Targeting the Correct Demographics: Why It Matters in Business!

Owning a business has its pros and cons. It’s entrepreneurial empowerment, that’s a pro but overwhelming too, that’s a con. It affords owners flexibility of being their own “boss” which is a pro but for some business owners to much flexibility can be a distraction for their business, that’s definitely a con. Of course, there are more examples of Pros and Cons but what’s key in running a successful business is knowing your demographics! It’s most definitely a pro when you clearly know them and a definite con when you do not.

Let’s define what we mean by demographics using the Dictionary.com definition. Demographics – the statistical data of a population, especially those showing average age, income, education; it can refer to a single vital or social statistic of a human population such as the number of births or deaths.

Demographics are typically confusing for business owners. Because of the variety of traits associated with demographics, confusion is not uncommon. Business owners compound the confusion by not having a well-defined understanding of demographics. This is an issue because it has a direct correlation of developing appropriate business development strategies. The lack of identifying them means they won’t be in the business plan. Identifying a broad demographic or to narrow a demographic means missing potential traits that could lead to identification of customers, as well as, placing limitations on the products and/or services your business might offer.

Demographics are researched based, and it is important to learn which ones are relevant to a business and why. The viability of business depends on knowing your demographics. A common mistake made in identifying demographics is the assumption of them. Meaning, a demographic that is identified might not be the correct one or, demographics might be arbitrarily selected. We tend to make decisions based on our personal preferences rather than a complete analysis of data, etc. Uncertainty of what demographics are important lead to missed opportunities that can be detrimental to the viability and success of a business.

For example, a small family owned hardware store wants to add a new product line for women. They want to attract more women customers. They looked at research on demographics. They looked at different products.

Over a few weeks the decision is made. The new product is designer gardening gloves, leather with cushioned finger tips. They come in a variety of colors, some very bright. They are stylish, some would say very hip and contemporary. Likely appeal to younger and older women. Sized to fit a variety of hand types. They are locally made too. They are priced modestly too.

The hardware store owner says, “Women in their 50’s will love these gloves. My wife is 57, she and her friends garden a lot; she’d love them. They will help with her arthritis. And they are local too, she’d like that”, he says.

PRO: They identified a demographic age group 50 plus.

PRO: They identified gender.

CON: They identified a demographic age group based upon his personal preference, his “wife’s age group” and health ailments.

CON: The older age demographic is limiting the potential to market toward a younger age group that you can develop a relationship with and build brand loyalty of the hardware store.

CON: Missing an opportunity to sell more designer gardening gloves to the age group 18-29 and 30-49. By not being identified, marketing, advertising and promotions of the new product won’t appeal to this group. Market share is not maximized.

CON: Price is a perceived value, the younger age women could afford to purchase them per the research, he did not look at income as a qualifying demographic.

Now, this example is not totally flawed, nor is it totally correct. Knowing Your Demographics, Why It Matters proves this point: The hardware store owner has data that shows the composition of gardeners in the U.S. and what their ages and gender are and region, etc. He seemingly ignores much of the data on age.

He is correct in his narrative, women over 50 are gardening more because it’s healthy for them and they can eat more organically, too. Organic can be considered a niche demographic.

He has identified a good demographic to target the new product line. However, he chose to overlook that women ages 18-29 and 30-49 are gardening more as well for those same reasons. He is missing an opportunity to target younger demographics and build greater market share and acquire new customers to build his brand loyalty.

If the small local hardware store owner had a clearer understanding of demographics and why they mattered, he would have considered the other two demographics of women 18-29 and 30-49 as being as important of customers and the impact of market share.

The Pros and Cons listed in this example are not all inclusive, of course there are other demographics to consider: ethnicity, income level, and geographic location, and number of women in a household, education, occupation, master gardeners, frequency of gardening etc.

Targeting the Correct Demographics: Why It Matters is a pro in every aspect of running a business and being successful in business development.

Why it matters:

1. It allows businesses to determine the size of a potential market for their product and/or services. Knowing this is valuable because it helps businesses to understand how to market to customers and strategically plan for future trends in customer demand.

2. Demographics are the data used to develop optimal marketing strategies that will lead to successful business development: increase in new customers, increase in products and/or services and an increase in sales and revenue. Also, targeting customers with similar demographics helps maximize sales and profits for business owners.

3. The more targeted your demographics are, the better you can design your messaging to their emotions. This is appealing and is relational which gets the customer to buy. Knowing the various traits can be used to determine product and/or services preferred by prospects and customers. It helps us learn buying habits of customer which allows for marketing, advertising, and promotions to be tailored to these habits.

4. Income is an important demographic to pay attention to because the appeal it has to certain income groups. People with higher incomes will seek out higher end products and/or services because it meets the appeal factor. People with lower income levels pay more attention to price and usually appeal to lower priced products and/or services. Value is a key factor related to “price” and influences the purchases made on products and/or services by customers.

5. Age of customers influence what products and/or services they purchase. For example, baby boomers continue have mass buying appeal as do millennials. Younger age demographics appeal to technology like cell phones and video games. As you can see, the appeal factor is different but desirable for each specific age group.

6. Geographic location is important as customers buying habits also vary by location, geographic region. Knowing this demographic and meeting those needs of the buyers and what they want means business owners can control operating costs and realize higher sales and revenue.

7. Education levels dictate what products and/or services a customer will make as customers with higher education have a higher household income. Higher incomes influence what purchases will be made and at what frequency.

8. Ethnicity impacts purchases. People from different cultures have different preferences and buying habits from one another. Holidays and cultural traditions of specific ethnic demographics impact purchases too.

9. Marital Status is important to understand because it impacts life experiences which impacts their buying habits. Also, marital status will dictate who is the key decision maker is when purchasing a product and/or service. Business development strategies must be targeted accordingly.

The importance of knowing your demographics lead to creating and implementing business development strategies that will elicit engagement of customer. They will respond to the marketing, advertising, promotion of a product and/or service without hesitation because it is appealing to them. You are able to reach the influencer and the decision maker, sustainability of business depends on knowing your demographics.

Knowing Your Demographics and Why It Matters is critical to optimal business development. Knowledge is power, business owners that identified fully their relevant demographics and have well defined them can develop optimal strategies that will reach each population. Sales and Profits will be the end result along with customer satisfaction, customer sustainability while bringing in new customers. Business Development success!

About the Writer: Becky Blaesing owns Blazing Kiss Michigan. She’s a Michigan native but has resided in Tennessee since 2009. She loves living in here and enjoys the outdoors!