Demographic segmentation, also known as customer or consumer segmentation, is a marketing strategy in which companies aim advertising for their products or services at portions of the population that would be most likely to purchase them. In the past, demographic segmentation was accomplished by taking out ads in certain types of magazines or commercials during certain types of TV shows. However, in the modern digital era, with the information that social media platforms and analytics software is able to gather on consumers through sifting of internet use, demographic segmentation is much more precise.
Dividing consumers according to demographics is relatively easy and inexpensive to accomplish because useful data is readily available. Businesses can collect it from census information, consumer reviews, surveys, analytics software, and other sources.
The advantages of demographic segmentation are numerous. For instance, by targeting specific segments of the consumer population, companies can greatly improve their return on investment, or ROI. This refers to the amount of products or services they sell in relation to the amount of money they spend on advertising. Companies are also able to speak directly to the type of consumers they want to keep, and in this way they improve customer retention and loyalty. Since they know precisely who they are targeting, they can optimize their strategies, clarify their messages, and plan their advertising campaigns for the long term. They can also improve their products and services based on customer need.
There are several categories in which potential customers can be divided for demographic segmentation. These include age, gender, occupation, income, religion, ethnicity, and family structure. Additionally, geographic segmentation divides consumers according to where they live, behavioral segmentation focuses on what consumers do, and psychographic segmentation considers consumers in relation to their lifestyles, interests, personalities, values, and social status.