Marketing Demographics Definition
What is Marketing Demographics?
Marketing demographics is the classification of populations of potential customers based on various attributes. Common attributes tracked include:
- Geographic location by country, state, city, neighborhood or ZIP code.
- Income level.
- Size of household or size of business.
- Education level.
- Marital status.
- Job title.
- Type of residence (apartment, single-family home, etc.)
- Business category (often segmented by SIC codes)
Marketers identify populations that are likely to become buyers of the product or service offered. Prospective buyer populations are typically identified by historical sales data of an organization or through market research activities.Only those populations with the highest potential for sales receive solicitations. This reduces marketing and sales costs dramatically since money is not wasted connecting with those least likely to buy.
One of the primary ways that marketers use demographics is in the selection of mailing lists for direct mail and email campaigns. Marketers also look at the audience demographics for trade shows, magazines, newspapers, television, radio and websites to determine if advertising opportunities offered by these venues have high potential to reach desired target populations.
The Demographic Dilemma
Are two households whose income level is identical both good sales prospects? Hardly. For example, there will certainly be a difference between the spending habits of a $100,000 household income earned by a young single attorney and that of a couple with two small children earning a combined household income of $100,000. Because of this, multiple attributes, or filters, are selected when choosing target populations.
But then there's the dilemma of how many filters to apply. Filter a list too much and you may not have a sufficient volume of potential buyers to achieve a reasonable return on your marketing investment. Filter it too little and you could be wasting valuable budget dollars on mediocre sales prospects.
Luckily, demographic choices have become more accurate with the evolution of psychographics.
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Demographics Evolved: Psychographics
"Census" type data (age, race, geographic location, marital status, etc.) only tells a tiny fraction of a population's story. Using the $100,000 household income scenario from earlier, the heads of those two households could also be on opposite ends of spectrum when it comes to hobbies and interests... or they could be nearly identical. Welcome to the brave new world of psychographics!
Unlike demographics, psychographics looks at the similarities of people in terms of attitudes, interests and other personality attributes.
At its basest level, psychographic techniques would involve the selection of target populations based on demonstrated interest in the product or service category. Popular interest-based sources of target populations include:
- Magazine and email subscriber lists.
- Association members.
- Event and trade show attendees.
- Buyers of similar or related products or services.
For example, a motorcycle dealership could send promotional materials to local subscribers of a popular motorcycle magazine or lists of motorcycle owners. But that could even be ineffective. Why?
If you know anything about the motorcycle community, you know that motorcycle owners are more finely segmented by brand of vehicle owned and style of riding. Though not applicable to all, typically there is a difference between a Harley-Davidson owner and a Ducati owner in terms of activities and attitudes. The former are often more interested in the community aspects of motorcycling such as group rides and events. It's a brotherhood or family. Whereas Ducati owners might be more interested in competitions and bike performance issues. Do you think there might be a different personality profile between bike owners interested in community and those interested in competition... and, more importantly, a difference is what they buy? Guaranteed!
How are these psychological profiles determined? Many marketers already have a good idea of the personality profiles of their customers, particularly in smaller organizations that have a good deal of direct contact with customers. However, if there are questions as to what an existing or ideal psychographic customer profile is for a business, it is worth investing in market research and surveys to determine.
A popular way that many businesses collect psychographic data is by having customers fill out product warranty information cards. (Yes, that's why they do it!) So if you've ever wondered why they asked you all those questions about whether you like stamp collecting or cooking, now you know.
Segmenting marketing efforts by demographic and psychographic data can be very finely tuned with the wide array of selection filters for mailing and distribution lists available. But it still requires a good understanding of customers' life situations, interests and needs to know which filters to apply.
Additionally, what populations may be viable prospects today, may be totally irrelevant next year. Monitoring shifts in demographic or psychographic profiles is a key marketing function.
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© 2013 Heidi Thorne