In this article, we will define demographics, with examples and explain ways of collecting demographic data. We will highlight the importance of demographics in terms of business marketing, and decision making as well as their use in public sector for policy making.
The term demographics is mainly used to imply the characteristics of a population categorized based on distinct criterial like age, sex and income to study the attributes of a particular group in the population. Demographic data is important for businesses and especially useful in terms of marketing, sales, and customer experience. Whether for business enterprises or government agencies, demographic data helps with decision making in several critical areas. While business enterprises generally use demographic data to create marketing strategies, government agencies use the data to create economic, legal, and other policies. There are various ways to collect demographic data including focus groups, surveys, polls and census. There are several uses of demographic data for businesses. Its applications are not limited just to marketing, but also apply in terms of pricing, sales management, development of new products and services and making important decisions in other operational areas.
What are demographics?
Demographics are statistics describing a population and its characteristics. Demographic analysis implies the study of a population based on age, sex, race or other demographic factors. Such data can also include employment status, education, marriage rates, birth and death rates, and similar other categories. It is not just businesses that use demographic data. Government agencies and Non-government organizations (NGOs) also use demographic data for various purposes. For example, government agencies can use demographics for policy development and a research organization may use it to carry out economic market research. For example, a fashion brand wants to reach buyers in the twenty something age group with a range of premium products, which means it is looking for twenty somethings that can afford to buy its products.
Demographic data can include information elated to the characteristics of a given population including:
- Race and ethnicity
- Income level
- Hobby and interests
- Employment status
- Birth rates
- Death rates
- Marriage rates
- Religious affiliation
- Political affiliation
- Geographic location
- Languages spoken
How to collect demographic data?
There are several ways to collect demographic data and with the proliferation of internet technology and increased use of digital tools including websites, apps, email, social media, and other channels, it has become easier for marketers to collect demographic data. Some of the most commonly used methods for collecting demographic data are listed below:
Polls and surveys:
Consumer polls and surveys have become one of the most popular and widely used methods of collecting demographic data. Businesses across various industry sectors depend on consumer surveys and polls to collect demographic data. Consumer polls and surveys have also become common to know about what customers love or do not love about a particular product or service or even a brand. Polls and surveys can yield valuable data to understand customer sentiment towards a product or brand. However, these polls and surveys also generate valuable demographic data related to your customers’ education, income level, marital status, age, sex, and similar other characteristics which a business can use to serve its customers better and to drive customer engagement higher. Businesses are also using social media and ecommerce channels to collect customer demographic data. The social media accounts can especially be very helpful in this regard.
Online surveys have also become common across various industry sectors. Market research agencies also use this method for collecting demographic data. The main advantage of using this method for data collection is that it is convenient and does not cost much. However, the sample that is available in this method is mainly a simple random sample. It is why it can be combined with other strategies to yield superior results. However, when it comes to collecting demographic data cost effectively, online surveys are highly effective. In the digital services industry, online surveys are among the most used tools to collect demographic data.
Census carried out by governments and government agencies are also a valuable resource of demographic data. Government agencies responsible for collecting data track data related to births, deaths, marriages, divorce, migrations etc to collect demographic data. In the US, apart from the population census, the Bureau of Labor Statistics also provides valuable statistics on employment by industry including data on employment by age, sex, and race.
Focus groups are also an effective method of collecting demographic data. Several businesses employ this method of demographic data collection for launching a new product or service and understanding the attributes that customers value the most in these products or services. Companies can organize focus groups to discuss specific products or services and to know how people interact with various products and services and the attributes they like the most. This method can also be used for collecting feedback from people in a demographic group that can be used to improve existing products or to launch new ones.
Sometimes basic demographic data is not sufficient to serve the needs of businesses and marketers. In such a case, one can employ psychographic or attitudinal research to look beyond basic demographic data. Psychographic research concerns the various psychological reasons that people in a specific demographic group make specific types of purchasing choices and their buying behavior. It looks into the reasons that people might or might not buy a certain product. It researches consumer spending patterns, hobbies, value systems and views on specific products or services. It helps marketers and businesses better understand why people would prefer a certain product over the others. However, this data can also be used for personalization and to improve marketing and customer experience.
Applications of demographic data in public and private sector:
Demographic data has several important applications in both the private and public sectors. Marketers, economists, analysts, government agencies and businesses use this type of data in various areas and for varying purposes. Some of the common applications of demographics are as follows:
Formulating marketing and product strategies:
Demographic data is most helpful for businesses in terms of formulating marketing and product strategies. Businesses first need to understand their target audience and its buying habits. Having demographic data allows them to know about their market size and segment their target market on the basis of demographic factors like age, sex, income, education, purchasing habits etc.
Market segmentation is at the core of marketing for a large number of firms. It allows them to segment their target market into groups and target the one that is most likely to buy their products. Apart from that, companies are also able to target those customers which are most likely to switch to their products from rival brands. The insights generated from demographic data can be applied in several areas like improving sales, creating new marketing strategies and for launching new products and services that might interest a particular customer group.
There are several brands that use the demographic data efficiently to target a desired customer segment. While several of them have segmented customers by age group, others by income or lifestyle. The digital fashion platform ASOS targets twenty somethings mainly or the people in the age group of 20-25 mainly. Its marketing and targeting strategy is based purely on age and nothing else. It has helped the company build a large customer base very fast. The company has expanded to several new markets targeting customers only on the basis of demographics (age). There are other fashion brands too that target customers based on their lifestyles. Fast fashion brands like Zara and H&M also target their customers based on age, income and lifestyle. How does demographic data help these firms? It helps them identify the right target audience and then find the right channels to reach them and keeping their market efforts focused on the right group.
For conducting economic analysis:
Demographic data has some crucial applications in the field of economic analysis also. There are several factors including economic, social and political which affect consumer preferences and demand for various products. However, demographic data can help prepare economic forecasts which can be helpful for businesses and other agencies in various areas. It can also help predict market situation and how various changes might affect demand for particular products. There are several economic indicators that analysts need to research to understand market situation and trends. For example, employment data including employment status by age and sex, GDP and other important economic indicators can help analysts prepare more accurate reports identifying trends and changing consumption patterns across the society.
While consumption trends keep changing and can fluctuate due to the impact of various factors including economic, social, technological or political, if analysts can prepare more accurate reports, businesses will be able to anticipate changes and accordingly make changes to their manufacturing, sales, and marketing strategies for the future. There is a wealth of demographic data in areas including finance, healthcare, education, real estate and other areas that analysts can use to prepare reports. Their job is made easier by emerging technologies including algorithms, big data and AI.
Forming government policies:
Agencies across the public sector also rely heavily on demographic data to formulate policies and to understand changing needs of the population. Governments at both state and central level use this data to create public policies and for allocating funds for various public services. Governments carry out population census and economic surveys to understand the state of poverty and employment across the nation and accordingly create sound policies that will affect the economic health of the nation over the next several years. This data can be used to improve the condition of education, employment, and living standards across the entire nation. Similarly, government can use education and health data to improve education and healthcare services. Data from the census and surveys also helps government agencies the situation of law and order and form better policies to create harmony in the society. Demographic data has both short term and long-term applications in the public sector. In the longer term, the performance of the economy and the society depends on how well the government uses this data to solve social and economic problems.
A few last words:
Demographic data collection is an important part of marketing and market segmentation. However, demographics also have application outside marketing and in areas like public policy making and economic research and analysis. Whether in private or public sector, demographic data is used for making several critical decisions. In the public sector, demographics are used for important policy decisions in economic, social and legal areas. On the other hand, in the private sector, demographic data is applied in several areas including marketing, sales and customer service. Businesses need to collect demographic data for marketing, product development, and for improving customer experience. While there are several tools for collecting demographic data, digital tools have continued to gain popularity in this regard. Online surveys are now used commonly for market research and to collect demographic data. Census records are also a useful source of demographic information. In terms of business, while demographic data helps improve marketing and other business processes, in several areas it can be insufficient and must be used in combination with other type of information like behavioral data to create more effective strategies.