Essential to any successful marketing strategy is the ability to target the right audience. Who is your product or service aimed at, and how can you convince them to buy it?
The solution: segmentation. Divide up the market into distinct categories and test which is the most likely to respond to your marketing efforts. Among the different types of segmentation, one that has long been heavily relied on by marketers is demographic segmentation.
The target audience is selected based on demographics, or socio-economic factors: for example, gender, age, location, languages, annual income, marital status, family size, or education.
However, with more sophisticated methods of segmentation now available, is demographic segmentation still a viable option for marketers? Below, I’ll explore some of the method’s strengths and weaknesses, before investigating the alternative approach of psychographic segmentation.
The advantages of demographic segmentation
Despite the growth of marketing tools and an increasing dependence on new technology, the traditional approach of demographic segmentation has endured. So what are its advantages?
Speed and simplicity: Based on easily obtainable information, such as census data and surveys, demographic segmentation is quicker and simpler to implement than other more complex methods.
Accurate – up to a point: For some products and services, demographic segmentation can identify a target audience with great accuracy: to give a classic example, a heating equipment manufacturer could use vague location info to target regions with a colder or more variable climate.
Can be used creatively: While it is a traditional method, demographic segmentation can still be given a twist. A recent example of this is so-called “BFF” or “Best Friend” marketing, where brands (largely fashion-based) target female customers with informal, chatty emails and social media interaction.
But this idea of “Best Friend” marketing highlights an important truth about demographic segmentation: it should not be used in isolation.
Whilst these women’s fashion brands are clearly focused on the female demographic, they are not simply targeting all women; rather, they are using tools such as social media to get to know their female customers better and create ever-more individualised marketing strategies.
The weaknesses of demographic segmentation
When marketing decisions are made solely on the basis of demographic segmentation, problems can start to arise very quickly…
The danger of stereotyping: When you make broad assumptions about a particular demographic group, there’s a great risk of stereotyping your target audience. This can be damaging for your brand, as, at best, potential customers may feel irritated or, at worst, deeply offended by your generalisations.
Misreading your customers: A demographic group is made up of individuals, and between those individuals there will be a vast amount of variation. Thus, a judgement based on what a demographic group needs is bound to exclude individuals from that group.
Marketer Matt Crush points out the differences between himself and his friend Arnold, both from the millennial age demographic: “Every time a marketer sends me and Arnold the same advertisement, the odds are that the ad is being wasted on one of us.”
Inefficient use of budget: A marketing campaign based on false or overly-broad assumptions about a demographic group is much less likely to result in ROI. Thus, choosing freely available demographic information over more expensive data analysis technology could ultimately be false economy.
So what’s the alternative to demographic segmentation, with its attendant risk of over-generalisation?
A new approach – the benefits of psychographic segmentation
Many marketers are turning away from traditional demographic segmentation and choosing the much more individualised approach of psychographic segmentation.
According to Matthew DeMeritt, “Psychographics broadens the scope from focusing on who a person is, to what that person believes in. Psychographics identifies lifestyle habits, values, attitudes, and other defining attributes.”
The aim is to understand the individual customer at a deeper level, allowing marketing to be specifically tailored to that person and what makes them tick. But if a brand has thousands of customers, is it really possible to approach each one individually?
With increasingly sophisticated technology, such a high aspiration is now indeed within the marketer’s reach. CRM tools can analyse interactions between a company and its individual users, and integrate with marketing automation technology. Data will highlight which specific tactics earn the best response. A testing methodology will allow for iterative improvements and better personalisation.
And widespread engagement with social media also provides opportunities for marketers. Robin Boytos notes that “advertisers can now assign unique personalities to consumers based on the way they communicate on social media. Audience profiling platforms take textual data from social media posts and run it through an AI engine to cluster personalities based on speech.”
Therefore, using these new technologies, psychographic segmentation can provide a more accurate way of identifying a target audience, based on individual personalities and lifestyles. Against the innovative, focused nature of this approach, the flaws of demographic segmentation are shown in sharp relief.
Demographic segmentation should not be discarded completely. For certain products and services it can provide reasonable accuracy in identifying a target audience. Alternatively, it can be a starting point to sketch out a broad category of potential customers, before using other methods to go deeper.
On the other hand, relying too heavily on demographics can lead to generalisation and misreading of customers – resulting in damage to a brand’s reputation and a waste of marketing budget.
Moving from generalisation to individualisation, psychographic segmentation provides a way to identify a target audience with much greater accuracy. New technologies can analyse user data and build personality profiles for customers, allowing businesses to create more tailored marketing strategies.
Customers want to be treated as people, not categories. With demographic segmentation there’s always the risk that the category mindset will predominate; in contrast, with psychographic segmentation, brands have the opportunity to achieve an increasingly personal approach.
Oren Greenberg is a growth marketer, and the founder of the Kurve consultancy in London. He helps startups and corporate innovations projects scale using digital channels. He has written for leading marketing blogs and has been featured in the international press.