What is Demographic Segmentation?
Demographic segmentation is the simple process used by marketers to divide the total potential customers based on their different demographic factors such as gender, age, family, income, educational background, religion, socio economic status, race, etc.
Definition. Demographic segmentation divides the market into segments based on variables like age, gender and family and offers the product and services that satisfy their mutual needs.
Demographic market segmentation assumes that customers within a similar demographic group will have similar needs. Companies consider this way to be the least costly way to segment their target market.
When combined with other types of segmentation like behavioral, psychographic, geographic and demographic segmentation starts the procedure by dividing the overarching target customer groups into more manageable sections.
Demographic Segmentation Variables
The different demographic segmentation variables with examples
Age and Life Cycle Segmentation
Age is the most basic demographic segmentation variable. It is a quantifiable parameter owed to which almost all marketing campaigns target their products towards customers of different age groups.
Famous fashion designers such as Chanel, Gucci and Burberry all formulate their fashion collections targeting demographic market based on age, gender and income. These brands follow a market segmentation strategy where different fashion clothing lines are offered for different age groups, e.g. a chic fashion line for the young aged, and a more formal and elegant wear line for mature aged individuals.
Life Cycle is another parameter of demographic segmentation used by companies to divide potential customers.
A simple example is of insurance companies that target young and middle-age individuals for their life insurance policies. Generally, they are expected to live longer compared to senior citizens and thus prove to be more beneficial customers.
Gender segmentation is another common market strategy, where customers are divided into categories of male and female. Every product that contains some kind of differentiation which caters to the different needs of the two genders is divided based on this type of market segmentation. As the saying goes men are from Mars and women are from Venus, naturally, there is a lot of differentiation between their likes, dislikes and preferences. Different products differ based on gender, and since companies are focusing on female customers equally as on male customers, majority of products offered in the market are divided based on gender segmentation.
Examples include Calvin Klein and Christian Dior that offer different perfumes, cologne and other fragrance, watches ranges for men and women. Nike and Adidas are more examples of footwear brands that offer different footwear for men and women.
When marketers initiate a marketing campaign and devise a market strategy, besides considering other factors of their potential customers, they also segment their customers, based on their income level. Products offered by a company, sets its product price based not only on the cost of production but also on the income level of its target market segment. If a product centres the middle income market, its price level will consider the income of that target market. In this way, not only the company will benefit from the product but the purchasing power of customers will also not be affected.
Similarly, high-end designer products target the high-income customers, offering them unique one of a kind product. Designer products thus are priced high, rendering them purchasable only by the high income individuals, and placing them out of reach of other lower income market segments. Products that practice income based demographic segmentation include all designer labels.
Religion market segmentation is the parameter where the target market is classified based on their mutual religious beliefs and other associated spiritual needs. Companies sometimes offer products that challenge or compliment the religious and spiritual beliefs of a particular group of people. In such a case the product is targeted towards the religion that favors its use, as others will not use it and are not potential customers.
For example, any food that contains pork or any of its additives will not be consumed by Muslims and Jews, as it is forbidden in their religion. Similarly, saint medals and bracelets with the cross sign will be purchased by Catholics as it supports their beliefs.
Marital Status, Occupation, Education
Companies also design their market strategies towards potential customers based on their marital status, education level and other demographic segmentation such as occupation, etc. This is done because their product offers something that satisfies a mutual interest to these segments.
For example, baby products from Mothercare a British retailer for mother and babies, are directed towards married couples who have or expectedly will be having a family and will require purchasing baby products. Similarly, certain products such as pharmaceutical goods are targeted towards a specific profession, or education e.g. doctors, pharmacists, who are capable of understanding their proper use and suggesting them to patients.
Demographic Segmentation Examples
Example Demographic Segmentation of Nike. Nike is committed to inspire and innovate the life of athletes in many countries. Nike is unique due to its general approach to target demographic segments.
- Nike target consumer from 15 to 40 years of age.
- Nike target teens under 20 year of age and offer them apparel in different sports like soccer, football and baseball
- Nike also target those households who want to look like an athletic and fashionable
- Nike demographic segment based on women and young athletes and showed tremendous sales figures in 2015.
- Nike focusses on all socioeconomic classes
Example Demographic Segmentation of Starbuck. Starbucks is an American coffeehouse chain operating in 6 continents and 75 countries and territories. In the United States Starbucks has more 13000 locations.
- Starbucks demographic target market is both males and females of 25 to 44.
- The Starbucks company also target teenagers from 18 to 24,
- The company core considered to be education and an average age of 42.
- It also targets high income and nigh spenders people with average annual income of $90,000.
Demographic segmentation in Healthcare.
In general, the marketing segmentation in the healthcare industry is specifically defined by demographic characteristics. The segment can be based on age, marital and mental status, gender and income level. This segmentation is very helpful to determine what segmented people want for example general or specific health care products.
The ability to buy general and specific products rely on customer income segmentation. Those who can afford will opt expensive healthcare plans and other will go individual services.