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This is like asking "How would knowing who are my ideal clients/customers help my business?" While psychographics is sort of a catch-all word that includes studying consumer interests, attitudes and opinions, you won't find a degree in psychographics.

But it sounds fancy doesn't it?

Marketing and advertising has taken to using this word to sound fancy (and possibly to inflate a bit of what we do). Psychographics includes sociology, economics, psychology, and marketing.

However, how is this now different than what marketers and advertisers have been trying to discover about their target audiences for decades?

It's the same as saying "with all natural sweetener" instead of just saying "with sugar".

I've seen "avatar" used a lot recently when talking about fleshing out the ideal customer. Why don't we just say, "Imagine who your ideal customer might be. Give them a name. How old are they etc.?" Does saying "create an avatar" mean something more than this or do we just use these words to add more jargon to our marketing lexicon?

Or is the purpose to subtract language; an explanation that might lead to a client figuring things out for themselves and thereby not needing the agency as much?

Whether B2B or B2C, you try to understand your customers' interests, attitudes and opinions to align your messages with them. No matter what it's called.

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Q: How will psychographic data help in better b2b marketing?
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