To effectively reach your audience, you need to learn about them. That’s why there is multiple segmentation type for customers. One of those segmentation types is demographic. It is an interesting way to learn about your audience by segregating them based on different factors. Other popular types of market segmentation include: geographic, psychographic, and behavioral.
Demographic segmentation is present within our lives as well. For example, you may have been segregated based on sex in your schools or on your educational qualification when you try to apply for a job. You are segmented on different criteria by the organizers to make it easy to understand for them to organize and understand behavior.
Table of Contents
- Defining Demographic Segmentation
- Benefits of Demographic Segmentation: Why use it?
- Should you go for demographic segmentation?
- Demographic segmentation advantages and disadvantages
- Demographic segmentation variables
- Demographic segmentation examples in marketing
- Steps to conduct demographic segmentation
Demographic segmentation categorizes the market audience based on multiple yet specific variables, including education, age, gender, family status, income, and occupation.
Demographic segmentation is a smaller subset of market segmentation and hence more accessible. Its accessibility is also because of fewer data points than other forms of segmentation such as geographic or behavioral segmentation.
For businesses, it means working with a more specific marketing strategy. Demographic segmentation improves your marketing strategy by solving the problem of not targeting your customers with different preferences.
In the end, you have defined your target market using demographics which enable you to run marketing campaigns for the group(s). By doing so, you use your resources efficiently and get the best Return on investment(ROI).
Demographic segmentation has multiple benefits for your marketing strategy. Let’s list them below.
- Greater product relevance: Targeting the correct people is crucial for your marketing success. Demographic segmentation provides the necessary information required to do better product relevance. For example, you do not want to showcase noise-cancellation headphones to the gaming audience as the noise-cancellation headphones are aimed at frequent travelers and those who work in noisy environments. By having more product relevance, you can ensure your marketing strategies are aimed at the right audience with better relevance.
- Better personalization: You can use demographic segmentation for better personalization and messaging. For example, if you are selling headphones, you can message it differently for gamers who play games and differently for other users who use them for work or entertainment. You can highlight the headphone’s gaming features for gamers while showcasing the clarity of voice and mic for those who use it for work.
- Improved advertising effectiveness: With better personalization and product relevance, you are bound to get improved advertising effectiveness. You are not trying to sell gaming headphones to an office guy — you are going to improve the advertising effectiveness. This also means that you are better ROAs and returns on your advertising budgets.
Demographic segmentation is vital for understanding your customers. Without demographic segmentation, you will find it hard to understand your customer’s needs. The categorization works on almost every customer type irrespective of the origin or size.
With the information, organizations can work and create personalized brand narratives that connect and excel at delivering the right message to the customers.
Even though demographic segmentation is beneficial, it is not for everyone. The choice to use demographic segmentation depends on your requirement. As mentioned earlier, there are other types of segmentation, and other segmentation types can be better suited for you.
So, what does all of these means? You need to take a look at what you are selling, the audience you are targeting, and your business size. You want the best result for your business, and demographic segmentation is not the only segmentation type. For example, suppose you are into the cloth business. In that case, behavioral marketing might be a better pick as it let you understand your customers better, considering you get more personalization exposure and opportunities.
Geographical segmentation is also an excellent option for the business that operates locally. So, you need to understand your needs and choose the segmentation that suits your needs.
Demographic segmentation does come with its advantages and disadvantages. Let’s discuss them below.
- Demographic segmentation is easily accessible. This means that you can find data for demographic segmentation easily and use it to your advantage.
- With demographic segmentation, you can grow faster in developing markets as it provides a baseline understanding of the market.
- Organizations can also use demographic customer segmentation to identify potential markets and learn what people like to buy.
- Demographic segmentation has a limited range. By limited range, we mean that two people within the same demographic segment might not have the same liking.
- Not all demographic segmentation variables are useful. For example, gender segmentation might not be that useful if you are selling drinks, comparing it with businesses selling cars.
To better understand demographic segmentation, we also need to go variables. Let’s go through them below.
Gender is one of the key demographic segmentation variables. It lets you identify persons as you can easily tag them as feminine or masculine. Different gender types have different choices, making it easy for you to learn their primary likes or dislikes. As a business, your job is to know which gender your product appeals to. By doing so, you can market your product and get maximum return on investment.
Not all members of gender will have the same choice or liking. But you can always have a strong understanding of what’s to offer regarding the marketing approach. For example, females are known for strong attraction towards jewelry, especially diamonds, compared to men.
Age is also an important variable. After all, age determines the consumer’s preferences and needs. On top of that, with age, consumers’ preferences and needs change — making it the most vital demographic segmentation variable. For instance, the products that kids like would not fit the needs or liking of adults.
Even in adults, you will find a difference in likings and the way they consume information. For example, younger adults are more open to getting digital marketing campaigns, whereas older adults like a more traditional way of consuming information.
For business, age determination is vital as it lets them decide which age group they want to create their products for.
Age segmentation is approached through life cycle stages:
They can further be segmented by generation:
- Late bloomers
- Generation z
Within age segmentation, more specific age segmentation can be created to find what the consumer needs. For instance, toddlers have completely different needs and requirements compared to what an adult would want. A company that creates clothes would require defining their age group and then proceeding with creating clothes or making other marketing decisions.
The next demographic segmentation variable is income. Income determines a consumer’s perception and choices. The income levels are crucial for businesses as not all products and services are targeted at everyone. For instance, Luxury clothing is aimed at people that fall under higher income groups. Similarly, people with higher incomes tend to spend on luxurious or highly-priced items. Consumers that fall under the lower-income groups may want to spend more cautiously and look at the value in return than anything else.
Using demographic segmentation income variable also let business to understand the target market. In fact, companies can use the information to the right place the product pricing within the market.
For organizations that deal with luxurious products would require to target high-income group consumers.
Not all marketing material or strategies work on every consumer. That’s because of the different educational levels of the consumer. In demographic segregation, you surely want to know the educational level of your consumers. With the information, you can determine the channels you want to use for running your marketing campaign. It also lets you determine how you can run the campaign.
On top of the manner and channels, the educational level dictates how you present the product to your customers. So, the product’s feature complexity is also determined by educational level. Basically, you do not want to deliver your messages to your consumers only to find that they do not connect well with the product. If you choose a complex way to explain product features, then the product would have less to no impact on people with medium to low education levels. To overcome it, you need to write the product features keeping the lowest educational level of your consumers.
The buying decision of many consumers depends on their race, ethnicity, and religion. If you offend a religion, race, or ethnicity, you are basically sabotaging your own marketing campaign and product sales.
That’s why it is important to understand people’s sentiments and values before you start working on your marketing campaigns.
Another important variable vital in demographic segmentation is family structure. Many regions have high-density popular with more family members. These family members are very cautious when spending and hence would buy things that they actually need and is not that expensive. With societies with smaller familiar, the proposition completely changes as family members are more likely to buy expensive things.
If your organization is creating products for a more specific audience, then you need to categorize customers based on their occupation and job types.
There are also other variables within demographic segmentation, including:
- Martial status
- Employment status
- Household income
Let’s go through some of the examples in demographic segmentation.
- Gender segmentation: Gender segmentation is one of the most frequently used variable forms of segmentation. For example, companies selling nail polish or sanitary pads are creating products for the feminine gender. They are women-centric and it shows in their marketing campaigns. Similarly, bike companies target men more as they are their main customers.
- Location segmentation: Location-specific segmentation is also vital for marketing. For example, companies can use local languages to connect better with the audience.
- Family segmentation: On a more micro-level, there is family segmentation. For instance, family members can have different needs. For example, a toddler would require cereals and diapers. Adults, on the other hand, would require burgers or pizza, and so on. Each family member has different consumption habits.
So, how do businesses conduct demographic segmentation? To conduct demographic segmentation, companies need to follow the below steps:
The first step you need to do is make a market identification. This will help you to identify individuals that are interested in the product. Not only that, but you will also learn more about your consumer’s needs and what type of product you need to develop to solve their pain and needs.
Next, you need to categorize the demographic based on the chosen variables broadly. We already discussed quite a long list of demographic segmentation variables. You need to choose the variables that go with your product and then create the segmentation. You can choose the most common variables for the segment, including gender and age.
There are many segmentation tools you can use. You can also create your segmentation solution for long-term usage.
Lastly, you need to do data analysis on all the customer’s data assets. The aim of data analysis is to uncover demographic patterns within the market. You may also want to create smaller segments based on the data you have collected to fine-tune it further.
Segmentation is a crucial part of the marketing process. As a business, you can opt for different segmentation types. However, demographic segmentation provides a great way to learn about your audience and market. We learned a lot about demographic segmentation, including its advantages, disadvantages, examples, variables, and so on. So, what are your next steps? Are you going to do demographic segmentation or choose other types of segmentation? Comment below and let us know.