One of the most crucial factors that brands and businesses focus on is understanding and catering to the needs and preferences of customers and prospects. And one way to accomplish this is via market segmentation.
It involves grouping users based on shared or common characteristics. This helps in organizing your customer relationships, enhancing user experiences, and improving conversions.
Certainly, segmentation is a powerful marketing technique. Segmentation based on demographic details ie., demographic segmentation is one of the most common market segmentations used by businesses.
And that’s what this blog will explore further. But, first things first.
What is demographic segmentation?
Demographic segmentation involves segmenting your market based on demographic factors such as age, gender, family size, family situation, race, ethnicity, annual income, religion, and education.
B2B businesses can segment their client firms based on their company size, industry, job role, etc. The ultimate aim of demographic segmentation is the better targetting of customers.
Why is demographic segmentation important?
The importance of demographic segmentation can be understood by looking at the following use cases.
1. Better marketing
Brands and businesses can integrate the demographic data of their current and prospective markets into their marketing and advertising systems. This will help them in targeting each customer section better.
For instance, a clothing store can use its market’s demographic data to promote women’s clothing to female customers, men’s apparel to male customers, baby clothing to young couples with families, etc.
2. Luxury targeting
Luxury brands need to ensure that they aren’t wasting their time and effort in attracting customers who won’t be able to afford their products.
Demographic segmentation helps here by helping them segment the market based on average income, and direct their marketing efforts towards only the creamy layer of the society.
3. Industrial campaigns
Industrial campaigns are those marketing or advertising campaigns that organizations run to target businesses that seek their products or services.
Demographic (firmographic) segmentation can help here by helping them target specific sectors, job designations, and job roles. This can drastically increase the campaign’s ROI.
6 Advantages of demographic segmentation
As seen in the previous section, demographic segmentation has several use cases in marketing and advertising. Here are 6 of its benefits.
1. Easily obtainable data
One of the prime benefits of demographic segmentation is that demographic data are easily available. Businesses can pull specifics of their choice from government-maintained census data to target their customers.
For instance, builders can promote their constructions to people based on their income and whether or not they own houses.
If you go for online surveys, you can distribute and collect them through different marketing channels like social media platforms, email, etc.
2. Straightforward targeting and analysis
The tool you use for market segmentation will also have analytical reporting features. You will get a detailed evaluation of your segmented data.
By going through it, you’ll get to know which segment is buying the most from you, how many people from a segment entered or exited it, which campaign performed the best, and more.
By evaluating the reason behind each metric, you’ll be able to understand what works with your audience and what doesn’t.
You can use the insights thus gained to optimize your future messaging and campaigns to increase conversion.
Segmenting your audience on the basis of their demographics doesn’t cost much. If you’re doing it using census data, it wouldn’t cost anything at all.
And even if you are using the other sources, the price wouldn’t be much. Additionally, the profit you’ll be making when compared to the price you are paying would be significantly surpassing.
For, segmentation facilitates personalizing your marketing and messaging tailored to each market segment. This in turn improves the conversions and has a favorable impact on your bottom line.
4. Customer retention and loyalty
When a business or brand caters to the specific needs of each customer segment and markets to them in a well-tailored manner, its customers become happy with it.
The customers keep coming back for its products and services. Thus, demographic segmentation acts as one of the best customer retention strategies.
Further, long-term customers, who are happy with a particular company, are likely to share it with their friends and folks.
This word-of-mouth promotion enhances your reputation in your sector and increases your customer base further.
5. Easy to measure
It is easy to assess and measure demographic data due to the simple nature of the data itself.
Demographic data is more straightforward than behavioral segmentation and psychographic segmentation, which are complex to obtain due to their subjective nature and ambiguity.
For, demographic data is only a collection of simple facts about people, and this is what makes it measurable and actionable. Additionally, it can also be easily updated.
6. Identify potential markets
Demographic segmentation also helps in identifying other potential markets. For, when you look at your analytics, you’ll be able to figure out that people with specific demographic attributes are purchasing more from you than others.
Recognizing them will show you the other markets where people who are most likely to buy your products are.
Demographic segmentation can play a vital role in the success of your business. So, do go for segmenting your audience on the basis of their demographics for personalized messaging and targeted marketing.
This will help you to nurture your audience easily and quickly. However, also remember that marketing solely on the basis of demographic segmentation can lead to generalization and stereotyping.
For, demographic data is quite basic. Digital marketing trends show that successful segmentation will include the needs, preferences, attitudes, interests, beliefs, online behavior, and past purchases of the consumers.
So, make sure that you segment your audience based on several categories including demographics.
The other classes should be psychographic segmentation, geographic segmentation, and behavioral segmentation.
Such a combination of approaches would be most useful as it can provide a qualitative and quantitative image of your target market.