Market Segmentation: Demographics

by Vlad Ungureanu

Mar 2020

Key takeaways from this article!

What are Demographics?

Demographics is the study of a population based on factors such as age, race, and biological sex. Demographic data also refers to socio-economic information expressed statistically, also including employment, education, income, marriage rates, birth and death rates and other factors.

While sometime treated separately, demographics may also include criteria determined by geographic location like nationality, political views, religious views and social status (social classes, cast systems, unique or special groups, minorities, migrant population, migrant work force and so on).

Adamant Links - Demographics

Governments, corporations, and nongovernment organizations use demographics to learn more about a population's characteristics for many purposes, including policy development and economic market research.

Demographics provide the most common criteria for market segmentation as the data is publicly accesible and constantly updated by governments, international organisations and private companies.

Biological Sex Segmentation

Adamant Links - Left vs Right Brain Functions

Research shows that men tend to use one side of their brain (particularly the left side for verbal reasoning) while women tend to use both cerebral areas for visual, verbal and emotional responses. These differences in the way the brain functions causes differences in behaviour between men and women.

Women tend to be better at sensing emotional messages in conversations, gestures, and facial expressions, and are thus considered to be more sensitive than men. Women start to speak and read at an earlier age than men and are generally better in verbal skills, such as learning a different language. They tend to have a better grasp on grammar and spelling, and generally girls have better handwriting than boys do. Women have better sight at night and have a more acute sense of smell, taste and hearing.

Women are better at multi-tasking, especially if some of the tasks refer to communication, have better distributed attention and tend to have better defined preferences.

In terms of marketing and purchases, women are more attentive to prices and tend to give a higher importance to bargains, promotions and discounts. Women tend to need a higher sense of security when shopping, especially online; they appreciate good customer service and value the way the process of acquisition made them feel. Studies also show that more women engage in more hedonistic shopping, compared to men.

Statistically, men have increased spatial coordination and a more efficient sense of direction. They tend to excel in mathematics and are great at interpreting three-dimensional objects. They tend to have a better hand-eye coordination and more precise control of large muscle movement. They have poor peripheral vision but better sight in bright light and a better sense of perspective. Since they use one side of their brain more than the other, they tend to use the left side for verbal reasoning and the right for visual and emotional activities (if they are right-handed).

In terms of marketing, men are more utilitarian in their purchases, with the majority of men defining their purchase as being able to solve a specific problem. Price is less relevant for the purchase and they rarely engage in window shopping, except for expensive, luxury products and brands.

Obviously, these differences are not rules. It is easy to find women who excel in mathematics and men who have excellent language skills (and it is even easier to find men with a limited sense of direction). Chances are the above statements are not going to work for your everyday situations, but these have been shown to be statistically relevant in scientific studies, based on large, diverse populations. When looking at large populations, these differences between men and women become obvious.

Age Segmentation

Age is one of the most important segmentation criteria, especially taking into account that preferences change with age. Almost all marketing campaigns target age-specific audiences.

Age based market segmentation usually considers specific age ranges or life cycle stages: babies, children, adolescents, adults, middle-age, and seniors. For example, many famous fashion designers have different collections to target different age groups. They aim certain clothing lines at specific age ranges, such as a chic fashion lines at younger prospects, and more formal and elegant lines at older individuals.

Age segmentation can also be generation-based: baby boomers, generation X, millennials, etc. Since members within each of these individual groups were born around the same time and grew up with similar experiences, they often share similar characteristics, preferences and values. Targeting baby boomers and generation X with the same offer and marketing strategy is likely to produce undesirable results because they think and act differently. Also, due to their age difference, they statistically vary in needs and desires.

Not only do age groups and generations differ in their buying habits, but also in how they respond to advertising. Age segements tend to have distinct ways of speaking and often spend their time on different information channels (TV, social media, newspapers). For example, millennials may spend most of their time on Instagram and Facebook, while seniors prefer their email inboxes and newspapers.

Age is negatively associated with using smartphones for texting, browsing the internet, and playing music. This means that the older the person the less likely they are to engage in social media usage and interactions. Social media emerged as one of the most important marketing channels in last decade because it is now used by more than two and a half billion people. But it is not as popular among older generations as it is among the younger generation. While 86% of the people below 29 years of age use social media, the percentage is only 34% for individuals who are 65 and above. Similarly, Facebook and Twitter are popular among all age groups, but Instagram and Snapchat are most popular among younger people, mostly generation Z. Another example, while 36% of 65-years-olds use Facebook, the percentage is only 5% for Instagram for the same age group and even less for Snapchat.

Income and Occupation Segmentation

If people can’t afford your product or service, there is no point in targeting them. After all, you wouldn’t promote a luxury car to someone who can’t afford a used vehicle. However, keep in mind that there is no such thing as negative publicity, and having your brand known by everyone has its advantages, as long as you target actual potential customers first.

Income targeting lets you measure the buying power of your potential customers. When you know the income range of consumers, you can usually find data to support how people spend money on both the higher and lower end of the spectrum. Many companies use this data to sell different tiers of the same product, based on income level. For instance, airlines have three classes: economy, business class, and first class. Occupation is strongly linked with income. Aside from this, ocupational targeting is also important as certain products or services are aimed at different industries and job positions.

Education Segmentation

Based on their level of education, potential customers will respond to different messages, ad formats, campaigns, proposed value and channels. Studies show that the higher the education the more a person is likely to own a smartphone and have access to mobile internet. However, the higher the education the lower their activity on social media and random internet sites. At a high level of education, the internet becomes an utilitarian tool (checking e-mails, status updates, keeping in touch with business personnel and so on), rather than an entertainment one (less time and interest in games, entertainment and casual news).

Adamant Links - Education Segmentation

A basic segmentation based on education level may contain:

Migrants/Non-native speakers with limited language proficiency:

• Simple messages
• TV based campaigns
• Poster/Print campaigns
• Less likely to follow ads in a foreign language or buy from foreign sites
• Very low purchase power

Minimum mandatory education:

• High use of TV and home Internet
• High use of social media
• Less likely to have smartphone or constant internet access (as it is expensive in many countries)
• Would respond to simple poster/print ads, especially if they contain images that attract attention
• Very low purchase power
• Likely to make impulse purchase (including taking out a loan)
• Rarely care about service quality, except when prices are very high

High School:

• High Internet, low TV
• Less likely to respond to print materials
• More likely to respond to smartphone/internet ads
• Low purchase power
• Some products, with small prices are very likely the preferred acquisitions
• Likely to make impulse purchase (limited loans)
• May accept services of moderate quality

University:

• Moderate Internet, low TV
• Conservative, might respond to print ads
• High Purchase Power
• Interested in value, price and return on investment
• Need sufficient information to make informed decisions
• Expect quality services

Doctorate:

• Low Internet, low TV
• Will respond to print
• Very high purchase power
• Most likely to make only informed decisions
• Expect quality services

In our next article, get a detailed look at geographic location segmentation:
Market Segmentation: Geographic Location