- Demographic data is used by businesses to help them understand the characteristics of the people who buy their products and services.
- With demographics, you can see who your brand appeals to the most by age, location, gender, job title, income and hundreds of other variables.
- With the right demographic data, you can spend more marketing to your most enthusiastic clients and stop spending to reach those who aren’t interested.
- This article is for small business owners who understand the importance of marketing but want to significantly increase the sales and leads they get from their campaigns.
In the past two decades, marketers’ ability to target the right person or business decision-maker has gotten much better for two main reasons: the rise of the internet and social media, and people’s willingness to constantly share and update vast amounts of information about themselves on these platforms.
The type of demographic data available to companies now is incredibly accurate and precisely segmented. That makes finding the people most likely to want your products and services a lot easier and less expensive.
What are demographics?
Demographics is the study of the characteristics of people or organizations within a defined geographical location. The more information collected, the more people and organizations can be segmented into smaller common groups with shared attributes.
Companies use demographic data to:
- Understand which products and services different groups of customers want and can afford.
- More precisely target marketing campaigns, thereby reducing the cost per lead or sale.
- Track how society is changing and how they should adapt (often used in PEST analysis).
What is demographic data?
Here are some examples of demographic data and variables (sometimes called fields):
- Age group
- Marital status
- Education level
- Employment status
- Income level
Traditionally, demographic data comes from a relatively narrow range of sources, like censuses, surveys and government records. In recent years, the depth of the demographic information collected on people has grown significantly because of the rise of search engines, social media platforms and specialist list providers.
For example, in addition to standard demographic data, Facebook now collects the following information on each user when it is volunteered:
- Relationship status
- School attended
- Academic background
- Job title
- Industry worked in
- Employer name
- Net worth
- Homeownership status
- Household composition
- Ages of children
- Political affiliation
- Entertainment preferences
- Dietary preferences
- Hobbies and interests
- Favorite brands
- Preferred retailers and e-tailers
- Favorite sports teams
- Web history
- Technology used to go online
This abundance of data means that businesses can now pinpoint the consumers they want to reach in ways that were not possible 20 years ago. No matter how niche the group you’re targeting, Google, Facebook and other online companies allow you to locate them and then communicate with them through advertising.
But advertising through Google and Facebook is not your only option. You can approach one of the hundreds of list owners and brokers in the United States. They buy subscriber lists from online and print magazines covering all sorts of interests and sell them to other companies.
For example, you could purchase an email marketing contact list of horse owners of a certain age, income level, and geographical area to promote your new range of saddles and run the campaign yourself.
Business and corporate demographic data (also known as firmographic data) include the following fields:
- Company size
- Products or services
Business-to-business (B2B) data has also become a lot more detailed in recent years, largely because of these factors:
- The volume of firmographic data (including hierarchical management structures) held by LinkedIn
- The greater availability of corporate data issued by governing bodies in different countries
So, if you want to sell a new document management system to CISOs in law firms on the West Coast with more than 100 employees, it’s now much easier to find them. You could advertise to them via LinkedIn or buy telemarketing data to call them directly to book appointments.
This type of precise targeting is also the future of email marketing in B2B. Companies are now sending far fewer emails than they were 10 years ago. That’s because they’re getting much better response rates and higher-quality leads. After all, the people receiving their emails are much more likely to need their products or services.
For decades, marketing teams have battled against redundancy, that part of their marketing spend is wasted because it reaches the wrong people. The proliferation of demographic data has greatly reduced redundancy in the past 10 years. This means lower costs per lead and sale.
What is demographic segmentation?
Demographic segmentation identifies specific types of people or companies based on their characteristics.
For example, a luxury jewelry company looking to target customers in the Northeast may divide this substantial target audience by location (state or city) or income level (a lower-income consumer may not be able to afford the company’s products).
Demographic marketing and segmentation improve your marketing campaign results and help you focus on targeting a more defined, receptive customer base.
5 main segments for demographics
There are five main segments in consumer demographics: age group, gender, income level, education and occupation.
While focusing on just one demographic characteristic might be profitable, targeting all five may deliver a better outcome. The more defined your target group, the more likely they are to exhibit shared consumer behaviors, interests and needs.
Additional types of market segmentation
In addition to demographic marketing, there are five other types of market segmentation:
- Psychographic segmentation: This approach relies on subjective traits like personality, values, interests, lifestyle, beliefs, priorities, motivations and attitudes. For example, a payroll software company using psychographic market segmentation may promote its products to business owners who prioritize staying tax compliant as efficiently as possible.
- Geographic segmentation: With this approach, you divide your customer base by country, city, ZIP code, climate, setting (urban or rural), or proximity to a certain location. An example of geographic market segmentation is an electric scooter company aiming its products at people who live in crowded cities.
- Behavioral segmentation: This apporach focuses on consumer behavior. It requires marketing research on consumer purchasing habits, spending behavior and brand interactions. Any company that targets customers who have bought a similar product from that company or a competitor uses behavioral segmentation as its marketing segmentation approach.
- Firmographic segmentation: This approach focuses on businesses. Firmographic segmentation targets companies by factors such as industry, location, size and revenue. For example, an energy broker may target industrial and manufacturing companies because their utility bills are likely to be much higher than those of office-based businesses.
- Market segmentation: This approach can be especially useful for social media marketing. This is because, by narrowing the audience of a social media campaign, you can achieve both a higher engagement rate and lower marketing costs.
Why are demographics important in marketing?
When you know the groups of people who are most likely to buy from you, it’s easier to find them, to understand what’s important to them, and to offer a product or service that appeals to them.
Demographics are also important for the following functions.
- Business plans: Demographics give you the information you need to determine the likely size of your target market for your business plan.
- Market research: helps you identify the consumer subgroups that will probably buy your product or use your service. You may discover that the groups you initially expected to be most responsive to your company are not as interested as you thought, while the groups you thought would show little interest are actually highly responsive.
- Image building: By knowing the age, social class, gender and other demographics of your current consumers and target audience, you can develop your company’s logo, imagery and branding to best appeal to your customer base.
- Media use: Demographics help you better determine how to spend your ad budget. If you have an older target audience, using social media to reach them may not be as effective, as social media audiences tend to be younger (though that trend is changing). [Related article: How to Target Older Demographics With Social Media Marketing]
How do companies use demographics in marketing?
Companies use demographics in four primary ways to help them create an effective marketing plan.
- Social media marketing: Study social media platforms’ key demographics to determine on which platforms your target audiences are likely to be active and readily available. Pew’s Social Media Fact Sheet discusses platform use by demographics.
- Ad spend: Websites, radio stations and email newsletters also generally publish demographic breakdowns of their audiences. Use their media packs to determine which advertising platforms will likely generate the highest return on investment.
- Marketing campaign images: Strong branding is more important than ever, and by understanding the demographic makeup of your audience, you can decide how to address your target clients both linguistically and visually. This should form part of your buyer personas, which we will cover later.
- Ad and marketing image placement: Would you place ads for a product with a mostly rural consumer base in subway stations or on the sides of buses? That’s why so many public transit ads are for movies or apps – people living in urban areas tend to use these products and services more than rural residents do.
Demographic market segmentation examples
Considering each relevant demographic category can help you decide how to allocate your marketing budget. Here are some examples:
- Age group can be used to place ads in the most consumed types of media for your target audience – for example, booking TV slots or organizing direct mail campaigns for older people looking to enroll in Medicare.
- Gender can be used to determine whether a social media platform is more likely to expose your product to men or women. For example, a makeup brand may choose a platform that reaches more women, whereas a necktie brand might choose a platform with a user base of mostly men.
- Race and ethnicity is a politically sensitive demographic, as brands are under pressure to take a stand against racism. Brands should understand the experiences of their target audiences and speak to them in their marketing materials. This is especially true of products intended for a specific demographic, such as shampoos designed for Black women.
- Location explains why a department store might, during the winter, target digital ads for its gardening tools at consumers in the Southeast while aiming its ads for snowblowers at people in the Northeast or Midwest.
- Marital status would be a particularly useful demographic for a couples’ vacation resort.
- Education level can be helpful for book publishers that are marketing young adult novels, children’s picture books and political essay collections.
- Occupation is important for non-consumer campaigns. For a school supplies company, there might be a real benefit in directly contacting teachers, who are often responsible for stocking their classrooms.
- Employment status may be of use to a payday loan company targeting potential clients in traditionally insecure job roles.
- Income level data is used by companies selling luxury goods and services to target online and offline audiences.
Use more than just location to find your customers. You might also choose income level and credit score to narrow down the people who see your ad. That can mean a lower cost per campaign and per lead.
6 tools to manage demographic data
Here are six ways to improve your revenue from demographic data and an explanation of whom your business actually serves.
You can perform a demographic analysis on your existing customer database and prospects who have not yet bought from you. How much you can do depends on how much data you’ve collected on them.
When choosing customer relationship management (CRM) software, please select a package that offers you the maximum flexibility in the amount of data you can record per client and that makes it easiest to find client groups based on the data you hold.
You’ll also need to decide which demographic information you want to collect and amend collection forms to include those fields.
Take geographical location as an example of how to use demographic data. You could use your CRM software to promote a webinar but hold separate webinars for customers and prospects in different time zones. Likewise, you could use your CRM to detect higher-than-average engagement with your website or email campaigns to determine which customers and prospects may be closer to a purchase.
Modern CRM software also gives you insight on which demographics are the most responsive to your marketing campaigns. With that information, you could focus more of your time and effort on these groups to increase sales.
Check out our picks for the best CRM software, including our review of Salesforce CRM and our monday.com CRM review.
Consumer and demographic data analysis
You can submit your customer and prospect data to consumer and demographic data analysis companies to add further depth to individual profiles. Depending on the information you can provide to these analytical firms, you could better understand the following about individuals’ specific circumstances for further segmentation:
- Likelihood of buying particular products or services
- Traffic density in their local area (to identify the best location to open a store)
- Local crime, health and education statistics
- Socioeconomic makeup of neighborhoods
- Individual net worth
For example, if you sell luxury clothing, this type of data might inform your decision on where to open new retail branches or target your advertising.
A buyer persona contains as many educated guesses as possible about a fictional customer. Buyer personas are most valuable to product development teams and marketing teams. The idea behind personas is to put a face and a personality on the statistics to better understand your target clients and their hopes and pain points.
A buyer persona includes assumptions on the ideal customer’s age, their educational background, their job and salary, their relationship status, the car they drive, the challenges they face in life, where they look for guidance, and their hobbies and interests. Many companies download a picture from Google Images of what they think a person being described by a persona will look like and give them a name.
Inspiration for your buyer personas often comes from analyzing demographic data, where you can identify shared characteristics of your target clientele.
Customer care/sales team regular contact
Many consumers and businesses welcome contact after a purchase. It makes them feel as if their opinions are important to that company. As well as offering you the chance to build up the demographic information you have on each customer, calling customers may present upsell opportunities that may not have existed previously.
If you have an in-house team for this, great; otherwise, you may wish to consider outsourcing the work to a call center. See our guide on choosing the best call center for your business.
Social media advertising
Social media platforms offer targeted advertising to consumers and businesses with the greatest number of demographic filters. You’ll need to create a social media profile for your business to use their services.
After that, you’ll need to log in to the advertising networks of each platform you want to promote your products and services on. Choose the demographics of greatest interest to your company, set a budget, and upload the creative for your campaigns.
Contrary to popular belief, sending emails to consumers and businesses without prior permission is not illegal. However, to comply with regulations, you need to offer a free opt-out mechanism, honor all requests within 10 days, and keep an up-to-date suppression file, among other requirements. The average reply rate is around 8%.
Third-party data providers
The U.S. has hundreds of specialist B2B and B2C data suppliers from which you can buy lists of specific email, telephone and postal marketing contact details.
While the segmentation on their lists may not be as deep and precise as that of social media networks’ advertising platforms, direct marketing offers an inexpensive route to your end market.
If you choose this path, be extremely specific with each list owner about what you want so that you can reduce the chances of buying data that won’t yield a return.
Email marketing campaign execution costs are very low, and inbox delivery rates can be very high, depending on your email marketing software. Please read our updated article on the best email marketing software providers, which includes a review of Constant Contact.
Max Freedman contributed to the writing and research in this article.