Demographics describe "who" people are, Psychographics explain "why" they buy (and how to win their attention and motivate them to buy).  By creating Psychographic Profiles, marketers are able to understand the motivational and non-conscious drives of a target audience.  In market research and social science research,psychographic variables are sometimes referred to as interest, attitude and opinion variables.

When marketers use psychographic data to sort, group (or cluster) customers and prospects to target or define a market, and position their products and services, this is Psychographic Segmentation (or Psychographic Market Segmentation). 
 

Psychographics can easily be misunderstood or incorrectly applied. It's quite common to contrast them with demographic variables such as age and gender, or with behavioral variables such as usage rate. In fact psychographic variables and the other major analytic variables work in concert. Each is related to the other and affects the other. A marketing approach that is focused solely on one such area can miss critically important information.

For example, many a demographic study assumes that people who share a common zip code share common purchasing behaviors. That's true up to a point. A child, a teenager, a married couple, and an elderly parent may share even the same address, and yet may have wildly variant individual purchasing patters. One needs to understand such consumers as individuals, and that is the aim of psychographics: to uncover the inner psychological characteristics that such consumer groups, rather than merely the surface characteristics.

Methods used to conduct psychgraphic research include-

When a thorough assessment of a person or group's psychographic make-up is done, it is called a psychographic profile. Psychographic profiling in market segmentation includes areas such as lifestyle, culture, subculture, ethnicity, values, beliefs, hobbies, religious or political affiliation, and nearly every factor that involves subjective preferences as opposed to external classifications. Psychographics uses a host of analytic techniques derived from the psychological and sociological sciences. Good psychographics and psychological profiling can be difficult to do, since they require both empathy and a familiarity with psychology and psychological techniques, rather than with just a simple application of standard market research techniques to subjective consumer experience.

Psychographics remain a valuable tool in effective market segmentation, since lifestyle, attitude, emotions and preferences are crucial factors in analyzing how consumers and business people allocate their money. Demographic and behavioral analyses give detail and data, but psychographics is needed for understanding the consumer in depth.