Demographics or demographic data refers to selected population characteristics as used in government, marketing or opinion research, or

the demographic profiles used in such research. Commonly-used demographics include race, age, income, disabilities, mobility (in terms of travel
time to work or number of vehicles available), educational attainment, home ownership, employment status, and even location. Distributions of values
within a demographic variable, and across households, are both of interest, as well as trends over time. Demographics are frequently used in economic
and marketing research.

Demographic trends describes the changes in demographics in a population over time. For example, the average age of a population may
increase over time. It may decrease as well. Certain restrictions may be set in place changing those numbers. For instance in China with the one child
policy.

The term demographics as a noun is often used erroneously in place of demography, the study of human population, its structure and
change. Although there is no absolute delineation, demography focuses on population structure, processes and dynamics, whereas demographics is
most often used in the fields of media studies, advertising, marketing, and polling, and should not be used interchangeably with the term "demography"
or (more broadly) "population studies".

Demographic profiles in marketing

Marketers typically combine several variables to define a demographic profile. A demographic profile (often shortened to "a demographic")
provides enough information about the typical member of this group to create a mental picture of this hypothetical aggregate. For example, a marketer
might speak of the single, female, middle-class, age 18 to 24, college educated demographic.

Marketing researchers typically have two objectives in this regard: first to determine what segments or subgroups exist in the overall population;
and secondly to create a clear and complete picture of the characteristics of a typical member of each of these segments. Once these profiles are
constructed, they can be used to develop a marketing strategy and marketing plan. The five types of demographics in marketing are age, gender,
income level, race and ethnicity.

Basically, Brandwise and other marketing firms help clients develop a target audience demographic in order to be able to reach them through
advertising, direct mail, trade show exhibiting, web promotions, email marketing, etc.

This is an important step in targeting and segmenting your audience. A well defined strategic demographic of your customers and prospects is half the
battle in new client conversion. It also leads into the next phase of creating buyer personas which helps in both marketing and sales.

5 Reasons to Use Demographics in Marketing

Most people willingly assign themselves to categories. In fact, they prefer to be categorized, proudly proclaiming themselves as Cleveland Cavaliers
fans; book-lovers; people who are scared of spiders. Categories are way for people to find those most like themselves and assign certain traits and
characteristics to their own behavior.

Think of demographics as the ultimate categorization tool. Grouping consumers based upon characteristics allows organizations to better serve the
needs of their ideal customers. In terms of marketing, it means selling a product or service to the person most likely to buy it based on their unique
needs and preferences.

Smaller organizations might believe that market research and demographics are something only massive businesses have access to (or need to worry
about). But not taking the time to truly understand your customers could be costing you. Here’s why:

1. Understanding the Ideal Customer

Every business has an ideal customer profile: A most-likely laundry list of traits and characteristics a customer would exhibit to purchase a
product. It’s why laundry soap is usually marketed to moms, and why financial services cater to baby boomers. As you create the profile of the
ideal customer, you delve deeper into that ideal customer’s tastes, preferences, and potential issues with a product or service. Doing so allows
you to improve and create marketing opportunities that target the customer you want.

2. Lowering Marketing Costs

Marketing can be extremely expensive, and medium is one of the factors that essentially decides your marketing budget. If you know your target
demographics, you can stretch that budget by going where you can find your ideal customer. If you’re looking to target millennials, it wouldn’t
make sense to spend money on a direct mail marketing campaign–they’re all on social media. Instead of large, blanket marketing strategies that
cast wide nets for a few fish, you’re able to cast your fishing rod and catch your limit in a smaller (more effective) pond.

3. Identifying New Opportunities

 Not only do demographics help you define and find your ideal customer, they can help you identify gaps in your marketing strategy. Any chief
marketing officer will need it to understand different consumer bases. You might be marketing to Gen Xers and realize that you’re leaving 20-
somethings out of the equation. Similarly, your key demographic might be asking for products and features based on their lifestyles, which would
mean a no-brainer addition to a product or service line.

4. Creating Unique Selling Points

Demographics help you create a marketing story. Instead of just throwing a product or service out there and hoping it sticks, you can create and
define scenarios to which your customers can relate. If you think about some of the products and services you use regularly, chances are you
can identify times when you were specifically marketed to based on your age, gender, geographical location, economic status, and overall
lifestyle.

5. Increasing Sales
The most important function of demographics in marketing is obviously to increase sales. By understanding consumers, any business can
increase marketing efforts to target those most likely to buy. Whether it means changing up marketing strategy or offering current customers
more products and services, it pays to really know what consumers want.

Don’t worry: Demographics won’t pigeonhole your efforts to just one subset of the population. Instead, it lets organizations both big and small get to
know past, present, and future customers better. And, the better you know your customers, the more likely you can give them exactly what they want.

What Is Demographics in Marketing?

Demographics are statistics that companies keep on business clients and consumers. These marketing statistics may include the sizes of businesses so companies ca n

better differentiate between small, mid-sized or large companies. But they are more commonly used to identify differences in personal attributes among consumers.

There are many different types of demographics companies use for various purposes.
Identification

Common demographics include age, gender, race and ethnic origin. Companies also track demographics like education, household size and occupation. Most

demographics are defined or delineated by specific ranges. For example, the age demographic may divided into ranges such as 18 to 24; 25 to 34; 35 to 54; and 55

years and over. People within these age groups have different values. Their preferences for certain products or services may vary as well. Similarly, statisticians may

divide income statistics into groups to differentiate those in the lower middle, middle and upper class.
Obtaining the Data

Companies can obtain demographic information from the U.S. Census Bureau. They usually list various demographics by state and city. Marketers can also obtain

more localized demographic information from area or county Chambers of Commerce. These entities typically break data down by various census tracts or smaller

regions in metropolitan areas. Companies that want demographic data related to their industry often purchase reports from marketing research companies like Nielsen,

Forrester Research or The NPD Group. These companies usually conduct regular surveys to garner this information. For example, a consumer products company may

want age breakdowns on the heaviest buyers or users of laundry detergents. Businesses can obtain more company-specific data by conducting their own phone or

Internet surveys. Warranty cards are another tool that can be used for collecting demographic data.
Local Uses of Data

Companies use local demographic data to better define their key customers. Certain data are more relevant to various businesses. For example, a high-end woman's

specialty retailer, which offers premium or higher-priced clothing, may focus on women over 35 with incomes above $75,000 per year. A fast food restaurant offering

children's meals may be interested in learning the percentage of families in their area who have kids. Hence, it may start by studying household size data along with

age breakouts of kids 12 and under.

Market Segmentation
 Companies also use demographic data to identify key buying groups on a regional or national basis. For example, a small financial management firm may be

interested in expanding to markets with large populations of people over 55. Hence, top management may study available data in contiguous markets first to determine

where to locate the new offices.

5.2 How Markets Are Segmented

1. Understand and outline the ways in which markets are segmented.

2. Explain why marketers use some segmentation bases versus others.

Sellers can choose to pursue consumer markets, business-to-business (B2B) markets, or both. Consequently, one obvious way to begin the
segmentation process is to segment markets into these two types of groups.

Different factors influence consumers to buy certain things. Many of the same factors can also be used to segment customers. A firm will often use
multiple segmentation bases, or criteria to classify buyers, to get a fuller picture of its customers and create real value for them. Each variable adds a
layer of information. Think of it as being similar to the way in which your professor builds up information on a PowerPoint slide to the point at which
you are able to understand the material being presented.
There are all kinds of characteristics you can use to slice and dice a market. “Big-and-tall” stores cater to the segment of population that’s larger sized.
What about people with wide or narrow feet, or people with medical conditions, or certain hobbies? Next, we look primarily at the ways in which
consumer markets can be segmented. Later in the chapter, we’ll look at the ways in which B2B markets can be segmented.

Types of Segmentation Bases

Table 5.1 “Common Ways of Segmenting Buyers” shows some of the different types of buyer characteristics used to segment markets. Notice that the
characteristics fall into one of four segmentation categories: behavioral, demographic, geographic, or psychographic. We’ll discuss each of these
categories in a moment. For now, you can get a rough idea of what the categories consist of by looking at them in terms of how marketing professionals
might answer the following questions:
 Behavioral segmentation. What benefits do customers want, and how do they use our product?
 Demographic segmentation. How do the ages, races, and ethnic backgrounds of our customers affect what they buy?
 Geographic segmentation. Where are our customers located, and how can we reach them? What products do they buy based on their locations?
 Psychographic segmentation. What do our customers think about and value? How do they live their lives?
Table 5.1 Common Ways of Segmenting Buyers

By By
By Behavior Demographics By Geography Psychographics

 Age/generatio
n

 Income

 Gender
 Activities
 Benefits sought from the product  Family life  Region (continent, country,
cycle
 Interests
state, neighborhood)
 How often the product is used (usage rate)
  Opinions
Ethnicity  Size of city or town
 Usage situation (daily use, holiday use, etc.)
  Values
Family size  Population density
 Buyer’s status and loyalty to product (nonuser, potential
  Attitudes
user, first-time users, regular user) Occupation  Climate

 Education
 Lifestyles

 Nationality

 Religion

 Social class
Segmenting by Behavior

Behavioral segmentation divides people and organization into groups according to how they behave with or act toward products. Benefits
segmentation—segmenting buyers by the benefits they want from products—is very common. Take toothpaste, for example. Which benefit is most
important to you when you buy a toothpaste: The toothpaste’s price, ability to whiten your teeth, fight tooth decay, freshen your breath, or something
else? Perhaps it’s a combination of two or more benefits. If marketing professionals know what those benefits are, they can then tailor different
toothpaste offerings to you (and other people like you). For example, Colgate 2-in-1 Toothpaste & Mouthwash, Whitening Icy Blast is aimed at people
who want the benefits of both fresher breath and whiter teeth.

Video Clip

A Vintage Colgate Commercial from the 1950s

(click to see video)

Watch the YouTube video to see a vintage Colgate toothpaste ad that describes the product’s various benefits to consumers. (Onscreen kissing was
evidently too racy for the times.)

Another way in which businesses segment buyers is by their usage rates—that is, how often, if ever, they use certain products. Harrah’s, an
entertainment and gaming company, gathers information about the people who gamble at its casinos. High rollers, or people who spend a lot of money,
are considered “VIPs.” VIPs get special treatment, including a personal “host” who looks after their needs during their casino visits. Companies are
interested in frequent users because they want to reach other people like them. They are also keenly interested in nonusers and how they can be
persuaded to use products.

The way in which people use products is also be a basis for segmentation. Avon Skin So Soft was originally a beauty product, but after Avon discovered
that some people were using it as a mosquito repellant, the company began marketing it for that purpose. Eventually, Avon created a separate product
called Skin So Soft Bug Guard, which competes with repellents like Off! Similarly, Glad, the company that makes plastic wrap and bags, found out
customers were using its Press’n Seal wrap in ways the company could never have imagined. The personnel in Glad’s marketing department
subsequently launched a Web site called 1000uses.com that contains both the company’s and consumers’ use tips. Some of the ways in which people
use the product are pretty unusual, as evidenced by the following comment posted on the site: “I have a hedgehog who likes to run on his wheel a lot.
After quite a while of cleaning a gross wheel every morning, I got the tip to use ‘Press’n Seal wrap’ on his wheel, making clean up much easier! My
hedgie can run all he wants, and I don’t have to think about the cleanup. Now we’re both GLAD!”

Encouraging consumers to use your products for multiple purposes is a smart marketing strategy.

Although we doubt Glad will ever go to great lengths to segment the Press ’n Seal market by hedgehog owners, the firm has certainly gathered a lot of
good consumer insight about the product and publicity from its 1000uses.com Web site. (Incidentally, one rainy day, the author of this chapter made
“rain boots” out of Press ’n Seal for her dog. But when she later tried to tear them off of the dog’s paws, he bit her. She is now thinking of trading him in
for a hedgehog.)

Segmenting by Demographics

Segmenting buyers by personal characteristics such as age, income, ethnicity and nationality, education, occupation, religion, social class, and family
size is called demographic segmentation. Demographics are commonly utilized to segment markets because demographic information is publicly
available in databases around the world. You can obtain a great deal of demographic information on the U.S. Census Bureau’s Web site
(http://www.census.gov). Other government Web sites you can tap include FedStats (http://www.fedstats.gov) and The World Factbook
(http://www.cia.gov/cia/publications/factbook), which contains statistics about countries around the world. In addition to current statistics, the sites
contain forecasts of demographic trends, such as whether some segments of the population are expected to grow or decline.

Age

At this point in your life, you are probably more likely to buy a car than a funeral plot. Marketing professionals know this. That’s why they try to
segment consumers by their ages. You’re probably familiar with some of the age groups most commonly segmented (see Table 5.2 “U.S. Generations
and Characteristics”) in the United States. Into which category do you fall?

Table 5.2 U.S. Generations and Characteristics

Birth
Generation Also Known As Years Characteristics

Seniors
“The Silent Generation,” “Matures,” “Veterans,” and 1945 and  Experienced very limited credit growing up
“Traditionalists” prior
 Tend to live within their means
 Birth
Generation Also Known As Years Characteristics

 Spend more on health care than any other age

group

 Internet usage rates increasing faster than any

other group

 Second-largest generation in the United States

Baby
 Grew up in prosperous times before the widespread
1946–1964 use of credit
Boomers

 Account for 50 percent of U.S. consumer spending

 Willing to use new technologies as they see fit

 Comfortable but cautious about borrowing

Generation X 1965–1979
 Buying habits characterized by their life stages

 Embrace technology and multitasking

 Largest U.S. generation

Generation Y
“Millennials,” “Echo Boomers,” includes “Tweens”
1980–2000
 Grew up with credit cards
(preteens)
 Adept at multitasking; technology use is innate

 Ignore irrelevant media

Note: Not all demographers agree on the cutoff dates between the generations.

Today’s college-age students (Generation Y) compose the largest generation. The baby boomer generation is the second largest, and over the course of
the last thirty years or so, has been a very attractive market for sellers. Retro brands—old brands or products that companies “bring back” for a period
of time—were aimed at baby boomers during the recent economic downturn. Pepsi Throwback and Mountain Dew Throwback, which are made with
cane sugar—like they were “back in the good old days”—instead of corn syrup, are examples (Schlacter, 2009). Marketing professionals believe they
appealed to baby boomers because they reminded them of better times—times when they didn’t have to worry about being laid off, about losing their
homes, or about their retirement funds and pensions drying up.
Baby boomers are aging and the size of the group will eventually decline. By contrast, the members of Generation Y have a lifetime of buying still ahead
of them, which translates to a lot of potential customer lifetime value (CLV), the amount a customer will spend on a particular brand over his/her
lifetime, for marketers if they can capture this group of buyers. However, a recent survey found that the latest recession had forced teens to change their
spending habits and college plans and that roughly half of older Generation Yers reported they had no savings 1.
So which group or groups should your firm target? Although it’s hard to be all things to all people, many companies try to broaden their customer bases
by appealing to multiple generations so they don’t lose market share when demographics change. Several companies have introduced lower-cost brands
targeting Generation Xers, who have less spending power than boomers. For example, kitchenware and home-furnishings company Williams-Sonoma
opened the Elm Street chain, a less-pricey version of the Pottery Barn franchise. The Starwood hotel chain’s W hotels, which feature contemporary
designs and hip bars, are aimed at Generation Xers (Miller, 2009).

The video game market is very proud of the fact that along with Generation X and Generation Y, many older Americans still play video games. (You
probably know some baby boomers who own a Nintendo Wii.) Products and services in the spa market used to be aimed squarely at adults, but not
anymore. Parents are now paying for their tweens to get facials, pedicures, and other pampering in numbers no one in years past could have imagined.

Video Clip

As early as the 1970s, U.S. automakers found themselves in trouble because of changing demographic trends. Many of the companies’ buyers were older
Americans inclined to “buy American.” These people hadn’t forgotten that Japan bombed Pearl Harbor during World War II and weren’t about to buy
Japanese vehicles, but younger Americans were. Plus, Japanese cars had developed a better reputation. Despite the challenges U.S. automakers face
today, they have taken great pains to cater to the “younger” generation—today’s baby boomers who don’t think of themselves as being old. If you are a
car buff, you perhaps have noticed that the once-stodgy Cadillac now has a sportier look and stiffer suspension. Likewise, the Chrysler 300 looks more
like a muscle car than the old Chrysler Fifth Avenue your great-grandpa might have driven.

Automakers have begun reaching out to Generations X and Y, too. General Motors (GM) has sought to revamp the century-old company by hiring a
new younger group of managers—managers who understand how Generation X and Y consumers are wired and what they want. “If you’re going to
appeal to my daughter, you’re going to have to be in the digital world,” explained one GM vice president (Cox, 2009).

Companies have to develop new products designed to appeal to Generations X and Y and also find new ways to reach them. People in these generations
not only tend to ignore traditional advertising but also are downright annoyed by it. To market to Scion drivers, who are generally younger, Toyota
created Scion Speak, a social networking site where they can communicate, socialize, and view cool new models of the car. Online events such as the
fashion shows broadcast over the Web are also getting the attention of younger consumers, as are text, e-mail, and Twitter messages they can sign up to
receive so as to get coupons, cash, and free merchandise. Advergames are likewise being used to appeal to the two demographic
groups. Advergames are electronic games sellers create to promote a product or service. Would you like to play one now? Click on the following link to
see a fun one created by Burger King to advertise its Tender Crisp Chicken.

Burger King Advergame

Income

Tweens might appear to be a very attractive market when you consider they will be buying products for years to come. But would you change your mind
if you knew that baby boomers account for 50 percent of all consumer spending in the United States? Americans over sixty-five now control nearly
three-quarters of the net worth of U.S. households; this group spends $200 billion a year on major “discretionary” (optional) purchases such as luxury
cars, alcohol, vacations, and financial products (Reisenwitz, 2007).
Income is used as a segmentation variable because it indicates a group’s buying power and may partially reflect their education levels, occupation, and
social classes. Higher education levels usually result in higher paying jobs and greater social status. The makers of upscale products such as Rolexes and
Lamborghinis aim their products at high-income groups. However, a growing number of firms today are aiming their products at lower-income
consumers. The fastest-growing product in the financial services sector is prepaid debit cards, most of which are being bought and used by people who
don’t have bank accounts. Firms are finding that this group is a large, untapped pool of customers who tend to be more brand loyal than most. If you
capture enough of them, you can earn a profit (von Hoffman, 2006). Based on the targeted market, businesses can determine the location and type of
stores where they want to sell their products.

Sometimes income isn’t always indicative of who will buy your product. Companies are aware that many consumers want to be in higher income groups
and behave like they are already part of them. Mercedes Benz’s cheaper line of “C” class vehicles is designed to appeal to these consumers.

Gender

Gender is another way to segment consumers. Men and women have different needs and also shop differently. Consequently, the two groups are often,
but not always, segmented and targeted differently. Marketing professionals don’t stop there, though. For example, because women make many of the
purchases for their households, market researchers sometimes try to further divide them into subsegments. (Men are also often subsegmented.) For
women, those segments might include stay-at-homehousewives, plan-to-work housewives, just-a-job working women, and career-orientedworking
women. Research has found that women who are solely homemakers tend to spend more money, perhaps because they have more time.
Figure 5.6

Considering the rising number of U.S. women who live without spouses, entrepreneurs have launched handyman services in many markets.

In addition to segmenting by gender, market researchers might couple gender with marital status and other demographic characteristics. For, example,
did you know that more women in America than ever before (51 percent) now live without spouses? Can you think of any marketing opportunities this
might present? (Barry, 1985)

Family Life Cycle

Family life cycle refers to the stages families go through over time and how it affects people’s buying behavior. For example, if you have no children,
your demand for pediatric services (medical care for children) is likely to be slim to none, but if you have children, your demand might be very high
because children frequently get sick. You may be part of the target market not only for pediatric services but also for a host of other products, such as
diapers, daycare, children’s clothing, entertainment services, and educational products. A secondary segment of interested consumers might be
grandparents who are likely to spend less on day-to-day childcare items but more on special-occasion gifts for children. Many markets are segmented
based on the special events in people’s lives. Think about brides (and want-to-be brides) and all the products targeted at them, including Web sites and
television shows such as Say Yes to the Dress, My Fair Wedding, Platinum Weddings, and Bridezillas.
Figure 5.7

Many markets are segmented based on people’s family life cycle needs.
 Resorts also segment vacationers depending on where they are in their family life cycles. When you think of family vacations, you probably think of
Disney resorts. Some vacation properties, such as Sandals, exclude children from some of their resorts. Perhaps they do so because some studies show
that the market segment with greatest financial potential is married couples without children (Hill, et. al., 1990).

Keep in mind that although you might be able to isolate a segment in the marketplace, including one based on family life cycle, you can’t make
assumptions about what the people in it will want. Just like people’s demographics change, so do their tastes. For example, over the past few decades
U.S. families have been getting smaller. Households with a single occupant are more commonplace than ever, but until recently, that hasn’t stopped
people from demanding bigger cars (and more of them) as well as larger houses, or what some people jokingly refer to as “McMansions.”

The trends toward larger cars and larger houses appear to be reversing. High energy costs, the credit crunch, and concern for the environment are
leading people to demand smaller houses. To attract people such as these, D. R. Horton, the nation’s leading homebuilder, and other construction firms
are now building smaller homes.

Ethnicity

People’s ethnic backgrounds have a big impact on what they buy. If you’ve visited a grocery store that caters to a different ethnic group than your own,
you were probably surprised to see the types of products sold there. It’s no secret that the United States is becoming—and will continue to become—
more diverse. Hispanic Americans are the largest and the fastest-growing minority in the United States. Companies are going to great lengths to court
this once overlooked group. In California, the health care provider Kaiser Permanente runs television ads letting members of this segment know that
they can request Spanish-speaking physicians and that Spanish-speaking nurses, telephone operators, and translators are available at all of its clinics
(Berkowitz, 2006).

African Americans are the second-largest ethnic group in America. Collectively, they have the most buying power of any ethnic group in America. Many
people of Asian descent are known to be early adapters of new technology and have above-average incomes. As a result, companies that sell electronic
products, such as AT&T, spend more money segmenting and targeting the Asian community 2. Table 5.3 “Major U.S. Ethnic Segments and Their
Spending” contains information about the number of people in these groups and their buying power.

As you can guess, even within various ethnic groups there are many differences in terms of the goods and services buyers choose. Consequently,
painting each group with a broad brush would leave you with an incomplete picture of your buyers. For example, although the c ommon ancestral
language among the Hispanic segment is Spanish, Hispanics trace their lineages to different countries. Nearly 70 percent of Hispanics in the United
States trace their lineage to Mexico; others trace theirs to Central America, South America, and the Caribbean.

All Asians share is race. Chinese, Japanese, and Korean immigrants do not share the same language 2. Moreover, both the Asian and Hispanic market
segments include new immigrants, people who immigrated to the United States years ago, and native-born Americans. So what language will you use to
communicate your offerings to these people, and where?
Subsegmenting the markets could potentially help you. New American Dimension, a multicultural research firm, has further divided the Hispanic
market into the following subsegments:

 Just moved in’rs. Recent arrivals, Spanish dependent, struggling but optimistic.
 FOBrs (fashionistas on a budget). Spanish dominant, traditional, but striving for trendy.
 Accidental explorers. Spanish preferred, not in a rush to embrace U.S. culture.
 The englightened. Bilingual, technology savvy, driven, educated, modern.
 Doubting Tomáses. Bilingual, independent, skeptical, inactive, shopping uninvolved.
 Latin flavored. English preferred, reconnecting with Hispanic traditions.
 SYLrs (single, young latinos). English dominant, free thinkers, multicultural.
You could go so far as to break down segments to the individual level, which is the goal behind one-to-one marketing. However, doing so would be
dreadfully expensive, notes Juan Guillermo Tornoe, a marketing expert who specializes in Hispanic marketing issues. After all, are you really going to
develop different products and different marketing campaigns and communications for each group? Probably not, but “you need to perform your due
diligence and understand where the majority of the people you are trying to reach land on this matrix, modifying your message according to this
insight,” Tornoe explains (Tornoe, 2008).

Segmenting by Geography

Suppose your great new product or service idea involves opening a local store. Before you open the store, you will probably want to do some research to
determine which geographical areas have the best potential. For instance, if your business is a high-end restaurant, should it be located near the local
college or country club? If you sell ski equipment, you probably will want to locate your shop somewhere in the vicinity of a mountain range where there
is skiing. You might see a snowboard shop in the same area but probably not a surfboard shop. By contrast, a surfboard shop is likely to be located
along the coast, but you probably would not find a snowboard shop on the beach.

Geographic segmentation divides the market into areas based on location and explains why the checkout clerks at stores sometimes ask for your zip
code. It’s also why businesses print codes on coupons that correspond to zip codes. When the coupons are redeemed, the store can find out where its
customers are located—or not located. Geocoding is a process that takes data such as this and plots it on a map. Geocoding can help businesses see
where prospective customers might be clustered and target them with various ad campaigns, including direct mail. One of the most popular geocoding
software programs is PRIZM NE, which is produced by a company called Claritas. PRIZM NE uses zip codes and demographic inform ation to classify
the American population into segments. The idea behind PRIZM is that “you are where you live.” Combining both demographic and geographic
information is referred to as geodemographics or neighborhood geography. The idea is that housing areas in different zip codes typically attract certain
types of buyers with certain income levels.
The tourism bureau for the state of Michigan was able to identify and target different customer profiles using PRIZM. Michigan’s biggest travel segment
are Chicagoans in certain zip codes consisting of upper-middle-class households with children—or the “kids in cul-de-sacs” group, as Claritas puts it.
 The bureau was also able to identify segments significantly different from the Chicago segment, including blue-collar adults in the Cleveland area who
vacation without their children. The organization then created significantly different marketing campaigns to appeal to each group.

City size and population density (the number of people per square mile) are also used for segmentation purposes. Have you ever noticed that in rural
towns, McDonald’s restaurants are hard to find, but Dairy Queens (DQ) are usually easy to locate? McDonald’s generally won’t put a store in a town of
fewer than five thousand people. However, this is prime turf for the “DQ”— because it doesn’t have to compete with bigger franchises like McDonald’s.
Figure 5.8

Proximity marketing is an interesting new technology firms are using to segment and target buyers geographically within a few hundred feet of their
businesses using wireless technology. In some areas, you can switch your mobile phone to a “discoverable mode” while you’re shopping and, if you
want, get ads and deals from stores as you pass by them, which is often less expensive than hiring people to hand you a flier as you walk by3.

Segmenting by Psychographics

If your offering fulfills the needs of a specific demographic group, then the demographic can be an important basis for identifying groups of consumers
interested in your product. What if your product crosses several market segments? For example, the group of potential consumers for cereal could be
“almost” everyone although groups of people may have different needs with regard to their cereal. Some consumers might be interested in the fiber,
some consumers (especially children) may be interested in the prize that comes in the box, other consumers may be interested in the added vitamins,
and still other consumers may be interested in the type of grains. Associating these specific needs with consumers in a particular demographic group
could be difficult. Marketing professionals want to know why consumers behave the way they do, what is of high priority to them, or how they rank the
importance of specific buying criteria. Think about some of your friends who seem a lot like you. Have you ever gone to their homes and been shocked
by their lifestyles and how vastly different they are from yours? Why are their families so much different from yours?
Psychographic segmentation can help fill in some of the blanks. Psychographic information is frequently gathered via extensive surveys that ask people
about their activities, interests, opinion, attitudes, values, and lifestyles. One of the most well-known psychographic surveys is VALS (which originally
stood for “Values, Attitudes, and Lifestyles”) and was developed by a company called SRI International in the late 1980s. SRI asked thousands of
Americans the extent to which they agreed or disagreed with questions similar to the following: “My idea of fun at a national park would be to stay at an
expensive lodge and dress up for dinner” and “I could stand to skin a dead animal” (Donnelly, 2002). Based on their responses to different questions,
consumers were divided up into the following categories, each characterized by certain buying behaviors.
 Innovators. Innovators are successful, sophisticated, take-charge people with high self-esteem. Because they have such abundant resources, they
exhibit all three primary motivations in varying degrees. They are change leaders and are the most receptive to new ideas and technologies.
Innovators are very active consumers, and their purchases reflect cultivated tastes for upscale, niche products and services. Image is important to
Innovators, not as evidence of status or power but as an expression of their taste, independence, and personality. Innovators are among the
established and emerging leaders in business and government, yet they continue to seek challenges. Their lives are characterized by variety. Their
possessions and recreation reflect a cultivated taste for the finer things in life.
 Thinkers. Thinkers are motivated by ideals. They are mature, satisfied, comfortable, and reflective people who value order, knowledge, and
responsibility. They tend to be well educated and actively seek out information in the decision-making process. They are well informed about world
and national events and are alert to opportunities to broaden their knowledge. Thinkers have a moderate respect for the status quo institutions of
authority and social decorum but are open to consider new ideas. Although their incomes allow them many choices, Thinkers are conservative,
practical consumers; they look for durability, functionality, and value in the products they buy.
 Achievers. Motivated by the desire for achievement, Achievers have goal-oriented lifestyles and a deep commitment to career and family. Their
social lives reflect this focus and are structured around family, their place of worship, and work. Achievers live conventional lives, are politically
conservative, and respect authority and the status quo. They value consensus, predictability, and stability over risk, intimacy, and self-discovery.
With many wants and needs, Achievers are active in the consumer marketplace. Image is important to Achievers; they favor established, prestige
products and services that demonstrate success to their peers. Because of their busy lives, they are often interested in a variety of timesaving
devices.
 Experiencers. Experiencers are motivated by self-expression. As young, enthusiastic, and impulsive consumers, Experiencers quickly become
enthusiastic about new possibilities but are equally quick to cool. They seek variety and excitement, savoring the new, the offbeat, and the risky.
Their energy finds an outlet in exercise, sports, outdoor recreation, and social activities. Experiencers are avid consumers and spend a
comparatively high proportion of their income on fashion, entertainment, and socializing. Their purchases reflect the emphasis they place on
looking good and having “cool” stuff.
 Believers. Like Thinkers, Believers are motivated by ideals. They are conservative, conventional people with concrete beliefs based on traditional,
established codes: family, religion, community, and the nation. Many Believers express moral codes that are deeply rooted and literally interpreted.
They follow established routines, organized in large part around home, family, community, and social or religious organizations to which they
belong. As consumers, Believers are predictable; they choose familiar products and established brands. They favor American products and are
generally loyal customers.
 Strivers. Strivers are trendy and fun loving. Because they are motivated by achievement, Strivers are concerned about the opinions and approval
of others. Money defines success for Strivers, who don’t have enough of it to meet their desires. They favor stylish products that emulate the
purchases of people with greater material wealth. Many see themselves as having a job rather than a career, and a lack of skills and focus often
prevents them from moving ahead. Strivers are active consumers because shopping is both a social activity and an opportunity to demonstrate to
peers their ability to buy. As consumers, they are as impulsive as their financial circumstance will allow.
 Makers. Like Experiencers, Makers are motivated by self-expression. They express themselves and experience the world by working on it—
building a house, raising children, fixing a car, or canning vegetables—and have enough skill and energy to carry out their projects successfully.
Makers are practical people who have constructive skills and value self-sufficiency. They live within a traditional context of family, practical work,
and physical recreation and have little interest in what lies outside that context. Makers are suspicious of new ideas and large institutions such as
big business. They are respectful of government authority and organized labor but resentful of government intrusion on individual rights. They are
unimpressed by material possessions other than those with a practical or functional purpose. Because they prefer value to luxury, they buy basic
products.
 Survivors. Survivors live narrowly focused lives. With few resources with which to cope, they often believe that the world is changing too quickly.
They are comfortable with the familiar and are primarily concerned with safety and security. Because they must focus on meeting needs rather than
fulfilling desires, Survivors do not show a strong primary motivation. Survivors are cautious consumers. They represent a very modest market for
most products and services. They are loyal to favorite brands, especially if they can purchase them at a discount 4.
 The segmenting techniques we’ve discussed so far in this section require gathering quantitative information and data. Quantitative information can be
improved with qualitative information you gather by talking to your customers and getting to know them. (Recall that this is how Healthy Choice
frozen dinners were created.) Consumer insight is what results when you use both types of information. You want to be able to answer the following
questions:
 Am I looking at the consumers the way they see themselves?

 Am I looking at life from their point of view?

Best Buy asked store employees to develop insight about local consumer groups in order to create special programs and processes for them. Employees
in one locale invited a group of retirees to their store to explain how to make the switch to digital television. The store sold $350,000 worth of
equipment and televisions in just two hours’ time. How much did it cost? The total cost included ninety-nine dollars in labor costs plus coffee and
donuts.

Intuit, the company that makes the tax software Quicken, has a “follow me home” program. Teams of engineers from Intuit visit people’s homes and
spend a couple of hours watching consumers use Quicken. Then they use the insights they gain to improve the next version of Quicken. Contrast this
story with that of a competing firm. When a representative of the firm was asked if he had ever observed consumers installing or using his company’s
product, he responded, “I’m not sure I’d want to be around when they were trying to use it” (Nee, 2003). This company is now struggling to stay in
business.

Segmentation in B2B Markets

Many of the same bases used to segment consumer markets are also used to segment B2B markets. For example, Goya Foods is a U.S. food company
that sells different ethnic products to grocery stores, depending on the demographic groups the stores serve—Hispanic, Mexican, or Spanish. Likewise,
B2B sellers often divide their customers by geographic areas and tailor their products to them accordingly. Segmenting by behavior is common as well.
B2B sellers frequently divide their customers based on their product usage rates. Customers that order many goods and services from a seller often
receive special deals and are served by salespeople who call on them in person. By contrast, smaller customers are more likely to have to rely on a firm’s
Web site, customer service people, and salespeople who call on them by telephone.

Researchers Matthew Harrison, Paul Hague, and Nick Hague have theorized that there are fewer behavioral and needs-based segments in B2B markets
than in business-to-consumer (B2C) markets for two reasons: (1) business markets are made up of a few hundred customers whereas consumer
markets can be made up of hundreds of thousands of customers, and (2) businesses aren’t as fickle as consumers. Unlike consumers, they aren’t
concerned about their social standing or influenced by their families and peers. Instead, businesses are concerned solely with buying products that will
ultimately increase their profits. According to Harrison, Hague, and Hague, the behavioral, or needs-based, segments in B2B markets include the
following:

 A price-focused segment is composed of small companies that have low profit margins and regard the good or service being sold as not being
strategically important to their operations.
 A quality and brand-focused segment is composed of firms that want the best possible products and are prepared to pay for them.
 A service-focused segment is composed of firms that demand high-quality products and have top-notch delivery and service requirements.
 A partnership-focused segment is composed of firms that seek trust and reliability on the part of their suppliers and see them as strategic
partners (Harrison, et. al., 2010).
B2B sellers, like B2C sellers, are exploring new ways to reach their target markets. Trade shows and direct mail campaigns are two traditional ways of
reaching B2B markets. Now, however, firms are finding they can target their B2B customers more cost-effectively via e-mail campaigns, search-engine
marketing, and “fan pages” on social networking sites like Facebook. Companies are also creating blogs with cutting-edge content about new products
and business trends of interest to their customers. For a fraction of the cost of attending a trade show to exhibit their products, B2B sellers are holding
Webcasts and conducting online product demonstrations for potential customers.

Segmentation bases are criteria used to classify buyers. The main types of buyer characteristics used to segment consumer markets are behavioral,

demographic, geographic, and psychographic. Behavioral segmentation divides people and organization into groups according to how they behave with

or toward products. Segmenting buyers by personal characteristics such as their age, income, ethnicity, family size, and so forth is called demographic

segmentation. Geographic segmentation involves segmenting buyers based on where they live. Psychographic segmentation seeks to differentiate

buyers based on their activities, interests, opinions, attitudes, values, and lifestyles. Oftentimes a firm uses multiple bases to get a fuller picture of its

customers and create value for them. Marketing professionals develop consumer insight when they gather both quantitative and qualitative

information about their customers. Many of the same bases used to segment consumer markets are used to segment business-to-business (B2B)

markets. However, there are generally fewer behavioral-based segments in B2B markets.

CHARACTERISTICS

In developing a marketing plan for your business, one of the key steps is to identify your target market segments. A market segment is a group of consumers or businesses that you see as primary

targets for your company and its marketing efforts. A customer profile is a thorough description of the typical customer or type of customer in a market. Demographic characteristics, including

personal descriptive traits, are commonly included in a customer profile.

Typical Age Range
A starting point for a customer profile is often an age range. While customers of various ages may buy your products or services, it is very helpful in marketing to know the primary ages of your

most common customers. Trendy, specialty fashion retail shops often target a younger female audience, for instance. In this case, an age range like 21 to 34 is often used to depict the likely

consumer. Some companies carry this trait a step further and identify the average or median age of their customers.

Gender and Marital Status

Two other key demographic traits that help you profile your typical customer are gender and marital status. Specialty hair salon Sports Clips clearly targets a male audience with its ads, which

state "Haircuts for Men," and the slogan is "It's Good to be a Guy!" This emphasis lets men know that the business and experience is customized to suit their needs and interests. Some companies

target couples or men and women in relationships as opposed to a specific gender. Carnival Cruise Lines often promotes adventure trips to retired couples, for instance.

Race and Ethnic Origin

Race and ethnicity are common, but not universally used, demographic traits in customer profiles. Sports Clips targets men, but not necessarily a particular race or ethnicity, in its target

marketing. Some ethnic-oriented specialty supermarkets target customers with specific ethnic origins. A Hispanic grocer would naturally target a customer of Hispanic ethnicity who has a desire

for certain types of foods and products familiar to his native culture.

Education and Income Background

Several closely related traits fit into the educational and income description in a customer profile. Education, income and occupation are often distinct attributes in the customer profile. The

general idea with these qualities is to identify how educated your customer is, where he works and how much he makes. High-end providers often have to target upper-income consumers that can

afford and want their goods. Low-cost providers usually target a lower-to-middle-class income earner with messages of low price, affordability or great value.