What is Demographic and Geographic Segmentation? Example and Benefits

The business can spend crores on their marketing budget, but if it does not factor in segmentation, then it will be just a loss-making effort. If the marketing is not reaching the right audience, then there is no point in the effort. For example, what appeals the millennials, might not work for boomers so easily. 

There are four main types of marketing segmentation: demographic segmentation, psychographics, behavioural, and geographic segmentation.

When buying a TV, the 20-year-old gamer will have different wants, needs, and desires than the 45-year-old mom with two young children. Understanding what makes your audience ‘tick’ is the key to making your campaign work. By using different audience segments, you can understand what the audience does and what their interests, budgets, and criteria are for buying a product. 

This way, the marketing campaign will be more specific and precise, and you will be able to isolate the prospective customers into categories and create specific selling points to meet the unique needs of the consumers to increase the sales. 

Segmentation helps you deliver more personalized customer experiences so that you can 

• Increase the email deliverability. 
• Improve conversion rate on websites and apps.
• Increase average order values.
• Lifts customer retention. 

Segmentation is applicable in both services and advertisements. The identified market is your target group. Another advantage of market segmentation is that it helps to identify the potential growth in a new market. 

Out of these, the demographic and geographic segmentations are usually done first. Let’s take a look on the benefits of both and some examples.

Demographic Segmentation

Demographic segmentation is based on the assumptions that people who have the same demographic profile will probably have similar buying behaviours, needs, and preferences. This type of segmentation in MarTech divides customers based on different characteristics, like;-

• Gender, which is men, women, and other gender identities and being careful to not assume gender stereotypes
• Race
• Age, which includes babies, children, adolescents, adults, middle-aged, and seniors, or baby boomers, Gen X, millennials
• Income group which helps define the buying power of the segment 
• Education and occupation include job titles, degrees, designations, etc. 
• Marital status, such as married, single or divorced.
• Nationality
• Religious affiliations  
• Family life cycles or generations such as joint families, nuclear families, single children’s households, etc. 

It is the most common type of marketing segmentation used by marketing geniuses, to target chunks of an audience. This market subset makes an excellent base for advertising personalization to target the group’s needs. Demographic segmentation is the ‘who’ of marketing.

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Importance of Demographic Segmentation

• Builds long lasting customer relationships because the customers feel a deeper connection due to personalization. The buyer tends to be more loyal and gives recommendations too.
• Helps improve products and services. When the business knows what the customer needs, they can modify or alter their products and services to meet those specific needs. 
• Gives insights into augmenting the marketing strategies. When you do demographic segmentation, it becomes easier to optimize the marketing steps that can attract more customers. If you know what is the demographic segmentation, then it becomes easier to plan the budget, resources, time, and budget. 
• It allows better budget and resource optimization.
• There is improved communications between the buyer and the seller because of a better understanding of values, attitudes, and behaviours.

Some Examples of Demographic Segmentation

• For example, if there is an accounting software company that wants to target small businesses, or entrepreneurs, or contractors, then their landing page will mention things like taxes, discounts, etc. Pricings will start low, for example, 50Rs for a 1000Rs invoice etc.
• If a company’s client group is between 20-40 for skin care, then the language should be geared to match the young females.
• If your segment audience is mid-budget income group, then the pricing of your products will be in that range. 
• A beauty band, which wants to target all age groups, will use the demographic segmentation to offer products to various age groups. The Men section will have products for men. 
• Home appliance companies usually target married demographic group.

Geographic Segmentation

Geographic segmentation in MarTech is based on grouping customers based on where they live or reside. Customer buying behaviour is quite affected by where they live. Geographic segmentation helps businesses work out marketing strategies that can target consumers based on 

• countries, 
• states, 
• regions, 
• neighbourhood, 
• cities, 
• colleges etc. 

The insight from the above data also computes information like temperature, food habits, living nature, clothing, language, population (urban vs. rural), etc.  Tailored marketing efforts bring in more revenues. People who live in the same place or city generally have the same cultural preferences, mindsets and like the same things to buy.

It is an important tool in the hands of the planners for increasing business. It will help the organization make a product or develop services that present and potential customers will like. 

Benefits of Geographical Segmentation

• More targeted marketing leading to enhanced conversions and efficient the use of marketing resources.
• Better product development that aims for more customer satisfaction, loyalty, and retention. 
• More share in the market and lesser competition especially in the niche markets. 
• Cost effectiveness for businesses

Example Of Geographical Segmentation

• Consider a tea company. By understanding the geographic segmentation, they will know that people living in one area are more likely to buy tea in winters than in summers. So, they can tailor their marketing accordingly and move the focus to the area during winters and shift it in summers. 
• Similarly, a skin care company can push products suitable for skin during winters and summers depending on the weather in the area as shown by the geographic segmentation. They can monitor the trends and patterns and thus plan their product development and delivery line so that the winter products hit the market just before the winters and vice versa for summers. 
• Customers in rural areas need to order products well in advance than those in the urban areas. Thus, with the geographic segmentation, the business can adjust their timers according to the customer location. 
• Based on language and cultural segmentation, a fast-food chain can put the specific menu that attracts the people of the same cultural tastes. 

It is not possible to satisfy every customer, but with demographic and geographic segmentation, you can divide the customers in to small groups that can cater to their needs in a personalized manner and have more people visit the business.

Knowing your audience subsets helps increase the ROI greatly. Marketing segmentation also helps in streamlining the business, which is imperative for giving it a competitive edge.

Also Read- Know All About Market Segmentation and its Benefits in 2024