Segmentation — Chapter 4

Demographic Segments

Demographic segmentation is perhaps the oldest form of segmentation. Demographics are specific and quantifiable facts about customers that can be collected. Examples of demographics include age, gender, ethnicity, location, employment status, and income.

While demographic segmentation has some limitations, it does have some advantages as well. For one, it's really easy to do, once you acquire demographic data. Ways to acquire such data are by asking customers directly through surveys, gleaning the information from transactional data (i.e., a customer's credit card billing address is more often than not where they live), or working with an external data supplier. Second, non-direct, traditional advertising is priced based on demographics, and if you want to utilize those forms of advertising, you will have to have segmented your customers based on demographics to determine whether it's worthwhile to advertise on a given channel.

However, there are some downsides to using demographic segmentation. For one, it assumes that demographics correlate with behavior. This can be true in some cases, but as mentioned in the Basic Lesson, you have to be sure to keep it relevant. For example, while it is technically possible to segment on hair color, the segments probably don't behave differently with regard to sock-buying behavior.

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