Demographic Segmentation

Demographic Segmentation: Why is it important?

The customer might always be right, but meeting your customers’ needs requires knowledge of who that customer is. Demographic segmentation is one market research tool you should use to better understand your customers. Segmentation helps you create customer profiles that allow you to target your marketing strategies more effectively. Learn how businesses can use demographic segmentation to add value to their products, messaging, and bottom line.

What Is Demographic Segmentation 

Market segmentation divides your customers into groups that share similar characteristics. Demographic segmentation is the most common type of segmentation strategy, the most conventional, and the most basic. This type of customer segmentation bases the groupings according to certain statistical data about the characteristics of populations, including the variables discussed in detail below: age, gender, household size, marital status, income, education level, occupation, and ethnicity.

Other frequently used types of segmentation include:

  • Geographic: Customers are sorted according to their location, region of the world or country, population density, climate, and whether they live in an urban, suburban or rural area.
  • Psychographic: Psychographic segmentation is perhaps the most challenging form since the characteristics used to sort are not so readily available. Psychographics concerns the customers’ psychological and emotional qualities, including lifestyle, interests, values, opinions, and personality traits.
  • Behavioral: You can identify customers based on their online and purchasing behavior. Behavioral characteristics include their web page views, previous purchases, shipping and payment methods used, participation in your reward program, and number of product returns.

The number of characteristics you could use to divide your market is unlimited. The characteristics that you choose to segment your customers is limited by the availability of the data, of course, and you should limit the characteristics that you choose for your customer profile to those that make sense for your business.

Demographic Variables

Age

Age is one of the most important variables. Consumer preferences change with age, and nearly all marketing campaigns target age-specific audiences. Additionally, you might need to adhere to certain advertising restrictions based on age depending on your product. For example, electronic cigarette maker Juul is engaged in ongoing battles over its marketing practices as they relate to underage audiences.

Marketers typically group age into generations (Silent Generation, Baby Boomer, Generation X, Millennial, and Generation Z), since those born and raised in the same time period generally grew up with similar experiences. These experiences led to similar thought processes and characteristics. Marketers also classify ages into ranges such as these:

  • 12-17
  • 18-24
  • 25-34
  • 35-44
  • 45-54
  • 55-64
  • 65+

Depending on your product or service, age could be the key variable in who you market to and the message you use. For example, if your company provides elder care services, you probably would not market to people in their teens. Your marketing angle would shift along with the target age range of your audience, so for those in their 50s and older you would speak directly to their needs as they age. For your audience in their 30s and 40s, you might highlight the benefit of your services for their aging parents.

Knowing customers’ age helps you decide which social platform to use to engage your target audience. Younger demographics, those 24 and younger, are more likely to use Snapchat and Instagram. Twitter’s largest group of users are between the ages of 18 and 29. People ages 30 to 49 predominantly use Facebook and YouTube, along with LinkedIn. Seniors also use Facebook and YouTube, but they also use email or traditional mediums like print ads.

Age groups differ in their buying habits, as well as how they respond to advertising. For example, those in Generation X tend to respond better to informational advertising, versus younger generations who tend to value peers’ opinions and reviews as more useful.

Gender

Gender is another basic basis for segmentation. Conventional segmentation has just two categories: men and women. More nuanced segmentation includes other gender identities, such as transgender. Men and women overall tend to have different preferences, needs, decision-making processes, and buying habits. For example, women typically do most of the household shopping. Men tend not to buy makeup.

Be careful about gender stereotyping, though. You could alienate your target audience. In Britain, such advertising recently was banned. The new rule prohibits advertisements to include “gender stereotypes that are likely to cause harm, or serious or widespread offense.” For example, ads cannot show anyone failing to do a specific task specifically because of their gender (such as showing women unable to park cars) or show stereotypical personality traits for boys and girls. Note that ads can still be targeted according to gender.

Household Size and Composition

When a family’s dynamic changes, so do its needs and desires. Household size and its composition relate in part to life stages, which strongly affect buying habits and your sales process.

For example, a couple with several children tend to have different needs than a couple who just had their first child. So, too, households of family members usually shop differently than do households of roommates. Large families might be interested in low-cost household products or bulk purchases, whereas a couple without any children might have more interest in a luxury vacation or high-end furniture.

Marital Status

Marital status also speaks to a consumer’s life cycle stage, which influences their product preferences and their personal priorities. Single individuals tend to prioritize themselves and their own needs. Newly married couples prioritize each other and their homes. Knowing your consumers’ stage in their life cycle can guide not only the products and services you market to them, but the language and overall message of your campaigns.

Income

You can measure the buying power of your audience with income targeting. Income targeting can sort customers into broad ranges of low-, middle, and high-income, or you can use more specific dollar ranges.

You can usually find data about how people spend money at different points along the spectrum when you know your consumers’ income range. You can use this data to sell different tiers of the same product. For instance, airlines have three classes of tickets that generally align with different income levels: economy, business class, and first-class. If your service or product is expensive, then you probably do not want to waste your advertising dollars marketing to people with lower incomes who cannot afford the purchase.

Income levels also influence marketing language. Lower income ranges respond more to value, affordability, and practicality, for example.

Education Level

Education variables identify whether consumers completed high school, attended some college classes, completed an undergraduate degree, or attained further graduate degrees. Your market’s education level might be critical or unimportant, depending on your product. You would not market professional curriculum courses to an audience without a high school education, for example.

Education level also influences advertising channels. Only a small percentage of Americans without a high school degree use the social media platform LinkedIn, whereas half of those with college degrees report using the platform.

Occupation

Occupation targeting classifies people according to their job title, industry, or combination of both. This is useful for products or services aimed at different industries. For example, if you sell aftermarket car parts, then those in the automotive industry would be likely targets. Sometimes the industry does not matter as much as someone’s organizational level. Corporate travel services would find more responsive consumers among executives of a company than entry-level workers. A blog dedicated to the challenges faced by remote workers, for example, would appeal to freelance writers and software programmers, and it would unlikely interest receptionists or retail staff.

Ethnicity

Segmentation according to race, ethnicity, and religion can be useful in international business and global advertising, as well as locally. Ethnic groups share cultural experiences, interests, preferences, attitudes, and beliefs. Ethnicity can impact consumers’ response to marketing and their buying habits. Be cautious when targeting markets according to ethnic groups that you do not reinforce racial stereotypes.

Why Demographic Segmentation Is Important

Market segmentation, in general, is important for helping you reach the consumers most likely to buy or use your product or service. Segmenting your market allows you to target your campaigns and refine your messaging according to what will speak best to the audience you are trying to engage. Targeting the right customers for your business, with the right messages, at the right time, can reward your efforts in higher conversation rates, increased sales, and greater profits. Appropriate targeting can result in brand loyalty, word-of-mouth advertising, and greater overall customer satisfaction.

Everyone has an age, gender, marital status, etc. These are clearly identified and straightforward categories. For mass marketing, demographic segmentation is one of the best ways to stratify individuals.

Where to Find Demographic Data

One of the advantages of segmenting your market along demographic lines is the relative availability of such information. Possible resources include:

  • Your own market research: Gather information from current customers through surveys and questionnaires.
  • Aggregated datasets: Several companies sell bundles of market data that they have collected and aggregated from multiple resources.
  • U.S. Government data sources: You can find a range of useful demographic information based on Zip codes. Popular resources include the Bureau of Labor Statistics and the Census Bureau. For example, you can find age, sex, race, and ethnicity at the neighborhood level from the most recent census through the Census Interactive Population Map. Find more information through Population and Household Economic Topics.
  • Local governments: Most cities and counties track residents’ demographic data. Check local resources to see if their databases are publicly accessible.

Limitations of Demographic Segmentation

Because demographic segmentation focuses on characteristics that do not include actual behaviors, there are limitations. Demographic segmentation is best used in combination with multiple demographics or with other forms of segmentation. For example, if you segmented according to age alone, you might find the group too broad to be useful. Adding other variables, like income, could provide a more useful target market. Use various types of segmentation to create customer profiles. For example, if you sell mattresses, the needs of a young attorney living in a city on her own might be very different from an older construction worker living with his wife in the suburbs.

Segmenting your market according to basic characteristics can be useful since segments generally share similar interests and needs. However, be careful not to assume stereotypes.

If you’re looking for accurate customer data or want to get started on your own market segmentation, then turn to ironFocus.

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