Let's start by looking at the differences between demographics and psychographics. Wikipedia defines demographics as such:
Demographics are the quantifiable statistics of a given population. Demographics are also used to identify the study of quantifiable subsets within a given population which characterize that population at a specific point in time. Demography is used widely in public opinion polling and marketing.Typically this includes items such as: Age, Education level, Income, Geographic location and other types of concrete data similar to what one would find in census data.
Wikipedia also describes psychographics in the following way:
Psychographics as the study of personality, values, opinions, attitudes, interests, and lifestyles. Because this area of research focuses on interests, attitudes, and opinions, psychographic factors are also called IAO variables.These are the less tangible data points. They are the things that make up the personality of the person.
Demographics make generalizations. And in some cases they can be valuable.
1) Geo-targeted needs: If your brand is local or regional, you need to focus your spend and messaging at a target that will purchase at your locations.
2) High-end, luxury goods: Most likely if your product or service has a big price tag, only those who can afford it will actually buy it.
Psychographics lump folks together based on beliefs, interests and the like. In the digital age, there are many more ways for people to connect around similar interests and share opinions about the brands that they use in relation to them (such as runners and shoes). Online ordering has removed the need to be local--if you have an online store front based out of Wichita, Kansas you can still have customers in Paris, France buying your goods. Even some items like cars can a stronger psychographic pull because gear heads can see luxury items as aspirational and they might not make a lot of money but would save it up to get the latest Audi or BMW to be car rich and life poor.
Psychographics transcend age and focus on behaviors. Someone who is 40 might be just as much a hard core gamer as someone in their late teens. You then need to develop communications that speak to that aspect of their passion, not to the fact that they are 40 or late teens. It can be trickier in some aspects but also much richer and relevant in others.
Strategies that focus on the behaviors and values of their customers provide brands a chance to connect with their customers at a deeper level than just looking at demographic data. Success is found when you find the right balance that allows you to be relevant to their needs.