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Demographics

Socio-economic characteristics of a population

What are Demographics?

Demographics refer to the socio-economic characteristics of a population that businesses use to identify the product preferences and purchasing behaviors of customers. With their target market’s traits, companies can build a profile for their customer base. They can determine their key customers or target market and create marketing materials.

 

Demographics - Market segmentation

 

Demographics also affect other business factors such as pricing, packaging, and service offers. When marketing campaigns are aligned with the demographics of customers, sales will likely increase.

 

Demographic Variables

What are the traits that make an impact on a business strategy? Here are some of the demographic variables used by businesses regardless of industry:

 

#1 Purchasing Power

In general, different products and services appeal to different income groups, and value is a critical deciding factor on which products to buy or services to avail. High-end dining establishments cater to customers with higher incomes, while those with lower incomes, and hence less disposable income, most likely go for affordable restaurants.

If your business is selling budget-friendly clothing items, it is best to attract people with lower salaries through discount shops and wholesalers. On the other hand, reach out to boutiques and specialty retail shops where people with higher incomes go.

 

#2 Geographic Region

The location also affects the buying preferences and behaviors of customers. Companies that aim to get higher sales and profits need to understand how the geographic regions of their customers come into play. For instance, you should know where your customers shop for specific food items, whether it be local markets or big supermarkets. If you sell your products in areas where your target consumers usually go to for their food and drink fix, you will most likely increase sales. Otherwise, you will lose such customers.

 

#3 Age

Products and services appeal to different age groups. For instance, millennials or people who are 35 years old and below are usually the critical customers of gadgets such as the latest models of phones and laptops. The baby boomer generation, which refers to people who were born between 1946 and 1964, are a large group as well. If your products are designed for millennials, make sure to offer them in communities or areas where there are a lot of young people.

 

#4 Family Status

Does the community comprise a lot of families with children or young professionals who are not yet married? Family status as a demographic variable exerts a significant impact on a business strategy. Companies need to understand the overall status of the population in a specific area to determine if their products or services will appeal to them.

 

How to Obtain Demographic Information

Demographics play a significant role in the success of a business, but how can you obtain the relevant variables? One of the best ways is to conduct market research surveys. Whether through email, phone or face-to-face meeting, a market research survey is a great tool to get as much demographic data as possible. Notice the demographics-related questions at feedback forms in establishments and even online? Data from the questions help businesses by knowing more about their customers.

If you need more demographic data, you can visit the website of the Census Bureau where you can find information about customers on a state or county level. Trade associations and local chapters of different industries also provide demographic data that you can use for your business strategy.

 

Related Readings

CFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)™ certification program, designed to transform anyone into a world-class financial analyst.

To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below:

  • 5 P’s of Marketing
  • AIDA Model
  • Economies of Scope
  • Market Planning

Financial Analyst Certification

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