Market Demographic Analysis
Demographic variables such as age, gender, income and occupation hold important clues to consumer behavior. People who share the same demographic profile usually have the same purchasing behavior. As a result, demographic analysis is an important component of marketing. Effective marketing campaigns target a specific audience. Demographic information is particularly useful when marketing mangers lack enough knowledge about a market or when the market is changing. Small businesses typically serve a smaller market, and managers need to have better grasp of their markets; hence, knowledge of the basic premises of demographic analysis can help them better serve their markets.
Unit of Analysis
In demographic analysis, managers need to first determine if their customers are individuals or businesses. This guides variable selection and information gathering. If the customers are individuals, variables such as gender, age and income guide information gathering. If companies form the customer base, issues such as the industry, sales and number of employees become important.
Customers have different preferences and needs during different stages of life. Also, the purchasing power of different age groups may change over time. For example, teenagers have enormous purchasing power and can potentially influence purchasing habits of families. Likewise, senior citizens spend more today than a generation ago and are more economically active.
Marketing has increasingly become interested on the influence of lifestyle on demand for products and services. For example, pet ownership is on the rise, and pet lovers make up an important market for companies that can target them. Likewise, singles may make up a demographic group with a specific lifestyle and preferences. Green and eco-friendly consumerism is strengthening, and addressing its concerns is important for marketing mangers. These consumers need credible assurance that the products are environmentally friendly.
Depending on the target market, a host of other variables such as gender, education, occupation and income affect purchasing behavior and preferences. In addition to choosing the variables, managers also need to identify the right source of data. For example, federal and state census data can be used to extract demographic information.
Those conducting a demographic analysis should consider individual differences and avoid the stereotyping pitfall. Stereotyping is broad generalization about a group of people based on limited knowledge. It is unethical and damaging to the image of the business. Managers should bear in mind ethical standards in conducting demographic analyses.
Alfred Sarkissian holds a master’s degree in industrial management. With experience in business and public policy, he has covered intellectual property rights, industrial policy and technology policy for various publications.