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A Guide to Demographics & Demographic Segmentation

  • Vrinda Mathur
  • May 18, 2022
A Guide to Demographics & Demographic Segmentation title banner

Demographics are the characteristics of a population that have been classified according to certain criteria, such as age, gender, and income, in order to research the features of a specific group. 


Demographic data analysis is critical for corporations, organizations, and governments to make choices. Businesses may use this data to develop marketing tactics, while governments can use it to enact public policy.


What are Demographics?


The study of a population based on criteria such as age, race, and gender is known as demographic analysis. Demographic data is a statistical representation of socioeconomic information such as employment, education, income, marriage rates, birth and death rates, and so on.


Demographics are used by governments, companies, and non-governmental organizations to learn more about the characteristics of a population for a variety of objectives, including policy formation and economic market research.


Demographic analysis is the study and collecting of data on the general characteristics of certain populations. It is commonly used in company marketing to discover the most effective strategy to reach customers and analyze their behavior. Companies can evaluate the size of a possible market by segmenting a group using demographics.


The usage of demographics assists in determining if a company's products and services are being targeted to its most influential consumers. Market segments, for example, may designate a certain age group, such as baby boomers (born 1946–1964) or millennials (born 1981–1996), with distinct purchasing patterns and attributes.


The internet, social media, prediction algorithms, and big data have had a major impact on the collection and use of demographic information. 


Modern customers unintentionally give out a deluge of data that is gathered and monitored via their online and offline lives by a plethora of applications, social media platforms, third-party data collectors, merchants, and financial transaction processors.


This mountain of acquired data, when combined with the expanding discipline of artificial intelligence, may be used to forecast and target customer choices and buying preferences with uncanny precision based on demographic features and historical behavior.


Demographic data is often gathered by census organizations, both government and private, which may use the data for research, marketing, and environmental and human development. 


The government can utilize statistics such as population and employment, as well as all relevant data fields such as density, ethnicity, and gender, to plan for infrastructure development such as roads, hospitals, and law enforcement.


Marketers and commercial organizations also utilize demographic data for customized advertising and product distribution. For example, in locations with a high concentration of Indians, fast food restaurants frequently serve Indian cuisine rather than Italian.


Also Read | Market Research Analysis



Demographic Variables


What are the characteristics that influence a company strategy? Here are some demographic factors that firms, regardless of industry, use:


  1. Purchasing Ability


In general, various products and services appeal to different income groups, and price is a significant deciding factor in selecting which things to buy or which services to use. Customers with greater incomes choose high-end dining venues, whilst those with lower salaries and hence less discretionary cash prefer inexpensive eateries.


If your company sells low-cost apparel, it is advisable to target customers with lesser incomes through discount stores and wholesalers. Selling to boutiques and  specialty retail establishments, which individuals with higher incomes frequent, will not be as profitable for your company.


  1. Geographic Area


Customers' purchasing tastes and actions are also influenced by their location. Companies that wish to increase their sales and profits must understand how geographic regions influence customer preferences.


To suit the demands of local customers, a downhill ski and snowboard business, for example, should locate store sites near mountains and slopes, as well as in colder regions. Putting a business or their items in hot places like Singapore or Dallas will result in lower sales.


  1. Age


Products and services are appealing to a variety of age groups. For example, millennials, or persons aged 35 and under, are early adopters of new technology such as the most recent versions of phones and computers.


The baby boomer generation, defined as those born between 1946 and 1964, is at a distinct stage of life and spends more money on holidays and health care. If your items are aimed towards millennials, make sure to place them in neighborhoods or places with a high concentration of young people.


  1. Family Situation


Is the neighborhood mostly made up of families with children or young professionals who haven't married yet? Family status is an important demographic element that has a substantial influence on company strategy. 


Companies must first comprehend the general state of the people in a certain region in order to evaluate whether their products or services would appeal to them.


Also Read | 3D Geolocation & Mapping


Uses of Demographic Information


As analysts in the private and public sectors have access to more data than ever before, the utilization of demographic data has become increasingly significant. Here are some of the most common applications for demographic data: 

Uses of Demographic Information :-1. Strategies for marketing 2. Customer demographics for sales team 3. Policies of the government 4. Strategic Planning 5. Economic evaluation

Uses of Demographic Information

  1. Strategies for Marketing


Because most businesses' business models rely on understanding their clients, obtaining demographic information helps them identify their target population. 


It is a strong marketing tool that allows businesses to estimate market size and segment it based on criteria such as age, gender, income, cultural customs, and purchasing behavior.


Market segmentation may give businesses critical information about their target population. Companies can determine the segmented groups most likely to purchase their products and services, as well as those who may be converted into consumers in the future. They may then use these data to offer new goods and services, increase revenue, and develop new marketing tactics.



  1. Customer demographics for Sales Teams


Once the marketing team has used these strategies to generate high-quality leads for the sales team, good demographics can assist in converting them into clients.


For starters, it allows salespeople to make the greatest use of their time by having data on both prospects and existing clients, which may be useful in prioritizing incoming leads. 


Second, the more you know about your prospect, the more you can personalize your presentation to their requirements - statistics like average income, age, or education may all advise what to expect from a sales call, as well as what topics to emphasize.



  1. Policies of the Government


Demographic data may be used by local, state, and federal governments to develop public policy and allocate funding for public services. Data from government and economic surveys, along with population and housing data from the United States Census Bureau, can give useful social statistics.


Population and health data may be utilized to estimate school and hospital needs. Property values, schools, and jobs are all important to community action organizations and regional planning bodies. 


When lawmakers have access to data and demography, they can better grasp the requirements of the nation and society as a whole. The way government organizations employ demography in the long run has the potential to transform society as a whole.



  1. Strategic Planning


The cost of obtaining a new client is five times that of retaining an existing one, but many businesses still prioritize acquisition over retention by a ratio of two. As a result, strategic planning based on existing consumer demographics becomes your hidden competitive weapon.


Making company decisions about expansion, location, and offers based on demographic data from existing consumers is both cost-effective and market-savvy. 


For example, apparel store Christopher and Banks has long centered its goods on a prototype client demographic known as "her," which consists of middle-aged women looking for reasonably priced items. 


These strategic orientations may then guide the marketing and sales operations, and knowing the life cycle of consumer demand can also aid in price and product modifications and new service offering. 



  1. Economic Evaluation


A solid grasp of economics is essential for making efficient use of demographic data in banking, health care, real estate, and even voting decisions. 


Analysts can mine consumer data using predictive algorithms and big data to understand how societies work and provide reliable reports about economic indicators and consumer trends based on retail sales and employment data.

Consumer trends shift in response to current social, economic, and political factors. However, knowing what to expect may help businesses prepare. They can alter their manufacturing and marketing to suit market demand and, as a result, stay in business for the long haul.


Also Read | Product Life Cycle


What is Demographic Segmentation?


Demographic segmentation separates the market into smaller segments based on demographic parameters including age, gender, and income. Instead of reaching out to the whole market, a company will utilize this strategy to target a certain segment inside that market.


Companies may use their time and resources more efficiently by segmenting the market into smaller parts, each having a common variable. They can have a deeper understanding of the future market and employ advertising personalisation to meet the demands of the targeted group 


Companies eliminate the risk of launching advertising to disinterested customers, resulting in an immediate improvement in ROI. In fact, email marketers who segmented their email marketing saw a 760 %  boost in income. In the United States, however, 85 percent  of new product launches fail to generate the targeted income owing to insufficient segmentation.


Aside from increased ROI, demographic segmentation enables you to :


  1. Create Long-Term Consumer Relationships


Reaching out to your consumers on a more personal level through demographic-based tailored marketing fosters greater client loyalty. It helps consumers to identify with your brand and feel as if you are an advocate for their needs, increasing the likelihood that they will do business with you for a longer length of time.


  1. Boost your Products and Services


Having satisfied customers motivates you to reconsider your products and services. When you have a better knowledge of your target audience, you can better serve them by putting yourself in their shoes. If you create fitness programs and know that the majority of your clients want the same sort of program, you're more likely to make it happen.


  1. Improve your Marketing Techniques


Demographic segmentation enables you to be more targeted in your marketing strategy. It clarifies your goal, gives you greater direction for future advertising efforts, and helps you maximize your resources, time, and money. 


If 85 percent of your clientele are between the ages of 20 and 35, this is the demographic you want to target. It would be a waste of your time and money to devote your time and resources to elders.


Also Read | Customer Relationship Management


Today's businesses rely heavily on demographics. They aid in the identification of specific members of an audience by picking important features, desires, and demands. This enables businesses to focus their efforts to certain groups of their client base. 


Over the last decade, online advertising and marketing have made significant strides in employing algorithms and big data analysis to micro-target ads on social media to highly particular demographics. 


Most major corporations perform demographic research to discover how to best sell their product or service to their target customer. It is beneficial to understand the existing consumer as well as where the potential customer may come from in the future. 


Demographic trends are particularly important since the size of different demographic groups fluctuates over time as a result of economic, cultural, and political factors.

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