Definition of 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.
BREAKING DOWN Demographics
Demographics is the collection of data regarding a specific population. 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. Market segments may identify a particular age group, such as baby boomers (born 1946-1964) or millennials (born 1980-2000), that have certain buying patterns and characteristics.
Types of Demographic Information
For corporate marketing goals, demographic data is collected in order 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, home ownership 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 in order 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 capture 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.