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What is Demographic Segmentation? Its Importance, Factors, and Examples

Agnishwar Banerjee Agnishwar is an experienced, multi-functional, full stack digital marketer. At CleverTap, he spearheads the content and digital marketing functions, leveraging his expertise to drive messaging, GTM & IMC campaigns and business results
What is Demographic Segmentation? Its Importance, Factors, and Examples

Segmenting customers into distinct groups depending on their shared characteristics is central to developing personalized marketing campaigns. Businesses across industries and geographies are increasingly adopting demographic segmentation to tailor their marketing campaigns and deliver a more relevant user experience.

This blog provides a detailed overview of demographic segmentation, including its factors, examples, benefits, how to use it for developing marketing strategies, and more.

What is Demographic Segmentation?

Demographic segmentation refers to the process of grouping existing and potential customers into distinct categories based on their common traits, such as age, gender, education, income, and occupation.

These shared traits influence how users react and respond to your marketing campaigns and can thus help you target the right people with the right message. When done right, demographic segmentation enables you to ensure optimum utilization of their resources.

It is important to note here that demographic segmentation is not a one-time activity. You may find yourself segmenting the customer pool based on different criteria at different times as required by your marketing strategy. For example, a travel and tours company would want to know the marital status, number of children, household income, and other such details ahead of launching a new holiday package.

What are the Benefits of Demographic Segmentation?

Demographic segmentation enables you to understand the composition of your customer pool and create groups that you can then target with more relevant messaging. Adopting this as part of your marketing strategy can engender a number of benefits. 

1. Better Personalization

Creating customer groups based on demographic factors enables you to use more relevant and personalized messaging that resonates better with the targeted group. For example, a streaming app could do an email campaign for a new anime movie for couples with kids, or a food delivery app could send a push notification to people with jobs to order something delicious to get rid of Monday blues.

2. Improved Product-Market Fit

Understanding who your target customers are and their preferences can significantly help align product development to meet the customers’ evolving needs. For example, with the growing environmental, social and governance (ESG) awareness of people belonging to the Gen Z and Millennial age groups, a lot of cosmetics companies today develop and market their products using messaging such as cruelty-free and environment-friendly packaging. 

3. Enhanced Marketing and Advertising Effectiveness

Marketing and advertising campaigns and initiatives that are developed to cater to a specific customer demographic segment will always be more impactful and effective than a more generic, one-size-fits-all approach. With demographic segmentation, you can target customers that are more relevant to you and more likely to make a purchase, thereby ensuring optimum utilization of the marketing budget with higher return on ad spend (ROAS) and lower customer acquisition cost (CAC). 

4. Better Customer Retention

Demographic segmentation allows you to bring the element of personalization into your marketing efforts. For the end user, this makes them feel valued and in turn helps you improve customer, loyalty, satisfaction, and retention.

5. Optimal Pricing and Distribution

Grouping customers based on their income provides you with insights into their buying behavior. This information can help you determine the right price for your products and the right channels that ensure maximum outreach.

Demographic Segmentation Factors and Examples

A business can use a demographic factor or a combination of factors to create customer groups. Some of the most widely used demographic segmentation factors include:

Demographic segmentation factors

Let’s look at some examples.

A business-to-consumer (B2C) company can segment customers using demographic factors like ‘age, gender, and income’. For example, a car company can design a marketing campaign for their luxury cars for people above 40 years and an annual income of $250,000 or above while promoting affordable cars with lower price points to youngsters between 21-25 years of age and low or no income.

Business-to-business (B2B) companies, however, would adopt a demographic segmentation that includes the “occupation” factor to ensure they are targeting the right person with their campaign. For example, a risk management solution provider could target risk management professionals across industries with designations of director level or up. 

How to Use Demographic Segmentation for Marketing Strategies?

Once you’ve collected demographic segmentation data and created customer groups, then you can design marketing strategies for specific groups. Let’s understand this with the help of some examples.

  • For Age-Based Segments

People belonging to similar age groups often share similar tastes, preferences, and lifestyles. This information can help you to create specific customer segments defined by their buying persona for driving personalized marketing campaigns. 

The list below shows the standard years of age-based classifications:

  • Baby Boomers: Born 1946-1964
  • Generation X (or Gen X): Born 1965-1979
  • Millennial: Born 1980-1994
  • Generation Z (or Gen Z): Born 1995-2012
  • Generation Alpha (or Gen Alpha): Born 2013-2025

For example, companies in the food industry would target Gen Alpha with fast food, snacks, chocolates, and candies while Gen Z and previous generations with healthier options. Given the growing health awareness globally, food companies today are highlighting their products’ nutritional ingredients in marketing messages to make them more relevant to their customers.

In another example, consider that you are a skincare company. Your target customers would comprise of people from say 16 years to 60 years of age. So, you could target customers in the 16-25 age group through social media and influencer marketing via TikTok and Instagram, with messaging centered on the latest trends, such as glass skin, blemish-free skin, and others. For people in the 25-40 age group, you could use a mix of social media and television advertising with messaging focused on using sunscreen, reducing fine lines and wrinkles, and so on.

  • For Relationship Status, Family Structure, and Income-Based Segments

Understanding demographic segmentation is critical to ensure the right product is offered to the right audience with the right messaging. Imagine you’re a vacation company offering travel and tour packages.

  • To a single person, you could offer a “trip with friends” to domestic locations for people within a certain income range or Coachella or Tomorrowland packages for people belonging to higher income ranges.
  • To a couple, you could offer a “couple getaway” to domestic destinations for people in a lower income range and international destinations like Bali, Maldives, or Paris, for people belonging to higher income ranges. 
  • To a couple with kids, you could offer a “summer vacation trip” to domestic destinations for people within a certain income range and international destinations like Europe or Singapore, which could include trips to museums and amusement parks.
  • For Ethnicity, Religion, and Nationality-Based Segments

Demographic segmentation based on ethnicity, religion, and nationality enables companies to better align their products and marketing efforts accordingly. For example, the global fast food chain company McDonald’s offers certain food items in certain countries to cater to the tastes and preferences of people in those countries. This includes offering soup in Portugal, McPinto Deluxe (a traditional dish) in Costa Rica, McPatongko (street food) in Thailand, Nasi Lemak in Malaysia, vegetarian and vegan burgers, and so on.

Using the Right Demographic Segmentation Tool: How CleverTap Can Help

To create the right demographic segments and drive tailored marketing campaigns, you need a robust technology-based analytics platform. CleverTap enables you to understand your target audience, create demographic segments, and engage with them efficiently and effectively with the ability to scale as needed. It leverages real-time behavioral data to identify specific customer groups, thereby enabling you to deploy personalized marketing campaigns that are relevant to each segment.

CleverTap helps you enhance customer segmentation with a range of advanced tools and technologies, including 

  • Behavioral Analytics, which helps create detailed customer profiles by tracking customer interactions across multiple touchpoints.
  • Real-Time Data Processing, which helps ensure customer interactions are timely and relevant by capturing and processing data in real time.
  • Omnichannel Engagement, which provides a 360-degree view of customer behavior by seamlessly integrating data from multiple channels.    
  • Clever.AI, which enables driving more effective segmentation and targeted campaigns by leveraging predictive analytics.  
  • TesseractDB, which helps drive comprehensive user data retention and analysis with unmatched data granularity and scalability.  
  • Lifecycle Optimizer, which helps continually optimize customer journeys by automating and improving customer interactions across their lifecycle.

Want to see it in action? Contact us for a personalized demo today!

Other Types of Segmentation

While demographic segmentation is important to developing a more targeted and personalized marketing strategy, it is not enough by itself. It needs to be coupled with other customer segmentation information, such as psychographics, behavioral, geographic, and others, to create unique groups that are more aligned with your business.

Geographic Segmentation

Geographic segmentation is the grouping of customers based on their location. Depending on your market presence, you can segment the audience by region, country, or even neighborhood.

Psychographic Segmentation

Psychographic segmentation involves segregating customers based on their interests, lifestyles, personality traits, and values. 

Behavioral Segmentation

Behavioral segmentation refers to the process of grouping customers based on how they interact with your products or services. It involves analyzing their purchase history, brand loyalty, and other behaviors. 

Conclusion

Knowing your customers is the first step in developing a targeted, personalized, and effective marketing strategy. While demographic segmentation is often regarded as rudimentary, it forms the foundation for marketers to build their more granular segmentation strategy. It is all the more important in today’s hyper-competitive business environment where every brand is trying to grab the attention of their prospective customers and meet their needs and expectations. Demographic segmentation enables you to “speak” directly to the customers, make them feel valued, and foster their long-lasting loyalty.

FAQ

Q: How to do demographic segmentation in marketing?

A: To segment customers based on demographics, you need to:

  • Gather customer demographic data from public sources, surveys, social media, and other channels
  • Analyze the data and create customer segments aligned to buyer personas
  • Determine the appropriate marketing channels for your outreach efforts
  • Personalize the message for each segment  

Q: What is the difference between segmentation and targeting?

A: Segmentation is the process of grouping customers into different categories based on their common characteristics such as age, gender, income, and family structure while targeting refers to the process of selecting the groups that you want to focus on with your marketing campaigns.

Last updated on October 28, 2024