The whole market can be segmented in a number of different ways. This article is about demographic market segmentation.
The most common profilers used in customer segmentation include the following four: behavioral market segmentation, geographic market segmentation, demographic market segmentation and psychographic market segmentation.
Demographic market segmentation
Demographic market segmentation divides the market according to the study of population data, trends in the society and demographic characteristics of the human population. It assumes that people have different characteristics as human beings. Demographic factors include age, gender (sex), race and ethnicity, marital status, family size, occupation (job), income, language and religion.
Age
Customers who belong to the same age group, such as children, teenagers, middle-aged adults and retirees, have very similar needs and wants. Hence, spending patterns will be similar. On the contrary, people from different age groups will be in completely different financial situation whereas human needs and wants tend to change with age. Therefore, businesses shall target different groups of customers age-appropriately.
Example 1: LEGO toys have many age-based segments with age clearly indicated on the packaging of LEGO bricks. The age range starts at 1.5+ years old with many different types of LEGO sets designed, especially to target each group range individually.
Gender (sex)
Gender segmentation is widely used in marketing because men and women have completely different wants and spending patterns. Companies selling consumer products such as clothes, cosmetics and magazines tend to segment by gender.
Example 2: Typical shopping malls in the city centers have the entire floor space allocated to female clothes as there is a huge market for women’s fashion. On the contrary, much smaller area is devoted to male clothing.
Race and ethnicity
This category relates to human ancestry used to categorize distinct populations around the world. While race is biological linked with physical characteristics such as skin color, ethnicity is cultural linked in cultural identification. People who belong to different cultures will usually demand different products. These days, as a result of widespread globalization, companies have many opportunities to target multiple cultures with their products, therefore reach larger customer base.
Example 3: Eating rice as staple food is common among Asian people living in China, Japan, Korea and Vietnam. While bread and potatoes serve as staple food among Europeans who seldom eat rice.
Marital status
Single people have different level of income and wealth from married couples – two working adults in one household. Also, single childless people have completely different purchasing patterns from families with children. Nowadays, an increasing number of people are delaying marriage or get a divorce. This is partly due to the soaring costs of weddings and the career aspirations of women who choose to have careers rather than children. These new trends social trends present both opportunities and threats to marketers.
Example 4: Global producers of baby diapers such as Procter & Gamble, Kao, Kimberly-Clark or Essity will certainly target married couples with small children in their advertising campaigns. Obviously single people do now buy diapers. It is worth-noting that the global diaper market size reached USD$72.9 Billion in 2021 and is expected to grow by around 8% in the next five years.
Family size
Extended families with many family members will naturally purchase large quantities of daily necessities such as food and water, utilities, clothes, personal care items comparing with young single people living in small studio flats. Businesses need to be aware that these two completely different market segments not only have different purchasing patterns, but promotion strategies need to be geared appropriately
Example 5: Large families with many kids will often visit entertainment such as amusement parks like Disneyland, sports areas such as public swimming pools and education training centers. Single people will be frequent customers of bars and restaurants.
Family lifecycle
Marketers categorize households in terms of their stage in the family lifecycle, because purchasing behavior is likely to be relatively homogeneous within each category, but different between categories:
- Single: Young, no social ties.
- Newly married: Young with no children.
- Full nest (Stage 1): Youngest child under six.
- Full nest (Stage 2): Youngest child over six.
- Full nest (Stage 3): Children still at home, but working.
- Empty nest (Stage 1): Children have left home and one partner still working.
- Empty nest (Stage 2): Both partners already retired.
- Solitary survivor (Stage 1): Still at work.
- Solitary survivor (Stage 2): Already retired.
Occupation (job)
A person’s job has an impact on income level which usually tends to determine the particular social class this person belongs to. Poor people will purchase completely different goods and services than people who belong to middle-class and upper-middle class. Very rich individuals will be even more different when it comes to spending money from the rest of the population.
Example 6: Very rich people may engage in various expensive hobbies such as golfing or scuba diving, go on luxurious holidays a few times per year using private jets, purchase exclusive sports cars and golden wristwatches.
Income
Income is another popular basis for demographic market segmentation. The wealthy people have very different consumption patterns from the poor working class. Many companies target affluent consumers with luxury goods and convenience services. By contrast, many companies focus on marketing products that appeal directly to consumers with relatively low incomes. Companies will use different pricing strategies based on the level of income for different consumer groups can affect the pricing policy of a business.
Example 7: Coutts Bank which offers private banking and wealth management services for high-net worth individuals and their families and Moët & Chandon which sells high quality champagnes target customers with very high-income levels. On the contrary, a discount food retailer Aldi or Walmart sell popular products at low every day prices.
Language
Businesses will offer goods and services depending on their mother-tongue language. This especially applies to manufacturers of daily electronics such as smartphones and laptop computers. IT companies producing computer software and designing video games will make several language-versions to cater for different customers speaking different languages.
Example 8: Microsoft Office and Microsoft 365 subscriptions for Windows sold by Microsoft are currently available in over 80 languages including Konkani, Māori, Luxembourgish, Valencian and Tatar.
Religion
Religious believers can be a very important market segment. The four most popular world religions include Christianity with 2.4 billion members, Islam with 1.9 billion members, Hinduism with 1.2 billion members and Buddhism 0.5 billion members. While Christians eat fish on Fridays, Muslims eat halal food while not being allowed to drink alcohol, followers of Hinduism do not eat beef whereas Buddhists follow vegetarian diet.
Example 9: McDonald’s has been forced to change its fast-food menu items in many countries due to religious reasons. In India, where beef is not consumed by the followers of the Hindu religion, beef was replaced by chicken and vegetarian patties in hamburgers sold at local McDonald’s restaurants.
Demographic market segmentation variables are amongst the most popular bases for segmenting customer groups because most of the customer needs and wants are closely linked to two variables such as income and age. For practical reasons, lots of data is available to help with the demographic segmentation process, hence different combinations of demographic factors are used for marketing purposes to devise appropriate Marketing Mix towards different market segments.
