Guide to demographic segmentation

Demographic segmentation is a powerful marketing tool enabling you to better understand your customers. This type of segmentation is also crucial in helping you create more targeted and personalized experiences for your audience.

Today's guide explores all the essential details you need to know about demographic segmentation. Discover how demographic segmentation can help you create fantastic customer experiences at every touchpoint.

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Demographic segmentation is a customer segmentation type where a business categorizes its existing and potential customers into groups based on their shared traits or demographic characteristics. These characteristics include variables such as age, gender, and occupation.

The main aim of demographic segmentation is to help a business better understand its customers.

Think about it: the needs of your 23-year-old customers will most likely differ from the needs of your 45-year-old customers. Recognizing these different needs and segmenting the two customers into their appropriate groups will lead to more personalized services and a better customer experience.

Moreover, it would result in better use of your resources since you have more clarity on what resonates with a particular customer group and what doesn't.

Effective demographic segmentation empowers you to understand your customers better and make the right marketing decisions. Let's explore the benefits of demographic segmentation further:

Increased effectiveness of marketing and advertising campaigns

Demographic segmentation groups customers into specific categories that best describe their traits. These categories inform your marketing decisions and enable you to develop messaging that resonates with each customer.

In addition, demographic segmentation enables you to save on resources by releasing promotions and marketing ads that always strike a chord with customers.

For example, demographic segmentation helps you avoid marketing to Baby Boomers (55-77 years) on TikTok when the largest percentage of this generation is most active on Facebook and YouTube.

Increased customer loyalty and satisfaction

Demographic segmentation gives you the needed data to create personalized messages and promotions. When marketing is personalized and targeted, customers feel seen and understood.

This personalization makes it easier for customers to identify with your brand and its message. The result is increased customer retention and, ultimately, greater customer loyalty.

Higher conversion rates and sales

As stated earlier, demographic segmentation provides the required data for targeted marketing and advertising. The result of such personalization is marketing that resonates with customers. In turn, customers feel understood and are more likely to buy from your brand and remain loyal as long as the personalization continues.

An Accenture survey of 8,000 global consumers found that 91% are more likely to purchase from a brand that recognizes, remembers, and provides relevant recommendations and offers.

In other words, customers prefer brands that care about personalizing services to meet their needs and preferences.

Better-informed product development

Demographic segmentation gives you a better understanding of your customers’ needs. Particularly it informs the type of goals or pain points your products need to solve.

This type of segmentation lets you step into your customer's shoes and envision products that fulfill their needs and wants. This leads to better products and services because the products fill a defined need and bring a positive change to customers' lives.

The following are examples of demographic variables:

Age

Age is the most basic trait in demographic segmentation, and almost every marketing promotion will target consumers based on their age group or life stage.

The age variable usually indicates a certain life stage (teenager, young adult, senior, etc.) or age range (18-25, 26-32, etc.).

Age segmentation can also be based on generations, for example, Genz, Millennials, Gen X, Baby Boomers, etc.

Age is a demographic variable because people in a certain age range or generation have major shared life experiences and many common mannerisms.

Different age groups will also respond differently to ads and advertising channels. For example, 88% of Gen Z spend most of their time on YouTube, according to a survey by Morning Consult of 1,000 Gen Zers aged 13–25 years.

Conversely, Pew Research found that Gen X's most popular social media platform is Facebook. When you know which age bracket customers fall into, it'll be easier to reach them in resonating messaging through their desired platforms.

Gender

Different genders have different buying thought processes. In addition, each gender has specific values and goals it subscribes to. Grouping customers into their relevant gender enables you to create marketing and products that speak to their thoughts and preferences.

However, avoid conforming to gender stereotypes, which can harm your marketing and lead to lost customers and loyalty.

Family status

Marital status, family size, and family structure influence consumers' buying habits. Segmenting customers based on their family status informs you of customers’ purchasing behavior and pain points.

For example, single people are often fiercely independent and prioritize issues such as self-care and their goals.

On the other hand, a couple that just had their firstborn will make most decisions by considering their baby's needs first.

Marketing to these two demographics will differ since each group holds different values and goals.

Occupation

Segmenting customers based on occupation is vital since some resources are aimed at different job titles or industries.

For example, a SaaS company that promotes software programming tools will aim most of their marketing at developers, software engineers, and data analysts.

Ethnicity and culture

An individual's ethnicity and culture significantly influence how and what they buy. Segmenting customers based on their culture and ethnicity ensures that your brand aligns marketing messages with customers' beliefs, values, attitudes, and interests.

For example, Coca‑Cola is a global brand in over 200 countries. However, to create personalized messages, Coca‑Cola localizes their marketing to fit the culture of each locality.

Income

The income variable in demographic segmentation lets you estimate the buying power of your customer groups. This income data will then help you price your products accordingly or build product tiers that fit the needs of each income group.

Education level and sexual orientations are two other examples of demographic variables.

One advantage of demographic segmentation is how easily accessible it is. You can use multiple sources to access demographic data, as seen below:

Customer surveys

Customer surveys are an effective way to better understand your customers' demographic traits. However, you don’t send these surveys out with the sole purpose of establishing demographics.

Rather, demographic-related questions will often be a small portion of the survey. For example, the survey might be about customer satisfaction, but it'll include survey questions about age, gender, occupation, and income levels.

These questions should be towards the end and optional since many customers don't want to answer personal questions about their income and age.

Existing customer data

Every operational business will have some form of first-party customer data. This data type, such as age, marital status, gender, and occupation, is collected once a customer signs up for your program or buys a product.

You can easily access this data via website analytics software such as Google Analytics. Your in-house CRM software is also another source for the demographics data.

Public records

Public records are yet another source of demographic data. For example, if you want to learn about the income range of a specific age group, you can consult the US Department of Labor Statistics(BLS).

Other public sources of demographic data in the US include:

• United Nations Population Division

• US Census Data

• gov (usa.gov)

Third-party companies

The final source of demographic data is third-party companies that specialize in marketing data services. Such companies use browser cookies and digital app analytics to help you paint a picture of your audience and their demographic categories.

The process of demographic segmentation should be continuous to record any changes that affect your customer groups. 

Here are the most crucial steps needed to perform demographic segmentation:

Collect data on demographics

Data about your customers is available through various means, as discussed above. Start with the data you have, which is easily accessible through analytics software, your CRM, and ongoing marketing campaigns. From there, you can move on to customer surveys and data from public records.

Identify the target audience

With the data you've collected, it will be easier to identify the main target groups of your product. This is possible through data analysis to uncover patterns, trends, and common characteristics among your customers. From there, you can group the customers into more accessible categories based on traits.

Analyze the data and identify patterns of each customer segment

Demographic segmentation doesn't stop at grouping customers by age, gender, culture, etc. You have to take the extra step of identifying the patterns and characteristics of each group. 

Analysis at this point involves comparing and contrasting the different segments based on their demographic characteristics to identify unique preferences and behaviors that can inform marketing strategies.

Create specific marketing strategies for each demographic segment

With all the pieces in place, it's time to develop marketing strategies for the demographic segments. Research their preferred channels, the type of messaging they relate to, and the type of media they expect.

Remember, demographic segmentation is continuous and should take into account market trends.

More importantly, data collected during demographic segmentation should be ethically sourced and compliant with relevant laws and regulations.

The primary challenge of demographic segmentation is it offers a limited perspective on customer behavior and preferences. For example, just because two customers are male and in the same age group doesn't mean they'll have the same preferences or purchasing intent.

To capture the preferences and intent, you must take the extra step of conducting behavioral and psychographic segmentation. With the data gleaned from both segmentation types, you can deliver personalized and relevant experiences for each customer.

Demographic segmentation is the most basic form of customer segmentation. For a business to deliver wholesome and personalized messaging, it must address other forms of segmentation.

Below is a quick dive into the other four types of customer segmentation:

1. Behavioral involves categorizing customers based on their behaviors and lifestyle. For example, behavioral segmentation can group customers based on their hobbies, buying patterns, travel, and exercise routines.

2. Psychographic groups customers based on their shared psychological similarities. For example, attitudes, beliefs, motivations in life and behind purchases, and opinions. These characteristics inform customers’ buying decisions, so it's essential to place customers into the most relevant psychographic group.

3. Firmographic mainly applies to business-to-business (B2B) target markets. Firmographic segmentation categorizes customers based on their shared organizational attributes.

4. Geographic classifies customers based on their location, e.g., countries, cities, or localities. It's crucial for estimating pricing and shipping costs.

When demographic segmentation considers these other forms of customer segmentation, it's easier to tailor products and experiences that speak to customer needs, intent, and preferences.

Feedback from customers is essential for any segmentation in marketing. Customer feedback lets you know whether your understanding of customers is relevant and accurate.

Moreover, constantly getting customer feedback helps you refine your marketing strategies to make marketing content more personal.

Online reviews, surveys, and focus groups are great for getting customer feedback.

Overall, customer feedback helps demographic segmentation with the following:

• Refining segmentation criteria

• Identifying customer preferences

• Understanding customer behaviors

• Understanding the effectiveness of targeting based on demographic segmentation

Learn more about customer feedback platforms

Demographic segmentation is vital for any company that wants to understand customers better. It plays a significant part in providing unique and memorable customer experiences that win customer loyalty.

Moreover, segmenting customers into demographics will increase ROI and make better use of marketing resources. But, as you collect demographic data, remember to maintain data privacy rules and regulations.

By continually monitoring and updating demographic data, evaluating marketing strategies, and staying attuned to market trends, businesses can use the power of demographic segmentation to optimize their marketing efforts and achieve marketing success.