinkers: Mature and reflective, these practical, responsible, well-informed, and well-educated consumers have the money to buy what they want but only make buying decisions after getting all the information and target durable products of value.
  • Achievers: These goal-oriented consumers lead busy lives that focus on their family, place of worship, and work. They favor established prestige products that save time.
  • Experiencers: These enthusiastic and even impulsive consumers are driven by self-expression and find an outlet for it in sports and social activities. As such, they're big spenders on outdoor recreation products, fashion, and entertainment.
  • Believers: These traditionalists have deeply held views on family, religion, and the country. They're predictable buyers who favor established (and preferably American) brands.
  • Strivers: These fun-loving consumers associate wealth with success but don't necessarily have the means to support the luxury lifestyle they desire. Still, they're active, impulsive shoppers.
  • Makers: These are do-it-yourself types who are happiest when they're working on a project of some kind, be it a construction project, a car repair, or cooking. They eschew luxury goods for basic products that serve a purpose.
  • Survivors: These consumers have minimal resources and resist change, preferably to focus on security and stability. As buyers, they're perhaps the most cautious and prefer to stick with tried-and-true products over trendy ones.

Benefits of Lifestyle Segmentation

The advantages of segmenting your market by lifestyle include:

  • Gaining a competitive advantage: If you understand the lifestyle habits and preferences of your main customers, you can deliver benefits and meet customer needs and desires that your competitors may not be serving or even aware of, thereby gaining a foothold in the market for your chosen lifestyle segments.
  • Identifying new market opportunities: If you know how your customers live and spend, you can develop new products or enter new verticals that attract them and increase your reach and profits in the process.
  • Retaining customers: It's as important to keep existing customers as it is to seek new ones. Yet changing lifestyles are often to blame for customers transitioning away from a product or service. (The transition from cable to streaming content services is but one of many examples). If you continually monitor the changing lifestyles of your customers, you're more likely to keep them as happy customers and less likely to lose them to the competition or the next fad.

Key Takeaways

  • Lifestyle segmentation involves dividing an overall market into groups of people with shared buying preferences and other lifestyle characteristics.
  • It's achieved by gathering insights about customers, dividing the market into different segments based on those insights, and then selecting one or more markets to target in your marketing mix.
  • Customers targeted this way can be categorized as innovators, thinkers, achievers, experiencers, believers, strivers, and makers.
  • The benefits of lifestyle segmentation include a competitive advantage, ideas for new products or services, and customer retention.