Next video:
Loading the player...

Demographics is the study and categorization of people based on factors such as income level, education, gender, race, age, and employment, just to name a few. 

In business, demographics are important because they help a company better target the market for its products, and thus better utilize its marketing expenditures. For example, if a company is using direct mail to market luxury products, it will use demographic studies to find neighborhoods containing individuals with high incomes. The company will then mail its brochures to those target neighborhoods.

Businesses also use demographics as a predictive tool. A pharmaceutical company will monitor demographics such as birth rates. If they see a decline in the birth rate, they may decide to put less research resources into pediatric medicine, and more into research aimed at producing medicines for the adult population.

Governments use demographics to track the effects of their policies. For instance, a government might perform a demographic study on changes in income for each age category to determine if the economic growth that resulted from a recent stimulus policy was distributed evenly among the population. 

Related Articles
  1. Tech

    How Changing Demographics Affects U.S Elections

    With the 2016 election upcoming, the change in two of the country's largest demographics will go a long way in determining who controls the White House.
  2. Investing

    Demographic Trends And The Implications For Investment

    See how people's movements, ages, deaths and buying patterns affect portfolios worldwide.
  3. Insights

    How Demographics Drive The Economy

    Demographics can have a profound effect on the economy. An aging population coupled with a declining birthrate points to a decline in economic growth.
  4. Investing

    Investing in India: The Next Frontier?

    Watch as India becomes one of the next top frontier markets in which to invest as it grows to be a major player in the global economy.
  5. Investing

    Leveraging Demographics in Emerging Markets

    Consider demographic trends when allocating to emerging markets.
  6. Investing

    4 Key Factors That Drive The Real Estate Market

    The size of the real estate market make it an attractive sector for many investors, but understanding the factors that drive it is essential.
  7. Insights

    Boom or Bust? The End of China's One-Child Policy

    China's easing of its one-child policy has demographers speculating whether it'll lead to a baby boom. Here's why it might not.
  8. Small Business

    How To Determine Your Business' Target Market

    Given that the U.S. has seen its prosperity ranking slip during 2012, this article looks at the importance of defining a target market and how best to achieve this.
  9. Personal Finance

    Benefits of China Changing Its One Child Policy

    China's one-child policy is changing, and investors are looking for ways to cash in. The reform might not have the effects that many anticipate, however.
  10. Small Business

    Generational Marketing: Harvest The Whole Family Tree

    Attract new clients by tailoring your message to specific age groups.
Hot Definitions
  1. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  2. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  3. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  4. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
Trading Center