What is Demographic Segmentation?
In business, demographic segmentation is when an organization uses data about the demographic characteristics of its customers to better target and enhance its marketing efforts.
By segmenting a market by demographic variables such as the age of the customer, gender, income, education, religion, and family life cycle, business professionals are able to create groups of customers that display similar wants and needs.
When businesses embed demographic segmentation into their overarching marketing strategies, it leads to better targeting, as they are able to identify the types of people who are most likely to buy their products.
These groups are then targeted with personalized messaging, which makes marketing strategies that leverage this practice more effective.
Demographic segmentation is one of the most cost-effective methods for breaking down a market. It helps organizations closely examine groups of customers without wasting resources like time and money.
When leveraged in conjunction with other methods of segmentation such as psychographic, behavioral, and geographic characteristics, demographic segmentation is often performed first, since it kickstarts the entire segmentation process by breaking the overall market into more manageable pieces.
5 Common Variables Used for Demographic Segmentation
One of the most impactful variables used in demographic segmentation is the age of the customer. This is because needs and wants naturally change as a person grows older.
Take wristwatches for example. A child would be more inclined to want a simplistic, easy-to-read digital watch than an adult, and an adult would be more likely to desire a fancy luxury timepiece.
Even though the foundational functions of both watch options are the same — they both tell time — the desires of the the two age groups are different.
Gender is another variable used in demographic segmentation, as men and women often have differing preferences when it comes to products.
While society is evolving to move away from generalizing the preferences and behaviors of specific genders, there are still some products that are designed specifically for one gender — think hygiene products, cosmetics, jewelry, etc.
Income is also a common variable used in demographic segmentation.
Depending on how much money a person earns, they will most likely have varying wants and needs in terms of the products they are considering purchasing.
Potential car buyers are a good representation of how income can affect purchasing decisions. Someone with a larger income will typically spend more on a vehicle, while people with smaller incomes will be more likely choose a budget-friendly option.
People with higher levels of education tend to be more informed in general. Thus, education is a widely used variable in demographic segmentation. Typically, education is broken down for demographic purposes based on the highest level of degree earned.
Think of the health foods market, for example. People with higher levels of education are more likely to understand the benefits of a healthy diet and consuming quality foods, while people with a lower level of education might need to be informed about how eating healthily can benefit them.
This is why organizations that sell health foods would want to address people with differing levels of education in different ways.
Although inquiring about a person’s religious affiliations must be treated delicately, religion is certainly a viable variable used in demographic segmentation.
Different religions hold different values, and people that align with these values often do so with conviction.
By learning about a potential customers’ religious affiliations, businesses can then take these values into consideration while targeting specific groups.
Family Life Cycle
Family life cycle is a concept of segmentation that can be extremely helpful in various industries for insights into shopping styles, what factors are involved in final purchasing decisions, and average spending potentials.
Family life cycle segments are often broken down into bachelors, newlyweds, empty nesters, couples wanting children, couples with children, and widows/widowers.
Depending on which stage a family is in, the members that comprise it will have significantly different wants and needs when it comes to products.
All you need to do is think of the products that a bachelor would buy, the products a father of three would buy, and the products a retired couple of empty nesters would buy to understand the value of this segmentation variable.
Advantages of Demographic Segmentation
The list of advantages that demographic segmentation provides is practically endless.
Below are just a few advantages of performing demographic segmentation:
- Oftentimes, the data required to perform demographic segmentation is available from census data maintained by the government. This data is publicly available and free.
- Demographic data such as age, income, and gender are easily and conveniently quantifiable. This means they can be adjusted depending on the requirements of the organization doing the research.
- For most products, the demographics of purchasing customers will remain reliably consistent over time. This allows the business to be consistent with its products, services, and marketing.
- By evaluating and defining customer groups based on income, businesses can remain confident that they are marketing to people that actually have the buying power to purchase their products.
Disadvantages of Demographic Segmentation
While disadvantages of demographic segmentation are less prominent than advantages, they still should be taken into consideration.
Below are just a few:
- By performing some fairly basic research, the competitors of a business are able to understand the parameters and the demographics that the business is targetting. These competitors can then run campaigns that directly interfere with the first business’ strategy.
- Demographic segmentation involves some assumptions about the wants and needs of the groups that it defines. While groups can be clearly and accurately described and marketed to, there isn’t a whole lot of certainty that these groups will actually purchase the product being offered.
- Simply put, targeting the wrong groups of customers can be a drain on resources and time for the company performing the segmentation. Demographic segmentation should not be used as an end-all-be-all way to gather consumer insights.
Using Surveys to Inform Demographic Segmentation
Surveys are the most accurate way to begin collecting demographic data. Lots of useful information about demographic groups can be derived from survey response data.
However, as mentioned above, asking demographic questions in surveys should be done so extremely delicately.
But don’t worry, Alchemer has put together this guide on How to Write Better Demographic Survey Questions. The guide even provides thorough examples!
You should now have all of the information you need to begin performing demographic segmentation that will benefit your organization’s marketing efforts and overall understanding of customer profiles.