Of the various market segmentation strategies, demographic segmentation is considered the best as it helps the firms tap their potential market without wasting the available resources.
In marketing, it is very difficult for a single firm to satisfy the needs of all consumers. In such circumstances, an apt way out is to resort to ‘market segmentation’, identify a particular niche and fulfill the needs of all the consumers belonging to that niche. Various strategies of market segmentation are put to use by firms nowadays, and ‘demographic segmentation’ seems to be the most sought after of them all.
By definition, market segmentation is the division of market into small segments in order to make marketing easier and avoid the waste of resources. It helps the firm tap available resources and satisfy the needs of a particular section of the market which it caters to. Simply put, it helps companies identify potential consumers and target them, which, in turn, results in efficient use of resources.
The division of market is carried out by using one of the five segmentation strategies.
~ Behavior segmentation
~ Benefit segmentation
~ Psychographic segmentation
~ Geographic segmentation
~ Demographic segmentation
Demographic Segmentation Explained
Demographic segmentation is market segmentation based on various demographic factors, like age, gender, social class, etc. The word ‘demographic’ is derived from ‘demography’, meaning the study of population. It helps the firm divide the market into several segments or groups, each having a common variable, and target each of these groups to enhance its performance. This market segmentation strategy aims at understanding the prospective market, and taking necessary steps to ensure that the needs of a targeted group are fulfilled.
Variables
Segmentation variables are basically the factors which help the firm determine the target group. In demographic segmentation, variables mainly consist of demographic factors, such as age, ethnicity, occupation, etc. Given below is a list of variables, which are commonly used to divide the market into segments.
• Age • Gender • Family size • Family life cycle • Nationality • Occupation • Income • Education • Lifestyle • Ethnicity • Religion • Social standards
Examples
Based on such demographic variables, the firm can decide which group they need to cater to.
A firm dealing in sports cars, for instance, will have to target people in the age group of 20-40. On the other hand, a company publishing women’s magazines will have to specifically target the female population. The “sporty” feel of a sports sedan can attract youngsters to a car segment, which is more often associated with business class, and that explains why car manufacturers are adding sports sedans to their product lineup.
An example can be that of a cell phone manufacturer segmenting the potential market with age as the variable. If people from the 15-25 age group form a major chunk of the potential customers, the manufacturer is more likely to opt for a sleek, trendy design. Furthermore, he may even decide to use the gender variable and come up with the idea of black, or blue handsets for guys and pink, or red for girls.
Advantages of Demographic Segmentation
If demographic segmentation is one of the most popular methods of market segmentation today, it is because of certain benefits, which make it the first choice for various firms. The two prominent advantages of this segmentation strategy are –
~ The firm can easily categorize the wants of the consumers on the basis of demographic factors, such as age, gender, etc.
~ Its variables are much easier to obtain and measure, compared to the variables of other segmentation strategies.
Disadvantages of Demographic Segmentation
As for the disadvantages, the most prominent one, which is often cited by its critics, is the one-dimensional approach that it follows. In this segmentation strategy, it is usually believed that all the individuals belonging to a particular ‘group’ have the same needs, which is not necessarily the case. If a firm is resorting to demographic segmentation alone, it is more likely to be vulnerable to its competitors.
Demographic segmentation helps the firm understand the customers, and satisfy their needs. In a market driven by intense competition, such segmentation can be of great help. The entire concept of market segmentation is based on the simple fact that you can’t please all consumers. You have to identify the potential market, divide it into various segments, and cater to the needs of each segment individually if you are to become a successful business entity.