How Can Companies Segment Their Customers Based on Demographics?

Companies need to understand and segment their customers before deciding on the product that they want to manufacture, the price that they want to charge the customers, the marketing campaigns that they want to run, or the channel through which they want to distribute their goods and services. Understanding the customer is the key to the successful implementation of other business activities. Companies can understand their customers by asking them questions, collecting their data, or just simply observing them. There are different segmentations that a company can do to understand and read its customers. The main types of segmentation are −

  • Demographic Segmentation

  • Psychographic Segmentation

  • Geographical Segmentation

  • And behavioral segmentation

In this article, we will be taking a deep dive into the demographic segmentation of customers and adding various examples from the business world.

Demographic Segmentation of the Customers

These are the demographic characteristics regarding the customer segment of the brand. These are easy to measure and are readily available as well. This helps the company determine the size of its market and develop a deep understanding of the personality types of its ideal set of buyers. While doing the demographic segmentation, marketers usually read the following parameters −

  • Age of the customer

  • Life-cycle age of the customer

  • Educational Qualification

  • Gender of the customer

  • Family size

  • Income status

  • Occupation of the customer

  • Race of the customer

  • The religion of the customer

  • Nationality of the customer

  • The social class of the customer

  • To which generation does the customer belong, among others?

These details help the marketers set up the image and then decide upon the 4 Ps of the business. We will be talking in detail about some of the factors mentioned above for more clarity and will also add business examples.

  • Age and life cycle stage of the customer − The age and life cycle stage provide the marketers with a basic understanding of how the customer might react when shown the ad. In simple terms, marketers try to predict the reaction of the customer when an ad is shown on the basis of age and life cycle stage. It is generally expected for students to be at school from 3 years of age to 18 years of age, so if they want to target these customers, they will be devising certain ads. So to elaborate further, Colgate and Crest are toothpaste brands, and they have different products for customers of different ages and life cycle stages.

    There is Colgate for kids, adults, and older consumers. When Colgate is selling to kids, they focus on taste and the cartoon characters; when they are selling to adults, they focus on different flavors and different mouth problems (like yellowing of the teeth, gum problems, sensitivity, and others); when they are selling to older consumers, they focus on mouth problems and on the fact of having strong teeth. It is an effective measure and comes in handy for the brands, but the difference between the age and the demand of the customer is getting blurred. Consumers today feel that 50 is the new 30, and hence the demand for goods is also varying.

  • The life stage of the customer − Here, the marketer distinguishes the customer on the basis of the stage of life that they are in. Age is no longer a factor here. For example, companies are targeting newlyweds, and they could be in the age range of anything between 18 and 70+. Here, the companies are selling products to the customers on the basis of the life stage that they are in.

    The different life stages could be marriage, studying, divorce, having kids, living alone, and others. Nebula, a sub-brand of Tata, primarily sells couple watches or other watches for occasions like marriage, new jobs, and others. Proctor and Gamble also understood that when couples get married, they look for the good, which is a juxtaposition of the brand preferences and choices of two different customers, and hence came up with Newlywed kits.

  • Gender of the customer − Gender also plays a very important role in deciding upon the marketing campaign, the packaging of the product, or the channels of distribution. In a study, it was found that men need an extra push to hold the product in supermarkets, whereas this comes naturally to women. Men often like reading about the product information, while women want to connect with the product on a personal level. For men, utilitarian factors win in most purchases, while for women, hedonic factors play an important role.

    The line of distinction is erasing here as well, as we see women, in terms of gender equality, embracing masculine acts as well. To support this with states, it was found that women in the United States and the United Kingdom make 75% of the purchase decisions regarding houses and 60% of the purchase decisions regarding cars.

  • Educational qualification of the customer − It is found that customers with a higher level of education are less influenced by ads that tell them what to do. They need open-ended ads in which they can do the thinking and information collection before landing on the purchase decision page of the product, while customers with a lower level of education need to be told what to do. If they are not told, then for them, the ad is not effective and is losing its importance.

  • Generation gap − The generational difference also plays an important role in deciding on the type of marketing communication used by the company and the type of product that customers will desire. When we are talking about Gen Z customers, they would prefer the internet and social media as their chosen mode of communication, along with goods that highlight their fashion sense and uniqueness.

    For Gen Z, mass-marketed and generalized products will now work. When we come to the millennial, then they would be a generation in the current time that is ready to get married or is celebrating big achievements like buying a house, getting a promotion, getting a new job, and others.

  • The religion of the customer − This also helps marketers make a very crucial business decision. What might be considered normal in one religion might move mountains in another. To elaborate further, when Ikea entered Saudi Arabia and other Muslim-dominated countries, they removed all the women models from their catalog because of their belief in not letting women enter the media.

    When McDonald’s brand entered India, they understood that they could not sell any beef products. The cow is considered to be a sacred animal in India, and if the brand does not change, it will be heavily boycotted. Hence, the brand came up with chicken and paneer-dominated menus only for the Indian subcontinent.

Demographic segmentation provides a lot of insight into the customer, their preferences, and what they might like, and then the brand can adjust itself accordingly. It is very important for brands to read the market before they enter, and demographic segmentation provides them with this knowledge. These insights help the companies sell better, build stronger relationships with their customers, and also give them an edge over other competing brands.

Updated on: 21-Apr-2023


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