The 17-page CUNA Council study, “The Power of Psychographics,” argued that psychographics may be a better tool to find out why members buy.

“Psychographics classifies people based on psychological traits such as attitudes, habits, interests and opinions,” according to the white paper. “In other words, geographic data explains where your member is; demographics explain who your member is, and psychographics explains why they buy.”

A report from digital marketing consulting firm CU Grow of Pasadena, Texas, released earlier this year showed only 13% of community banks and credit unions are exploring psychographics. However, the data also found credit unions relied on demographics even though marketing based on this type of research has been found to be unreliable, according to a 2011 article in the Journal of Financial Services Marketing, said James Robert Lay, CEO of CU Grow.

Because the financial services industry has become so much more competitive, there is a need among financial institutions to know their members and what motivates them, said Lars Perner, a consumer behavior and marketing professor with the University of Southern California's Marshall School of Business in Los Angeles.

Psychographics has the potential, Perner explained, to help financial institutions understand what motivates consumers to accomplish their financial goals, which has strong emotional underpinnings that can help retain members and attract new ones.

The word psychographics surfaced during World War I to classify people by their physical appearance and it was later used during the 1920s as a method to also classify their attitudes, according to Emanuel H. Demby, a consumer behavior researcher who was one of the first to research psychographics during the 1960s.

“Psychographics allows us to view a population as individuals with feelings and tendencies, addressed in compatible groups (segments) to make more efficient use both of mass media and those that are targeted to particular portions of the populations,” Demby wrote in a 1989 article for Marketing News.

While psychographics can provide marketers with valuable data that can help differentiate credit union marketing from competitors, it can also, more importantly, build strong connections with target markets.

Read more: How can credit unions apply psychographics to member marketing?

To illustrate, from a demographic point of view, young, old, women, men, married and single members will need a car and a loan to buy it. By leveraging psychographic data, credit unions can segment members by what is important to them such as status, value, safety, environmentally friendly and other key characteristics.

Here's an example about how psychographics may be used, according to CUNA's white paper: “Meet Sam and Clint. Sam's geography is in an upscale suburb and his demographic is early professional, married, no kids, homeowner, and his psychographic indicates an interest in foreign travel, trendy restaurants, and foreign sports cars. Clint's geography is in the suburbs and his demographic is successful business owner, married with kids, homeowner, and his psychographic profile indicates (he uses) his truck for work and enjoys working with his hands and DIY projects.”

There is a big difference between knowing your members and really knowing your members, according to the white paper's example.

“These two people have clear differences in wants. If the credit union has plans to market to Sam and Clint and knows these psychographic differences, the marketing piece going to Sam might include a graphic of a foreign sports car and the piece going to Clint might have a pickup as a graphic.”

If these graphics were reversed, with the pickup going to Sam and the sports car to Clint, the piece would be irrelevant and adversely impact the likelihood of response, the white paper noted. Matching the voice, graphic, and offer to the right member tells the member this marketing is relevant to me, and is a win-win for everyone.

Some credit union marketing professionals fully endorsed the white paper's premise that psychographics is not only an effective tool but a necessary one f unions to stay competitive and grow.

“From my point of view, it's one of those investments that is critical,” said Matt Purvis, principal of Eugene, Ore.-based marketing firm Purvis Management.

Lay at CU Grow said psychographics can help credit unions personalize and humanize their digital marketing channels.

“I see psychographics being useful in helping to plan and develop digital consumer journeys including relevant content marketing assets,” he offered.

Purvis added that in every digital marketing channel including social media, email, online video, texting, mobile, Internet radio, podcasting, blogs, Web ads and others, consumers have specific behavioral aspects that the psychographics data can capture.

Knowing those behavioral aspects such as attitudes, values, interests, habits, opinions that draw consumers to specific digital channels can help credit unions tailor messages to members as well as reaching non-members who have similar behavioral aspects and may be more likely to join a credit union, Purvis explained.

The CUNA white paper noted that collecting psychographics information can come from a credit union's transaction data, surveys, marketing customer information file system data, customer relationship management system data, focus groups, Web data and other sources. However, Perner warned that organizations should avoid relying solely on one or two data points because they may be misleading and cause marketing campaigns to fail.

For instance, though member surveys can provide some good insights, research has shown some people are not always honest with their answers. While detailed transaction and Web data also can be useful, it takes sophisticated analysis tools to understand what all of the information means, Perner said.

“Organizations should be prepared to invest in more resources into data mining and to get outside help to assist in understanding all of the data and what it means,” he suggested.