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Business Demographics Definition

Updated on May 29, 2018
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Heidi Thorne is an author and business speaker with over 25 years of experience in sales, marketing, advertising, and public relations.

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How Business Demographics Made Me Quit My Chamber of Commerce

One of the typical pieces of advice to those who are, or who serve, small businesses is to join the local chamber of commerce to network. When my business sold promotional products, I loved being a part of one of our local chambers. The people were super friendly and I enjoyed going to the events. It was great to be a part of the local community.

But there was just one problem. Many of the members and attendees were not ideal customers for my business.

The profile of many chamber members would be described as “small business owners.” Since that was a broad business demographic I was targeting, it sounded like a good fit. I did get a few good clients from my networking in the group. But most members weren’t the right small businesses since they often fit into the following categories:

  • Multilevel marketers (MLMs). MLMs are folks who are in direct sales for a variety of products. These people usually buy their promotions from their MLM companies and may be prohibited from buying elsewhere.
  • Onesie, Twosie. These businesses were one-person micro business operations or consulting practices that wanted to only buy a few imprinted products, sometimes on the order of less than 10 pieces. If you know anything about the promotional products world, you know that orders of less than 500 or 1,000 pieces are often too small to bother with. Plus, they didn't order on a regular basis, sometimes ordering only once a year or every two years. But I felt obligated to try and serve them.
  • Franchises. Like their MLM brethren, franchises (restaurant franchises, oil change shops, etc.) are typically restricted from buying promotions outside the franchise organization.

Yes, all of these were “small businesses.” But they were so wrong for my business.

Also, rounding out the chamber membership were branches of big organizations like banks, hospitals, and telecom who had corporate buying departments and weren’t looking to do business with the likes of me.

In hindsight, I guess I could have asked the chamber for a more detailed breakdown of the business demographics of the membership before getting too involved with it. Eventually, I ended up quitting the chamber since I was getting better results from my online marketing where I could better filter potential customers.

Lesson learned.

What are Business Demographics?

Like people, businesses have traits which distinguish them from one another... and make them more or less likely customer prospects for a business. Thus, definition of business demographics is the grouping of organizations by their distinguishing characteristics, including the following:

  • SIC or NAICS Codes (more on this in the next segment) or industry
  • Location or ZIP postal code
  • Facility size or type (i.e. square footage, office complex, home office)
  • Number of employees
  • Annual revenues
  • Ownership status (i.e. publicly traded, proprietorship, partnership, etc.)
  • Type of owners (i.e. woman or minority owned)
  • Size of business (i.e. micro business, small to medium business, multinational enterprise)
  • Types of products or services sold (i.e. Chevrolet dealers, Chinese restaurants, plumbers)
  • Profit or non-profit status (many charities are corporations)
  • Use or ownership of various products and services (i.e. copy machines, uniform rentals)
  • Age of business

What are SIC and NAICS Codes?

For mailing lists in particular, businesses are often grouped by their Standard Industrial Classification (SIC) or North American Industry Classification System (NAICS) codes. SIC codes were developed by the Occupational Safety & Health Administration (OSHA) of the United States Department of Labor. NAICS codes are those used by the U.S Census Bureau.

These codes are assigned to businesses by the various government agencies, not by the businesses themselves.

Business Customer Profiling

The list of characteristics that combine to create an ideal business customer profile can be many! Though there are many qualities that could define any business no matter the size, targeting a group of customers by one quality only can waste marketing dollars, time and effort.

For example, businesses that could be classified under SIC Code 2052 Cookies and Crackers could be a massive packaged cookie manufacturer OR a small business that makes custom cookies for serving at weddings and events. Sure, both businesses use ingredients such as flour, eggs, and sugar to bake cookies. But they would differ dramatically in areas such as these:

  • Scale. One may use truckloads of flour, the other may purchase bag by bag for custom orders. A manufacturer may need multiple shifts of workers, whereas the small business may be just one person.
  • Marketing. A packaged goods manufacturer may market and advertise locally or even nationally and have wide distribution to the consumer markets. The custom cookie maker is more likely to be local and market to either event planners or end users.
  • Location. A manufacturing operation for commercial cookie baking could be a massive factory. In the custom market, the "factory" could be a small business owners home oven or rented out kitchen facilities.

Savvy marketers look well beyond the industry code when establishing their ideal customer targets, even though they may start with the all encompassing industrial classification. When purchasing mailing and sales lead lists, or when doing their own research, marketers can choose several of the business demographics characteristics to filter it to just those who are most likely to become buyers.

Using the cookie makers example, a supplier of bulk baking ingredients for large scale manufacturing could filter their marketing targets based on these factors:

  • SIC Code 2052 Cookies and Crackers
  • Commercial factory locations of a certain square footage
  • Revenues that would be typical of the size of factory targeted
  • Geographical locations to which ingredients could be cost-effectively shipped

That's only four major filters. There could be several other factors unique to the supplier's offerings on which the list could be further filtered.

Note that depending on how a particular government agency classes it, the custom cookie manufacturer could also be categorized as a restaurant or even a retailer, further muddling its demographic definition. This is where multiple filters can, again, help marketers sift through potential prospect lists to get to those with the highest potential.

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Using Business Demographics for Trade Shows

One of the primary ways that companies use business demographics is in choosing trade shows at which to exhibit. Trade shows can help companies meet dozens or even thousands of potential buyers cost effectively within a short period of time. However, exhibiting is not a cheap endeavor.

So when evaluating potential shows, companies should look at all the business demographics of the projected attendance. If the show management cannot provide sufficient demographic data for its audience, the investment in exhibiting has a much more questionable return.

Disclaimer: The author/publisher has used best efforts in preparation of this article. No representations or warranties for its contents, either expressed or implied, are offered or allowed and all parties disclaim any implied warranties of merchantability or fitness for your particular purpose. The advice, strategies and recommendations presented herein may not be suitable for you, your situation or business. Consult with a professional adviser where and when appropriate. The author/publisher shall not be liable for any loss of profit or any other damages, including but not limited to special, incidental, consequential, or other damages. So by reading and using this information, you accept this risk.

© 2013 Heidi Thorne

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