Definition of Demographic Segmentation
Demographic segmentation is a market segmentation method based on variables such as age, gender, income etc. This segmentation helps organizations understand consumer behavior accurately that in turn helps them perform better.
But, before we delve into the depth of what demographic segmentation is let us first discuss a few terminologies that will help us understand the concept better.
The word demography has been derived from the Greek word “demos” meaning people and the English word “graphy” which literally means “the study of”. When these two words are combined they mean the study of people.
In market research, however, there is a slight deviation in the manner in which the word is used. In marketing, it defines people that form a specific market for a product or a service based on demographics. To study the market, it is important to know demographic who comprise of that market space.
Demographic attributes like age, sex, gender, religion, and educational qualification, play an important role in research. Whether it’s with a purpose of launching a new product or introducing changes or implementing new services, businesses need to stay on board and up to date with this ever-changing market. Therefore, the study of how population based on demographic segmentation behave towards changes in products or services is essential to know. This one aspect helps businesses stay ahead of their competitors and perform better.
Learn More: Demographic survey templates
Examples of Demographic Segmentation Variables
Within the marketing segmentation, there are different types of segmentation that are known. One that is very closely related to demographic segmentation is geographic segmentation.
Within the demographic segmentation, there are various variables that exist. These variables are as follows:
1. Demographic segmentation based on age: One of the most important variables for demographic segmentation is age. A generation is a set of people who are born around the same time in history, grew up with the similar kind of experiences with certain geographic segmentation.
For example, baby boomers are those born between 1946 and 1964 in the United States. The people born in this generation have certain similar characteristics and thought process. Generation X followed by the baby boomers are born between 1965 and 1981.
So, if a market researcher is reaching out to the baby boomers and generation X with the same strategic planning and asking the same questions, then there is a likelihood is that they might end up having inconclusive results as there is a huge gap between how these two generations think and act.
2. Demographic segmentation based on gender: Men and women have distinctive differences in their outlook and how they perceive the ways in which the market functions. Even the market researchers are very clear about the difference in the thought process of both genders and so, they manufacture products that are gender specific.
Perfumes, clothes, footwear to even cars there is gender specificity that product manufacturers understand and thus cater to the specific needs.
3. Demographic segmentation based on income: Income is also one of the important variables, as this variable decides the amount at which the product is priced. Most of the product manufacturers keep in mind the income demographic segment while putting a price tag on the product.
However, there are other manufacturers who cater to only the higher income segment of the society. Cars, technology, clothes etc. are made more specific to these segments as they prefer luxury over anything else.
Learn more: Demographic Examples
4. Demographic segmentation based on religion, race, and nationality: Alcoholic beverages have limited to no reach in the middle eastern countries, leaving scope for non-alcoholic beverages or fizzy drinks because of hot climate. Brands across the globe have a wide scale advertising campaigns.
But they haven’t just stopped there. With the increase in international business, these brands have come up with campaigns that are best suited to the religious beliefs, and even nationality, and made sure that no sentiments are hurt. With the increase in the geographic area of the business, there is also an increase in demographic segmentation based on religion, race, and nationality.
Advantages of Demographic Segmentation
1. It is uncomplicated and easy to use, as government census is readily available in most countries.
2. When an organization looks at the demographic segmentation, it focuses on the people who are most likely to buy a product. This helps in identifying the target market.
3. Demographic segmentation helps the organizations in developing market outreach.
Disadvantages of Demographic Segmentation
1. Demographic segmentation is based on an assumption that consumers in the same demographic group will have similar needs. For example, not all 30-year-olds would have the same needs when it comes to buying a mobile phone. Some may want a high-resolution camera, some may want an awesome music player etc.
2. A population is never constant. Marketers cannot collect demographic data only once and use it for years to come as population is never constant. Census data is refreshed each year. This information needs to be collected constantly in order to have a realistic picture.