What Is Demographics?

Demographics is the study of a population based on factors such as age, race, and sex. Governments, corporations, and nongovernment organizations use demographics to learn more about a population's characteristics for many purposes, including policy development and economic market research.

For example, a company that sells high-end RVs wants to know roughly how many people are at or nearing retirement age and what percentage are able to afford the product.

Key Takeaways

  • Demographics is the collection and analysis of broad characteristics about groups of people and populations.
  • Demographic data is very useful for businesses to understand how to market to consumers and plan strategically for future trends in consumer demand.
  • The combination of the internet, big data, and artificial intelligence is greatly amplifying the usefulness and application of demographics as a tool for marketing and business strategy.
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Demographics

Understanding Demographics

Demographics is the collection and study of data regarding the general characteristics of specific populations. It is frequently used as a business marketing tool to determine the best way to reach customers and assess their behavior. Segmenting a population by using demographics allows companies to determine the size of a potential market. The use of demographics helps to determine whether its products and services are being targeted to that company's most important consumers. For example, market segments may identify a particular age group, such as baby boomers (born 1946-1964) or millennials (born 1981-1996), that have certain buying patterns and characteristics.

The advent of the internet, social media, predictive algorithms, and big data has dramatic implications for the collection and use of demographic information. Modern consumers give out a flood of data, sometimes unwittingly, that are collected and tracked through their online and offline lives by myriad apps, social media platforms, third party data collectors, retailers, and financial transaction processors. Combined with the growing field of artificial intelligence, this mountain of collected data can be used to predict and target consumer choices and buying preferences with uncanny accuracy based on their demographic characteristics and past behavior.

Types of Demographic Information

For corporate marketing goals, demographic data is collected to build a profile for the organization's customer base. The common variables that are gathered in demographic research include age, sex, income level, race, employment, location, homeownership, and level of education. Demographics make certain generalizations about groups to identify customers. Additional demographic factors include gathering data on preferences, hobbies, lifestyle and more. Governmental agencies collect data when conducting a national census and may use that demographic data to forecast economic patterns and population growth to better manage resources.

How Demographic Information Is Used

Most large companies conduct demographic research to determine how to market their product or service and best market to the target audience. It is valuable to know the current customer and where the potential customer may come from in the future. Demographic trends are also important, since the size of different demographic groups changes over time as a result of economic, cultural, and political circumstances.

This information helps the company decide how much capital to allocate to production and advertising. For example, the aging U.S. population has certain needs that companies want to anticipate. Each market segment can be analyzed for its consumer spending patterns. Older demographic groups spend more on health care products and pharmaceuticals, and the method of communicating with these customers differs from that of their younger counterparts.