Making Demographic Market Segmentation Work for You

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Even many laypeople know a little about demographic market segmentation, or categorizing audience members by personal characteristics such as age, gender, marital status and education. It just makes sense that a luxury car brand would want to market to audiences with a household income above a certain threshold and that a maker of mobility assistance tools would target older consumers.
Not only is demographic segmentation easy to understand, but the data needed to perform it is relatively easy to collect as well. Public sources such as the U.S. Census Bureau and other governmental departments are a font of demographic information, as are reliable third-party data providers and social media platforms. And of course, a brand can ask customers and website visitors to volunteer their age, gender and other relevant demographic information, perhaps in exchange for a discount or other incentive.
Though its apparent straightforwardness is one reason demographic market segmentation is a popular marketing tool, another is its effectiveness. Demographic segmentation has been proven to boost customer acquisition and retention, along with overall sales and return on advertising spend.

 

 

The Benefits of Demographic Segmentation

Demographic market segmentation can benefit brands through every stage of the customer experience journey, from awareness to advocacy. Knowing the personal characteristics of current customers can help a brand determine its most likely potential new ones, as well as how best to communicate with them; a seller of extreme sports gear targeting Gen Z males probably wouldn’t advertise in Vogue, for instance. Organizations can then allocate marketing resources to where they’re apt to generate the greatest return.
Beyond marketing channels, demographic segmentation can inform messaging, creative and offers. To target suburban mothers aged 33-49, a frozen-food brand might emphasize convenience and value, with ads featuring women in that age group. That same brand might speak more to speed and novelty, with flashier graphics and younger models, when marketing to single men and women in their 20s. By homing in on the common personal traits of each segment, the brand is more likely to resonate with them. And the more targeted the message, the stronger the relationship between customer and brand.
Organizations can also create retention campaigns and loyalty programs that appeal to specific demographic segments, as well as diversify product features, packaging, pricing and promotions for distinct audience segments. For example, while a bike lock might be an effective gift-with-purchase for urban cyclists, a bike helmet with a light could be more attractive to rural and suburban bikers.

 

 

Demographic Market Segmentation Examples

The demographic features a brand uses to categorize consumers depend largely on its offering. For a makeup brand, education level might be less important than gender or age; for a luxury cruise company, household income could be the most important demographic criterion. Among the most commonly used demographic segmentation parameters are age, gender, sexual orientation, income, occupation, education, ethnicity, religion, marital status, residential environment (urban, suburban, rural) and household composition/family role.
When segmenting an audience by demographics, organizations often use multiple factors to create cohorts. For a womenswear brand, dividing an audience by gender might be only the start; it could subsequently segment the women by age, size, profession and location, since each factor would influence a consumer’s shopping and purchasing behaviors: A Gen X, size 10 urban professional might shop for different apparel than a plus-size Gen Z suburban mother who works part-time as a mechanic. Alternatively, the brand might find that for its particular offering, age isn’t all that relevant but income is, or that size trumps all other factors. Many organizations turn to marketing and segmentation specialists to help them determine which parameters to use for demographic segmentation and the most effective cohorts to create.

 

 

Beyond Demographic Segmentation

Although it’s commonly used, demographic isn’t the only type of segmentation available to organizations. Firmographic segmentation is the B2B equivalent of demographic segmentation; it creates cohorts based on business characteristics such as industry, number of employees and sales volume. Also related is geographic segmentation, which organizes audiences by their location. Because where people live can also be considered a personal trait — urbanite vs rural or suburban dweller, for instance — many people consider geographic segmentation a subset of demographic market segmentation.
Both firmographic and demographic segmentation categorize audience members by who they are. Behavioral segmentation focuses on what they do: where they shop, how often, how much they spend, what brands they spend the most on. Psychographic, AKA attitudinal, segmentation identifies consumers by why they behave the way they do — the attitudes, beliefs and interests behind their actions. Because each type of segmentation has its strengths, weaknesses and blind spots, using multiple types typically provides greater actionable insights and a higher level of personalization than relying on just one.

 

 

Drawbacks of Demographic Segmentation

For all its benefits, demographic market segmentation has its limits. The greatest shortcoming is that personal traits alone often aren’t enough to determine an individual’s affinity toward a brand or product. Illustrating this is a meme showing the UK’s Prince Charles and prince of heavy metal Ozzy Osbourne share many demographic traits: They’re both men born in 1948 who have been married twice, have grown children and young grandchildren, and are quite wealthy. It’s highly unlikely they’d favor the same apparel brands or hobbies, however, nor that they consume the same media.
Stereotyping by demographic is another potential shortcoming. A tool brand trying to appeal to young women might assume all it needs to do is manufacture its products in pink and get a few fashion influencers to tout them, for instance, when research could have revealed that making the handles narrower or including women as well as men in its ads would have made more of an impact.
And because demographic segmentation is straightforward, brands can be sure that some, if not all, their competitors are also using it to appeal to similar audiences using similar tactics. This is yet another reason to use psychographic and/or behavioral segmentation as well. Incorporating multiple types of segmentation can provide a more nuanced portrait of who the brand should target and how.

 

 

How Material Can Help with Demographic Segmentation

Material has decades of experience developing and implementing segmentation solutions for some of the world’s most successful brands. We tailor each framework to the organization’s offering and goals, from customer acquisition to improved loyalty to identifying new markets. Contact us today to learn how demographic segmentation, as well as other types of segmentation, can deepen your consumer understanding and improve your business’s outcomes.

 

 

FAQ

How can we use demographic data to enhance targeting and personalization efforts?
Knowing the personal traits of your customer base — gender, age, marital status and the like — enables you to more effectively appeal to segments within that audience that share particular characteristics. Demographic segmentation can also help you determine which cohorts are least likely to engage with you, so that you can avoid wasting resources targeting those consumers.

 

How often should we update our demographic segmentation strategy to remain relevant?
There’s no hard and fast rule as to how often an organization should update its demographic segmentation strategy. Consistently failing to meet business goals or a downward trend in key metrics is a strong indication that it’s time to revisit the strategy, as are significant changes in the organization’s offering or in the market. That said, it’s good practice to at least review the strategy annually; this can help you identify potential problems before they snowball.

 

Can demographic segmentation be integrated with other segmentation strategies, such as psychographic or behavioral?
Demographic market segmentation can certainly be used alongside behavioral and psychographic segmentation. In fact, doing so typically reveals even more actionable insights and facilitates customer-centricity by creating a more-precise picture of audiences – not just who they are but also how they act and why.

 

How can we measure the effectiveness of our demographic segmentation strategy and make data-driven improvements?
Tracking key performance indicators enables organizations to gauge the effectiveness of their demographic segmentation strategies. If faced with declining performance, you can conduct A/B testing to try to pinpoint whether certain messaging, creative or promotional elements need to be updated. You might also review the segments themselves, to see if their parameters should be changed.