CRA Business Marketing Explored – USA
By Max Freedman
- Demographics explain who makes up your audience and help you to segment your customers by individual characteristics and needs.
- Using demographics to make your marketing efforts more effective is a key element of running a successful marketing campaign.
- You can use demographics to refine your marketing budget and make more targeted investment decisions about how to engage your audience.
- This article is for small business owners who are looking to improve their marketing efforts by more effectively targeting various segments of their audience.
Have you ever seen an ad aimed at an audience that clearly didn’t include you? If so, you’ve witnessed the power of demographics in marketing. Demographic data can help brands to narrow the scope of their marketing efforts so that their time and money aren’t spent pursuing people who are unlikely to become customers. After all, not everybody will be interested in that website ad for a dating website.
Any business owner or marketing expert can harness the power of demographic segmentation in marketing. Below, learn all about demographics and how to use them in marketing segmentation.
What is an example of a demographic?
Here are some examples of demographic data and variables for consumers:
- Age group
- Marital status
- Education level
- Employment status
- Income level
For businesses, demographic data and variables (also known as firmographic data when collected for businesses) may include the following:
- Company size
- Products or services provided
All of these demographics reflect basic qualities that can be used to determine the market segment to which your target audience, whether businesses or people, best belongs. In other words, demographic segmentation allows you to divide a larger target market into smaller subgroups that may be more receptive to certain products or marketing strategies.
Key takeaway: Demographics include a wide range of characteristics, such as age, ethnicity, education level and income.
What is demographic segmentation?
Demographic segmentation is the division of a target market into smaller groups of people who share demographic characteristics. For instance, a luxury jewelry company looking to target customers in the Northeast may divide this massive target audience by location (state or city) or income level (a lower-income consumer may not be able to afford the company’s products). Demographic marketing, which is one of the four market segmentation types, can streamline your business’s promotional efforts and help direct your work toward a narrower, but likely more receptive, customer base.
The five main segments for demographics
Although there are many examples of demographics, there are five main segments for demographic targeting: age group, gender, income level, education and occupation. While all of the major demographics have merits when it comes to your marketing strategy, a demographic segmentation strategy that prioritizes the five main segments may prove more fruitful, since these demographics tend to most strongly inform consumer behavior, interests and needs.
Additional types of market segmentation
In addition to demographic marketing, there are four other types of market segmentation:
- Psychographic segmentation. Whereas demographic marketing is based on objective qualities, a psychographic segmentation strategy relies on subjective traits. These traits may include personality, values, interests, lifestyle, beliefs, priorities, motivations and attitudes. For example, a payroll software company using psychographic market segmentation may promote its products to business owners who prioritize staying tax compliant as efficiently as possible.
- Geographic segmentation. Location can be part of a demographic marketing strategy, but in geographic segmentation, location is the entire focus. Use a geographic segmentation strategy to divide your customer base by country, city, ZIP code, climate, urban or rural setting, or proximity to a certain location. An example of geographic market segmentation would be an electric scooter company aiming its products at people who live in crowded cities.
- Behavioral segmentation. A behavioral segmentation strategy focuses on consumer behavior. It requires marketing research into consumer purchasing habits, spending behavior and brand interactions. Any company that targets customers who have bought similar products from either that company or competitors is using behavioral segmentation as its marketing segmentation approach.
- Firmographic segmentation. Whereas demographic segmentation applies to people, firmographic segmentation applies to businesses. Firmographic segmentation involves dividing target companies by factors such as industry, location, size and revenue. For example, a water delivery service with limited supply may use firmographic segmentation to market itself to smaller businesses that may not demand as much water.
- Market segmentation. Marketing strategies often involve market segmentation, since this approach details the makeup of the target audience. Market segmentation can be especially useful for social media marketing, because narrowing the audience of a social media campaign can boost engagement rates while lowering marketing costs. Market segmentation also overlaps with market research. As you narrow your target audience, you will naturally come to learn these customers’ behaviors, interests and needs.
Key takeaway: There are many approaches to demographic segmentation that can help you precisely target your marketing efforts to the people who are most likely to want or need your products and services.
Why are demographics important in marketing?
Demographic targeting is important for determining the group of people who best fit your vision of the ideal customer. Demographics can – and should – inform your marketing strategy from the bottom up, as pushing a product to an unreceptive audience can be a wasteful use of time and money.
Demographics are crucial for the following aspects of your company:
- Business plan. When determining how your business will earn revenue, you need to be sure that your most likely customers are aware of your products and services. Therefore, the very foundation of your business plan should be to figure out the target market for your products and services, and demographics can help you determine that.
- Market research. When you are gathering data about your customers’ wants and needs, demographics can be of paramount importance. Dividing market research tasks by demographic can allow you to identify the consumer subgroups that are the likeliest to buy your products or use your services. You may even discover that the groups you had initially expected to be most responsive to your company are uninterested, while the groups expected to be uninterested are highly responsive.
- Image building. Messaging, branding and image are vital for brand success, and demographics can help you finalize each of these marketing tools. By knowing the age, social class, gender and other crucial demographics of your current consumers and target audience, you can develop your company’s logo, imagery and general presence to best appeal to your customer base.
- Media use. If your demographic research determines that your customer base skews older, using social media to reach them may backfire, as social media audiences tend to be younger. Likewise, placing ads on a men’s magazine website may backfire if you learn that your audience is mostly women, and pitching coverage in a local newspaper may be ineffective if your demographic research does not identify that particular region as a hotspot for your company.
Key takeaway: Demographics and audience segmentation help to inform other important planning aspects of your business, such as your business plan and brand building efforts.
How do companies use demographics in marketing?
Here are some of the ways companies use demographics in marketing:
- Social media marketing. Most social media platforms’ key demographics are readily available. Your company can use these demographics to inform your social media strategy. Look at where your customers’ demographics overlap with those of social media. For instance, if your customers are primarily women and you see that Pinterest’s user base is overwhelmingly female, you may find Pinterest campaigns especially useful.
- Ad spends. Knowing your customers’ demographics can inform your ad spend strategy. Age group is a particularly powerful demographic for ad spending, especially for products that target young adults who spend often or older adults with greater spending power. According to one survey, during an eight-month period in 2018, digital advertising efforts geared at people 65 or older increased by 25% and ad spending for data on consumers ages 25 to 34 increased by 23%.
- Marketing campaign images. Visuals and images, whether digital ads on websites or large ads seen at public transit stops, can be crucial to your marketing plan. However, if these visuals are not relevant to the groups you are targeting, the images will be far less effective. Use demographics to help you decide whether your images should appeal to women or men, older or younger customers, people in urban or rural areas, and more.
- Ad and marketing image placement. Speaking of public transit ads, why would you place ads for a product with a mostly rural consumer base in subway stations or on the sides of buses? That’s why so many public transit ads are for movies or apps: People living in urban areas tend to use these products and services more than rural residents do.
Key takeaway: Demographics and audience segmentation can help you determine where to place your ads for maximum return on investment, both in digital marketing channels and for more conventional ad placement.
Demographic market segmentation examples
Each major demographic category can be used to inform a marketing strategy. Consider the following examples:
- Age group can be used to tailor a digital ad to young adults, parents of young children or older people looking to enroll in Medicare, for example. Age group is also important because certain generations comprise more people than others; in fact, millennials will soon outnumber baby boomers, according to Pew Research Center.
- Gender can be used to determine whether a social media platform is more likely to expose your product to men or women. For example, a makeup brand may choose a platform that reaches more women, whereas a necktie brand might choose a platform with a user base of mostly men.
- Race and ethnicity may be trickier demographics to use, as brands are under pressure to take a stand against racism. It is advisable to use race and ethnicity as market segments only if you can prove that your product is bought primarily by, or made for a specific race, such as shampoos designed for Black women.
- Location may explain why a department store might, during the winter, target digital ads for its gardening tools at consumers in the Southeast while aiming its ads for snowblowers at people in the Northeast or Midwest.
- Marital status is a useful demographic for a tourist attraction that’s popular among couples, for example. In that case, marketing efforts that target married people instead of single people may have a higher return on investment.
- Education level can be helpful for book publishers that are marketing young adult novels, children’s picture books and political essay collections. Age group also would be a prominent demographic segment in this example.
- Occupation can be relevant for a school supplies brand, because teachers, instead of education systems, are often responsible for stocking their classrooms. Targeted marketing that reaches an audience of teachers going back to school for the year may have a larger return on investment.
- Employment status can be important to a temporary staffing agency’s marketing efforts, since employed people are less likely to require these services than unemployed people are.
- Income level is of primary interest for companies that sell expensive items, such as luxury watches, yachts and private planes. Likewise, a nonprofit that works primarily to restore wealth imbalance may want to market itself to lower-income audiences.
Key takeaway: Demographics relate to virtually every aspect of your potential customers’ lives. Determine which characteristics are important to consider when you are marketing to your customers.
Where to find demographics
When you’re learning about the ways demographics are used for marketing, you may be wondering, where are businesses that successfully market to demographic segments getting their demographic data, and how can your business do the same?
These are the primary methods of demographic collection in the digital era:
- Customer accounts or orders. If a customer has created an account with your business or placed an order for shipping to their home, then you already know one of their major demographic variables: their location. These accounts can often give you even more demographic info. For example, if you own a clothing company for which customers register accounts online and save favorites to their accounts, you may be able to at least guess your customer’s gender.
- Digital apps and online platforms. You can use third-party demographic marketing services to collect demographic information on your target audience from digital apps and online platforms. Data collected via these services can paint a detailed picture of the demographics your marketing efforts should target.
There are two traditional methods you can turn to as well:
- Public records. Most developed countries, including the U.S., regularly collect demographic data. You can access this data through public records, such as those from the U.S. Census.
- Private surveys. If your company needs to send out surveys for any reason, you can also include questions about each respondent’s age, gender, income and other demographics. You may want to save these questions for the end of your survey, to encourage respondents to complete the survey and make them feel more comfortable providing potentially sensitive information.
The ease of obtaining demographic data is a huge factor in the popularity of demographic marketing and segmentation. Just make sure you have a plan in place before turning your data into marketing campaigns and, hopefully, results.
Key takeaway: Source demographic information about your audience from customer accounts, private surveys and even public records to get a better understanding of your audience and how to reach these customers.