If you have ever started a business, you must be aware that no matter how great your product or service is, your business won’t head anywhere unless you make a sale. Marketing helps you get the product to a consumer, but as an art, it is extensive. Consumers must be grouped according to various categories (market segmentation) based on some similarity or commonality. There are various ways to segment a market: Geographical segmentation, lifestyle or psychographic segmentation, distribution segmentation, price segmentation and demographic segmentation, just to name a few.
However, our focus is on the demographic segmentation, which generally involves grouping the markets into sub-categories based on demographic variables such as occupation, age, religion, nationality, gender, income, race, family size and education. Most marketers prefer segmenting a market based on demographic variables, partly due to the fact that a customer’s preferences are closely related to variables such as age and income.
Types of Demographic Variables
Before we take a look at some of the main demographic variables that heavily influence marketing strategy, learn how to expertly profile your customers to help you create your demographic variables.
This variable segments a market according to the age of consumers. It is based on the premise that a typical consumer’s needs and desires change as they age. This variable classifies a consumer’s age into four stages:
- Children (infant)
- Older popularion
A child will demand to have toys, while teenagers want to keep up with the latest fashion trends.
Furthermore, some consumer segments have more purchasing power than others. Consider this; In the United States, there are around 76 million baby boomers, which refer to individuals born between 1946 and 1964. This buying group forms the single largest consumer market, as they outspent other age groups by $400 billion in 2009. A small business owner has much to gain by targeting this age group.
Income is the most important and commonly used base for segmenting a consumer market. The purchasing power of a typical consumer varies based on the level of income earned. Based on this demographic variable, consumers are grouped into three categories; high, middle and low income, with the market also classified on the same basis. This is due to the fact that high-income consumers tend to give pr luxurious goods such as designer clothes.
Likewise, consumers with middle incomes will opt for medium-priced and durable goods, while consumers with low income purchase and often prefer lower-priced products to satisfy their physical needs. This is because they have less disposable income and hence are sensitive to price changes. Manufacturers of home appliances, cars and motorcycles classify their markets based on consumer income.
Size of Family
The number of family members or family size is another demographic variable that can be used to segment a market. This is mainly due to the fact that the number and size of family members directly affects the usage rate of consumer goods. The size of the family also affects the size of packaging.
This variable classifies a consumer market into two segments; female and male market. Since the desires, wants, interests and needs of females and males differ, marketers take this into consideration when designing their marketing strategy.
When formulating your marketing blueprint, you can also segment a consumer market based on social class, which is divided into three categories:
- Lower Class
- Middle Class
- Upper Class
The behavior, purchasing power, and motives of consumers vary depending on their social class. As such, upper class consumers tend to buy luxurious products more, while the middle class consumers tend to buy durable and quality products whilst keeping a close eye on prices and quality. Likewise, consumers in the lower class buy low-priced products that satisfy their physical needs. Learn more about segmenting consumers based on social class in this marketing course.
The occupation of the consumers can greatly influence their buying decisions. This means you must keenly identify professionals that would be interested in your products. In fact, some companies focus on making products that satisfy the needs of certain occupations. Ideally, a senior company executive will buy luxury cars, expensive clothes and subscribe to a golf club membership. Similarly, a teacher will purchase books, papers and pencils as well as lower-priced clothes.
Family Life Cycle
The stage of the lifecycle may differ among individuals of the same age; some young people may be single, others young and married but with no children, young and married with children, older married persons with dependants, older married persons with no dependents, older divorced persons living alone as well as middle-aged married and with dependent children. The list is exhaustive, and is classified based on the products sold. The differences in life cycle stages influence the objectives of the purchase, desires, buying behaviors and wants. Manufacturers of luxury cars such as Ferrari tend to target middle-aged men with no children or young (and wealthy) men with no children.
The religion of a particular demographic is a key variable that influences sales of certain products. Have you noted that Muslims usually eat cow meat, instead of pork? Likewise, Hindus consider a cow as sacred. They also view pigs as dirty animals and hence won’t eat it, unlike Christians who regularly include pork as part of their menu.
The education level of a particular individual tends to influence his buying decisions. This necessitates subdividing the consumer market based on education level, which creates two groups; educated and uneducated consumer segments. The educated group is sub-classified further into elementary, high school, associate degree, bachelor, masters and doctorate. This grouping is commonly used by book publishers who classify a market based on the education level of the targeted consumers.
Racial and Ethnic Background
Multinational companies tend to use this form of classification, which holds premise that consumer needs and buying patterns differs from one racial or ethnic group to another. The global market can be classified into American, African, Europeans and Asian. As such, food processor will package cow meat for sale to Chinese market, but process chicken meat specifically for Indian markets only.
In case you are not familiar with the term, psychographics is the study of lifestyles, personality and interests of various people. Psychographic variables are also called IAO variables as they deal with exploration of interest, activates and opinions. Under this classification, marketers consider factors such as environment, behaviors and culture. Let’s have a look at two key variables; personality, lifestyle and motives. Learning how to interact with the culture of even your local neighborhood is a good place to start on learning how to find opportunity to make money.
- Motives– This category lumps consumers based on the reasons why they buy a particular product. It includes safety, personal appearance, health, status and affiliation. These motives not only influence the type of products bought, but also determine the choice of retail outlets from which the products are bought.
- Personality Characteristics– This can be used especially where there are several competing goods. You must always structure the product with certain personality traits that the target market views positively. Individuals with high self-esteem tend to respond well to marketing messages that appeal to their ego and project a suitable image.
- Lifestyles- This method of segmenting a consumer market based on an individual’s lifestyle is anchored on the belief that it directly influences his choice of a particular product. As such, don’t be surprised if you ask an environmentalist what is his idea of an enjoyable holiday only to be told it is a rally driving experience or a hunting expedition.
There are many approaches you can use to segment a market and develop the best strategy to capture as many consumers as you can. However, it is recommended to use several strategies at once for the best results. Identifying a marketing strategy that incorporates demographic variables is easy to understand and the key to maximizing your sales.