The phrase demographic environment is composed of two words, demographic which in turn comes from demography and environment. Demography is the study of the human population living in an area, their age, jobs, income, spending habits, ethnicity, gender and so on. In terms of marketing and business, this study of human population actually leads to an identification of the potential customers.
Businesses employ quite a few methods to identify potential customers for their products and services. Demographic segmentation is one such way. Based on age, gender, ethnicity, income group and several other parameters, businesses segment the market and identify the target group that are most likely to become their customers. These parameters taken together is known as the demographic environment. A study of the demographic environment is one of the most used methods to identify and reach out to potential customers. A marketer is, however, required to keep in mind the dynamic attributes of such an environment and keep updating the data that is collected on a continuous basis.
Let’s say, an enterprise engaged in the business of teaching English language is trying to find potential customers. Who do you think from among the following three demographic segments are likely to avail of their services? –
a) 40-60, male, unemployed and native English speaking
b) 20-40 both male and female, employed, native English speaking
c) 20-30 both male and female, employed as well as looking for jobs, immigrants from non-English speaking countries
It is a no-brainer that segment C is the most suitable demographic for the business to reach out to. This is but a few of the hundreds and thousands of potential demographic parameters that can be used by a business to identify their customers from a demographic environment.
Advantages of Demographic Environment Analysis – Targeting Marketing Messages to Specific Demographics Based on Age
The demographic environment analysis has some obvious advantages. It analyses the different parameters that control the demographic environment and modifies marketing approach to cater to the ones that are promising. Age, e.g., is an important consideration for marketers. Age allows marketers to target products that are relevant to a specific age to the desired demographic. Data is collected from a variety of points and the analyzed. In the long run marketers are able to design their marketing campaigns according to the target age. However, not always is such analytical research result put to right use.
Case Study – Baby Boomers, the Neglected Group
E.g., any business not looking to reach out to baby boomers would do well to rethink their marketing priorities. Baby boomers were born between 1946 and 1964. That would make a large part of this demographic to be sexagenarian and quinquagenarian in 2014. These are individuals who are the heads of their respective families, the main earning members in certain cases and in some cases retirees living off their pension. In spite of their age, however, these are also individuals who are at the pinnacle of their career and are successful in their lives. They are shaping the economy, transforming technology, making decisions that affect lives and molding marketing codes as you read this. But what makes this whole discussion particularly interesting for any marketer is that this is the demographic that spends more than $2.3 trillion annually. They are hooked to technology, love using their digital gadgets as much as the younger generation and eager to try out new products as they are launched. They are also spending more money online than any other age group. What is baffling to note after reading all these is that modern marketers somehow do not keep these baby boomers in their purview for their marketing strategies. These are the people who hate the conception that they are older. In fact they consider themselves younger than their earlier generation at the same age! A fact that should be considered by marketers when branding their products.
Another thing about age as a parameter of demographic environment is that it is dynamic. Even within a population age is in a constant state of transition. Marketers must understand the core concepts of demographic transition and take it into account when making their assumptions and marketing strategies. Demographic transition deals with the transformation of a nation from a high birth and death rate one to one with a low birth and death rate. This transformation happens because over time as a country progresses technologically and economically, quality of life improves. This directly impacts infant mortality by reducing it and increases life expectancy.
However, demographic transition opens the door to a different type of problem. It can be explained here very quickly. In the current state of economic and technological stage, western countries are experiencing an aging population. This when compared to emerging countries such as Brazil and India where the population is generally younger, western countries are facing a shortage of talent to fill up places which are left open by retiring individuals as well as new positions that are opening up. This is making the availability of skilled labor across industries more and more difficult to fill in. Comparatively countries such as India, where nearly 1/3rd of the population is under the age of 15, are experiencing a surplus of talent. Having said that, there are other factors too, such as the unavailability of skilled labor even in emerging markets which makes it difficult for businesses to find the right talent. In a nutshell, marketers have to keep an eye on the age distribution of the target demographic as well as the average disposable income to be able to perfectly assess their target customers.
Trends are dynamic, they are continuously evolving and trends do also keep coming back (retro fashion). An important study that marketers conduct from time to time is what the customers are looking for, i.e., what’s in vogue? This analysis is based on data collected from different source points – store fronts, personal opinion, celebrity styling, online buzz and so on. Understanding the market trend helps businesses to keep in tune with the pulse of the market and keep manufacturing products that are accepted by the consumers.
Disadvantages of Demographic Environment Analysis – Assumption
A large chunk of a marketers efforts are based on assumption, which, in turn is dependent on the analyzed data that is collected from various source points in the market. Resultantly, even though the data part is correct, the assumption part can sometimes be wrong. This is because human desire and the resultant trend is not always linear. When assumptions and reality don’t match up marketers find it difficult to adapt to the changes in the market environment.
Lack of Focus in the Right Areas
Demographic environment analysis has been blamed to be myopic at times. Such analysis have often resulted in marketers missing the woods completely for the trees. In other words they have overlooked vital information that can impact the bottom-line of a business in the long run. In the discussion on age as a demographic factor it was explained how baby boomers are a neglected lot in the marketers list of priorities. Somehow business feel that if they associate their brand with baby boomers it will mean a shift in their brand image. While businesses are solely focusing on the 20-40 group, people who are younger, tech –savvy and have a higher disposable income they are essentially missing out on yet another lucrative segment, one that is even more important. E.g., social media marketing. If only Facebook statistics are taken, there are over 19 million active users in the USA who are over the age of 55. The neglected lot, again! Achtung! Online marketers, are you reaching out to them?