Demographic Segmentation: Explanation & Benefits

What is Demographic Segmentation?

Demographic segmentation is defined as a market segmentation method that looks at variables such as age, gender, income, religion, and educational qualification that help organizations to understand consumer behavior. These variables are then used to divide a consumer market into smaller segments based on common factors. Once an organization gains these insights, it becomes easier to target, understand, and learn from their consumers. Having this insight is essential for businesses to stay ahead of their competitors.

Types of Demographic Segmentation

Age and Gender

This variable is very important when starting to segment your consumers. Everyone in the world can be put into generational segments based on their age range. The same can be (mostly) said for gender as well. Age and gender segments often have similarities that can be assumed across the entire group. For example, people born between 1946-1964 are considered baby boomers; this group can then be broken into gender, and then research can begin into their behavior.

Household Size

Household size, or more commonly known as Family Size is important to know for targeting specific consumer bases. Spending patterns and disposable income change with the more people that are in a household. Knowing this information about your consumer base allows you to infer their purchase intentions and what drives them (family). This information also helps companies to alter features and benefits to satisfy consumer needs based on household size.

Income, Occupation, and Education

This demographic information is very important to know for pricing strategies, purchase influences, and preferences. Organizations can change their marketing strategies to fit around income level and education. A person’s income level and education level have been shown to directly influence product purchases, desired product characteristics, and buying power. Occupation is important for businesses that offer services for specific business types and can also predict consumers’ interests.

Religion, Race, and Nationality

Another important demographic descriptive, religion, race, and nationality can offer insights to make sure that companies deliver appropriate messaging for different regions and segments. With the world becoming less homogeneous, this demographic piece can help organizations be sure to not unintentionally offend people of different backgrounds because they are not aware of their customs and cultures. This information can also allow for consumers’ belief systems and backgrounds which helps when developing a content plan.

Benefits of Using Demographic Segmentation

Higher Customer Retention

When companies use demographic segmentation, they begin to focus more on their consumers’ thoughts and needs which leads to a higher level of retention. Marketing strategies are made more personal because of the insights gained and the consumer begins to feel more of a personal connection with the product or service.

Increase in ROI

By using the insights gained to target very specific consumer segments, companies can have an increase in revenue. This increase in revenue matched with no increase in advertising spending leads to a higher ROI.

More Optimized Marketing Strategies

Segmentation allows organizations to get more specific and creative with their marketing strategies because they know exactly who they want to reach and how they need to go about it. When the exact market base is known, messaging can be clarified. This allows companies to save money and time.

Improved Products and Services

Because of the insights that organizations gain from using this segmentation, they know their consumer base on a deeper level. This allows for better product/service development which contributes to customer retention and ROI.