Before there was a thing called the internet – brands used demographic data to understand, segment, and convert people to customers.
With the massive amounts of data almost every business has at their fingertips, many of the most basic (and often most powerful) forms of segmentation are overlooked.
Needless to say, this is a mistake because it can often be low hanging fruit for you to capitalize on.
In this article, you’ll learn more about demographic data, how to get it, and interesting ways to use it to grow your business.
What is demographic data?
Demographic data is information collected about the characteristics of a population and is often used to research whether or not a product is suitable for different groups. Demographic data can influence your go-to-market strategy, pricing, and even the way you position your products.
It includes information like age of a population, income levels, family makeup, education level, and more. Together, this information can paint a picture that helps you make high-impact changes in your business.
Let’s look at a simple way to get demographic data.
How to get demographic data?
You can use publicly available information such as what the Census Bureau provides. This is far from ideal because it may not be indicative of your customer base.
You can hold multiple phone calls with your target audience. Unfortunately, it’s time-consuming if you do it in-house and expensive to outsource it. The solution comes in the form of simple demographic surveys.
As the name implies, a demographic survey is a research instrument that asks a series of demographic questions to find the characteristics of your audience. You can ask anything but keep in mind that people won’t answer questions that are too personal. Avoid asking things like:
- Real names
- Exact income (use ranges instead)
- Exact age (use narrow or broad ranges)
- Address (ask for a geographic location like city or county)
If you already have a good idea of the demographic characteristics of your customers then you can use multiple-choice questions. This is because when you present options, it’ll be relevant to most of your respondents.
When you’re just starting the research and only have assumptions about who you’re serving, use open-ended questions. This will help you avoid providing the wrong answer options and let your customers fill the gaps in your knowledge.
Only focus on the information that has a direct application to your business. For example, if you’re selling software, it may not be important to know the gender of your customers. It will be important to understand their income or employment. Whenever possible, use a ratio or interval measurement scale so you can do deeper analysis.
Once you’ve gotten your demographic data back, done analysis, and understand who your customers are, it’s time to use that data.
Uses of demographic data
I’ll touch on three ways to use demographic data but keep in mind that we’re only scratching the surface. Think of this as a primer. Get creative in the applications and you’ll be able to consistently improve your business.
Let’s dive in.
Meaningfully group customers
Even though people may be buying the same product, that doesn’t mean they’re the same or even remotely similar. For example, BMW sells luxury cars and everyone from entrepreneurs to professionals buy it. The way the car is positioned for each demographic group will affect their willingness to purchase.
The professional may buy it because it’s a status symbol but the entrepreneur may buy it because they’re busy and it requires little maintenance. Of course, BMW will position its car differently for each and it could get an idea of who those people are based on employment status, income, and location.
BMW isn’t the best example because it has near-limitless resources to implement segmentation. An Ecommerce store selling clothes and accessories could also use demographic segmentation.
The most obvious grouping would be gender. Going beyond that, it could promote the more expensive products to people who are in a specific income bracket and inexpensive products to people in a lower income bracket.
The goal is to move away from one size fits all products and messaging. Use the data to make meaningful customer groups that’ll be more likely to respond to your messages and increase revenue.
Identify markets to enter
Almost every growing business reaches the point of saturation in its initial market. Most of their potential customers have heard of them or bought from them. When that happens, demographic segmentation makes it possible to choose the best markets to target and enter.
The results of your research will tell you where your customers are. It can also let you know the density of customers in specific areas. To get this information, ask a demographic survey question about where they live and provide answer options.
Plot the results on a graph to find out where the majority of your customers are. Also, take note of other markets where you’ve not made an effort to market your products but still have customers.
Look at the demographic profile of the people buying in those fringe markets. Are they similar to people who spend a lot of money on your business? Do they have the same characteristics as those who refer other customers? Can you see that they’re similar to people who buy often?
If you can find a statistically significant number of people who match your ideal customer group, it may mean the market is worth your time. Of course, you’ll want to do small tests to confirm your assumptions but this can be a great way to take the guesswork out of expansion.
Develop or customize products based on needs
There are countless shirt brands. Some of them cost $5 and some cost over $1,000. People are buying at every point along the spectrum. It could be argued that there’s no shirt that’s too expensive.
While that may be true, there is such a thing as a shirt being too expensive for a specific group of people. If someone is making $25,000/year, they’re not buying $1,000 shirts.
Demographic data gives you insights into the type of employment your customers have and their income range. If the majority of them have a high income, you know they can afford expensive products. Whether they’ll buy it is another story that has to do with positioning.
When you see the majority of your customers have a lower income, you may want to develop a cheaper product line to meet their needs. Keep in mind that even people with a lower income can purchase expensive products if they desire or need it enough.
Conversely, you can present the same product in a different way based on the income of your customers.
For example, if you were trying to submit a website design proposal, you may take the size and revenue of a company into consideration. If it’s a small business that’s just now coming online, you would try to work within their budget. If it’s a conglomerate like Apple, the cost wouldn’t be a consideration and you’d be able to charge much more.
Demographic data shouldn’t be ignored because there are “sexier” ways to segment your audience. In fact, you should embrace it because the data you get is concrete and easier to make use of.
Send out a survey to get demographic data and use the results to group customers. Once grouped, test different marketing messages, explore new acquisition channels, and tailor your products to the needs of your customers.