A business may initially believe that its products, goods and services will appeal to everyone, and on some level, this can be true. However, there will always be people who are more likely to be interested in one product over another, and learning how to focus on and cater to these particular markets is one of the best ways to be successful in today’s market landscape.
Rather than trying to make products that are acceptable to everyone, companies now work to make products that are exceptional to the key portions of the market that will want them. This approach requires a lot of data and a good understanding of demographics.
Demographics are meaningful ways to divide a population to gain a better understanding of its characteristics. These are social and socioeconomic factors that can reveal how people in different situations will react to a proposal of some sort (mainly, the goods and services that are offered to them).
Demographics reveal broad characteristics about these groups and work in averages, so they aren’t a full capture and obviously will not represent the situations of every single individual within the demographic. They are meant to show trends and general behaviors rather than individualistic specifics. Demographic breakdowns usually begin with the following characteristics:
- Age: Populations are often broken up by age or by generation (baby boomers, millennials and so on) since one’s life condition can drastically change over the course of one’s life. It’s also generally accepted that generations behave differently in the marketplace and have different sets of values when it comes to their lifestyle.
- Gender: Since men and women are under different sets of societal pressures and expectations, it makes sense that their behavior toward the marketplace might differ. In addition, it’s important to include options for those who may not identify as either gender, as their priorities may differ greatly from the male/female demographic.
- Race: Again, since individuals of different racial backgrounds carry different sets of morals, ideals and values and also face very different societal expectations, racial demographics can be very revealing when looking at overall preferences and the way individuals make their choices.
- Marital status and number of children: Single individuals will spend their money differently than those who are married. Likewise, families have different spending priorities than those who choose to be childless. These demographics can be important breakdowns to determine target markets.
- Education level: Level of education doesn’t always correlate with individual income, but it can correlate with decision-making processes and different mindsets. In markets where these factors are relevant, individuals with doctorates may prove to behave differently than those with a GED.
- Annual income: As expected, those who earn more will have completely different market habits than those who earn less. Individuals below the poverty line will have their own set of behaviors, as will those who make comfortably more than they need for cost of living.
Other demographics that may be used depending on the report in question include location, home ownership (own vs. rent), political or religious affiliation, disabilities or occupation.
When retrieving this sort of data, surveys may also ask individuals to self-identify in a number of additional categories. This can include affinity categories such as cooking fans, car enthusiasts, sports fans and so on. It can also include asking individuals to categorize themselves into lower, upper or middle class, for example.
While demographics like income and living status might allow the analyst to sort individuals into class segregation, asking the individuals to sort themselves can also reveal valuable data on how these individuals view their own situations and preferences.
Businesses may ask for a demographics report for a number of reasons. Executives may want to look at their sales demographics to see whether research and development can be done to better customize existing products for existing target markets, and they may want to look at where there may be sales opportunities for new products as well.
Marketing demographics can show where the company’s advertising strategies are having the most impact and whether resources can be better targeted on the most profitable market segments. In cases of the customer service or consumer social responsibility departments, demographics can reveal key ways they can make their outreach more effective to existing customers and to the business’s community.
The most common reason companies undertake the construction of a demographics report is to plan new marketing strategies or new product lines. Demographics are incredibly important within the field of marketing. It’s been shown that generic marketing designed to accommodate everyone is less effective than crafting a campaign targeted specifically to those who are most likely to buy.
Because marketing and especially advertisements can be so subjective, marketing experts can easily develop strategic advertisements meant to appeal to a certain socioeconomic group. Demographics reports are also used to develop future projections about the market. These predictions are then used to develop new products, hoping to meet the future needs of the consumer base.
The first step to building a concrete demographics report is to obtain information about the demographics in which the company is interested. In the United States, the Census Bureau conducts a survey census every 10 years to gather demographic information from the nation’s population.
Other organizations and the best demographic websites may conduct formal surveys to focus on specific regions. Analysts can also use local registries that keep records of information on the individuals within their purview. Many industries have organizations or trade associations that collect this data as well and make it available to anyone for a reasonable price.
The growth of the internet has also led to the collection of a substantial amount of individual behavioral information using cookies, apps and online analytics, which provides insight on completely new types of demographic divisions, like individual buying trends, search histories, social media use and spending habits. While the census provides information about social and population demographics — information that for the most part represents an individual’s situation rather than choices — information gathered online can produce valuable information about the way consumers make choices about their time, spending and habits.
When obtaining this data, it’s important to be sure the information can be readily verified. Often, independent surveys and censuses may have internal biases toward certain race, economic class or income demographics. It’s easy for these internalized biases to skew data, which can lead to faulty conclusions.
Government agencies and third parties that have no conflicts of interest can usually provide the most accurate data sets. Also, be sure the data is as up to date as possible. Especially in today’s markets, with changes in technology, demographics can change dramatically over a seemingly short period of time.
With this in mind, if the information is available, it’s best to track demographics over time. This allows analysts to develop trends that will show market changes and help to predict future consumers. Tracking data over time can often be more helpful than simply providing a snapshot of what existed at the time a survey was taken.
A company’s first step with a demographics report should be to determine the information for which it is looking and what questions it wants answered. This will help to focus the analysis and give it structure. Identify the goal of the report, what assumptions will have to be made with regard to the data and how the results will be used. Also, identify the target audience: Will this report go directly to a marketing manager, is it for the executive team or is it intended for research and development? This should influence the way the analysis is collated into a report.
From there, competent business data analysts should begin breaking down the data on hand in ways that can answer the questions. For example, if the company is looking to better focus its marketing campaign, the analysts should explore what demographics already purchase the company’s goods and services and compare them to other demographics to see whether there are marketing opportunities.
This should involve identifying the demographics that have made purchases: Which age group uses the company’s services the most? Is there any difference in male and female interest? Do families with children buy these products more often than single individuals? This can require careful statistical analysis of demographic trends in order to make meaningful conclusions. It’s important to allow the data to build a story about the customers rather than going into the report with expectations, which can unintentionally bias results.
The first step in using the report is to review the results and conclusions with the stakeholders for confirmation. The analytical team should explain their approach, their logic, any assumptions that were made and how they have drawn their conclusions. Occasionally, management might ask for confirmation or for more information. Once the results have been explained to the team that will be using the data, executive management will make decisions on how to change company direction.
Knowing this information can change a company’s marketing strategy. For example, if families are a demographic of interest, the marketing department could consider adding children to television ads, highlighting the family friendliness of the brand or offering deals and specials catering to parents with children.
As an alternate route, if families are already a well-established customer demographic, the marketing department might try to cater its ads and offers to single individuals. The company’s strategic plan should determine whether the company wants to focus its efforts on one sort of target demographic or attempt to add another demographic to its marketing efforts.
The demographics report should also include a section looking at trends over time, combining knowledge of the existing market with the demographic information to predict the future needs of key consumer segments. The company can then initiate research and development projects to create new products that should meet these future expectations.
Changes in demographics over time is also important. For example, a store that depends on local sales will want to watch demographics like income, age or household status so it can understand its own region and adjust marketing, prices and products as necessary.
At some point, all types of businesses can benefit from a demographics report, from smaller entrepreneurial startups to large corporate companies. Whether the marketing team consists of one person or an entire department, understanding which types of consumers are most likely to purchase the goods and services offered is a fundamental piece of success.
Even without direct marketing, this understanding helps business owners determine which parts of their products are the most important to consumers. This lets them focus resources on those pieces to further improve and differentiate their business. Luckily, there are resources available online to obtain this data as well as a number of companies that can happily perform this kind of analysis.