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What is demographic segmentation?

Marketing segmentation | 7 MIN READ
What is demographic segmentation?

If you think every person is a prospective customer, you will be so far off from your target audience. Given the resulting lack of effectiveness and waste of valuable resources, It would rather be best that you don’t indulge in marketing at all.

Having a segmented audience to target is not only ideal, but it is also a basic activity that a brand needs to undergo before embarking on any marketing activity. The failure to segment your customers will reflect in your marketing results, and it won’t be a positive one.

A 50-year old doctor might not be attracted by the same kind of products/services that piques the curiosity of a 22-year old economics graduate. This is the simplest explanation possible to make you understand the significance of demographic segmentation.

In creating customer profiles, demographic segmentation is one of the most basic steps that is followed. While there are many other types of segmentation - psychographic, behavioral, transactional and geographic, to name a few, they have different types of utilities and should be used based, often in combination with one another, on your business needs.

In this article, we will look at demographic segmentation, why it is important, its variables, how to collect demographic data and a few examples of how it is used by businesses.

What is demographic segmentation?

Dividing your target customers based on characteristics like gender, age, income, ethnicity, religion, education, etc. is called demographic segmentation. Instead of reaching out to the entire market, segmentation allows you to direct your marketing budget and efforts only to those who might be interested in your products.

Why is demographic segmentation important in marketing?

Demographic segmentation allows you to reach your potential customers with ease. Marketers will be able to fine-tune the messaging style and be in a position to target potential customers at the right time with the right offer. You will be able to increase your sales, achieve higher conversion rates, reap greater profits, and so on. By understanding what customers need post-purchasing, you will also be able to increase your retention rate and have more loyal customers. Here are a few more benefits of demographic segmentation.

#1 Offer more personalized products

With demographic segmentation, you will be able to offer different messages to different groups. In other words, you can send highly-targeted messages relevant to each of the customer groups. For avid gamers, you can position your phone as if it were the best mobile phone for them while value-seekers can be communicated that they are getting a phone that is the best in the price range for the features it provides.

#2 Effective advertisements

Demographic segmentation lets you target the most relevant customers. For gender specific products and services, for example, you don’t want to exhaust your marketing budget by targeting male executives when you should have been aiming to grab the attention of female managers. Wrong targeting of ads will never result in positive results.

#3 Product-market fit

When you ensure that you collect demographic information about your prospective customers, you will be in a position where you can create products/services that are relevant to the market. If not for segmentation, creating products for a market will involve a lot of guesswork that might not even fetch any results.

Demographic segmentation variables

#1 Based on age

Age is an important differentiator when considering demographic segmentation. People who are born during different generations will have a completely different outlook towards life, interests, hobbies, entertainment and whatnot. That’s also one reason why we have terms like Baby Boomers, Millennials, Generation Z, etc., to segment people based on when they were born.

#2 Based on income

Income is also an important variable because it determines your pricing ability. Most businesses ensure that their pricing is comfortable enough for their target market to purchase repeatedly. There are companies which only mass-produce products so that they could make bank by concentrating on volume while there are others who only target high-income individuals.

#3 Based on religion/race/ethnicity

You don’t want to sell ice to the Eskimos, do you?

Although globalisation has shrinked the size of the world, there are a lot of marked differences in the way people consume things. Religion plays a big role- kosher and halal foods will influence the buying decisions of people who care about it. Even some of the biggest companies change their offering and messaging when they set up shop in different countries based on the local culture.

#4 Based on gender

While men and women are the same in most matters, there are differences in terms of their likes, dislikes, preferences and line of thinking. Women may tend to use cosmetic products more while men might be your target market if you are selling power tools. It is your responsibility not to propagate gender stereotypes as you might end up earning the wrath of your target market.

#5 Based on family structure:

Marketers differentiate families in terms of where they are in the family life cycle. Newly married couples tend to prioritize the needs of each other. Just to give you a deeper understanding of how family structure changes shopping patterns- a family that recently welcomed a newborn will have completely different needs from that of a family which has several children.

Where to find demographic data?

Sources of demographic data

#1 Web analytics: Using the analytics dashboard on your website or app, you will be able to find demographic data that can be used in segmentation.

#2 Market research: You can send surveys to your target market, conduct interviews and discussions to collect demographic data.

#3 Government data sources: Based on the zip codes you want information from, you can find a range of demographic information from resources such as the Bureau of Labor Statistics, the Census Bureau and so on.

#4 3rd party providers: You will be able to gather information from 3rd party service providers.

#5 Observational data: Another widely accepted format is to use passive data collection methods where the researcher observes as a neutral third party or as a participant in the activities that happen.

#6 Focus groups: While focus group discussions are like interviews, they are done in groups which increases the chances of the data collection being reliable and insightful. A focus group has at least three to twelve people in the group along with a moderator or an observer. If you want to test different scenarios or re-create a scenario to see how people work, then it is one of the best methods that you can use.

How to conduct demographic segmentation?

The more you know about your target market, the better you will resonate with your audience when you send them an email or direct them to a landing page.

Can you imagine the kind of firepower you can add to your marketing strategy when you know that you need to target men between the ages of 35 and 55 earning above $150,000 and who own more than one car instead of using a strategy that says target anyone above the age of 35?

The kind of clarity it gives will allow you to push your boundaries in terms of marketing and you will be able to send the right offer that they were looking for.

Examples of businesses using demographic segmentation for marketing

Coca Cola (Food & Beverages)

The beverages company offers different beverages for different age groups. They introduced a juice called Oasis to target the age group of 20-30. For consumers who are health conscious, they introduced products such as Diet Coke and Coca Cola Zero, these are people who are usually in the age group of 30-50. For families of different sizes, they have various SKUs such as 1 ltr, 1.5 ltr, and 2.25 ltr packs.

Disney (Entertainment)

Disney mainly targets children and their families. They target average income families who live in urban areas. Most of the Disney stores are located in large super centers and malls.

For kids, Disney makes animation films and toys while older kids have Disney Channel, Radio Disney and live-action films. Disney’s live-action films like Pirates of the Carribean are slated to attract adults too.

Even Walt Disney is said to have famously said-”You're dead if you aim only for kids. Adults are only kids grown up, anyway.”

Walmart (Retail)

According to a research study, Walmart’s average shopper is a 46-year old white woman with an annual household income of $76,000. Business Research Methodology says that age and gender is immaterial for Walmart when it comes to demographics. They target people in all life-cycle stages and are looking at individuals and households of low-income and middle-class families. Their target market are students, manual workers, floor level employees and middle level managers in public and private sectors.

Apple (Consumer Electronics)

They are looking at students and business professionals between the ages of 14 and 55. Apple caters to high income segments, which is one more reason why you will find most of the Apple stores are located in relatively posh areas.

Nike (Apparel & Fashion)

The sportswear company targets consumers between the ages 18 and 40. Nike targets households and teens who want to look athletic and fashionable. They do not cater to a particular income segment.

Xiaomi (Consumer Electronics)

The technology company has earned the moniker “Apple of the East” thanks to aping Apple products and presentation style. They target customers in the age group 18 to 65 of both the genders. Xiaomi targets students, employees and professionals from different family life-cycle stages.

Fitbit (Health & Wellness)

The wearable fitness brand’s current consumers include men and women between the ages 18 and 34. The consumers of Fitbit are those who are either fit or are trying to become healthy. When it comes to fitness bands, studies suggest that there are more female consumers than men. The Fitbit customers range from single to married individuals who are educated. They have disposable income and are comfortable buying from well-known brands.

Conclusion

As we have listed here, there are a variety of demographic factors based on which your prospective customers can be segmented. If you sell luxury items, then you should segment your customers based on the income but if you were to sell men’s grooming products, then the segmentation should be based on the gender. Sometimes, it is as simple as that.

One should also note that you might have to use more than one demographic segments for a single product.

Your ideal customer would be men between the ages of 25 and 35 earning anywhere from $50,000 and above residing in California and are single. In this type of demographic segmentation, the variables used are gender, age, income, location and family factor.

In short, the demographic segmentation that you use should be done by keeping your customers in mind. Well, that’s the mantra for everything, not only for demographic segmentation.

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