Using Demographics

Wisdom from the folks at Small Fuel:

Marketing by Numbers: How Demographics Can Help (and Hurt) Your Marketing

When you’re making the decision of how to spend your marketing budget, you don’t want to pour money into a campaign you haven’t planned out carefully.

Advertising in the wrong place, at the wrong time, or to the wrong people could cost you more than you realize – not only in lost sales but in lost time and market share. In order to keep risk low when it comes to spending, many businesses use demographic information to craft a highly targeted campaign in hopes of getting the highest return from their marketing dollars.

On the surface, demographic marketing seems like a perfect fit for the savvy marketer; simply segment the population by defining characteristics such as age, race, gender, income, or geographic location and you’ll get a better feel for how to design a message that resonates with that group and converts more effectively.

But as with anything in life, there are advantages and disadvantages to every strategy. Understanding both sides of demographic marketing will help you become a better marketer.

Let’s take a look at some of the pros and cons.

Strength In Numbers: Protecting The Bottom Line

Marketers all over the world have relied on demographic information for a number of reasons, but possibly the strongest one of those reasons comes down to cost savings. Since marketing budgets heavily depend on their return on investment, demographic data allows you to get more for your money by spending only on the specific group of people who buy your product. You can benefit from even the simplest information, like that from free services such as the MSN AdLab Predictor.

For example, if you are selling a high-end luxury sedan, your primary target market is likely to be affluent professionals between the ages of 35 and 55. Accordingly, this allows you to filter out any media outlet that does not cater to that age group and helps you focus your funds on the outlets that your target market is more likely to be paying attention too. Keeping your market segment tightly defined can help you use your budget to advertise in multiple outlets so your brand gains more credibility simply by being seen in multiple places.

Tailoring Your Message: Talking To My Generation

Another advantage to factoring demographic data into your marketing campaigns is that it helps you define the voice and tone of the messages you send to your target market. Let’s say that you discover that your age 35-to-55 luxury sedan buyers are actually composed of two subgroups – one set of people who came into money fast via high-tech jobs and another which earned it slowly over time, the old fashioned way. It’s probable that both groups, even though they fall into the same age window, will respond very differently to your message.

The fast-track affluent may resonate with edgier, faster-paced advertising that emphasizes “having it all,” while the slow-and-steady earners may appreciate a more subdued message that focuses on enjoying luxury because “they earned it.” For this reason, it is important that you take the time to break down your market segments into their relevant subgroups, and be aware of which media outlets serve which audience by using services such as Quantcast. By using that demographic data to tailor the target-appropriate message to each audience, you can increase the conversion rate for both campaigns.

These two examples highlight the power of using demographic data to build targeted marketing campaigns that are more likely to capture your potential customers’ attention.

However, relying on the raw numbers makes it easy to miss another critical aspect of marketing: understanding the behavior and triggers that caused your prospects to buy in the first place.

Missing The Forest For The Trees: Behavioral Marketing

As powerful as demographic data can be, it doesn’t tell the whole story – it gives the “who,” but not the “why.” That “why” is a critical factor that has the potential to take your marketing ROI through the roof, but it can easily be missed by focusing strictly on the numbers that your demographic data gives you. The reason for this is a common misconception that demographic information is predictive – that is to say that matching the demographic is a good indicator that a sale will take place. In other words, it is like saying “60% of our buyers are 35 to 55, so if we just target that age group, we’ll get a lot of sales.”

But in reality, demographic information is not predictive – it is suggestive. What this means is that all you can infer from this data is that it suggests a potential for action based on a data-driven profile – in other words, “We notice that a lot of our buyers are age 35 to 55,” and that’s all. You may get your luxury sedan’s ads in front of thousands of 35-to-55s and be left scratching your head as to why you didn’t get the buy-in you expected, all because you were dealing with data that suggested possible behavior rather than predicted likely behavior.

So if demographic data is not predictive, than what is? The answer to that question is so simple that many people miss it: past behavior is the ultimate predictor of future behavior. You already know this in other arenas of marketing – for example, you know that existing buyers are easier to sell to than unsold prospects. Why? Because behavior itself is predictive by nature. What someone has done in the past, they are likely to do again.

Given that, you may be surprised at the results you get if you move past demographic marketing – that is, marketing that luxury sedan to 35 to 55-year olds – and focus more on finding outlets that broadcast to existing owners of those sedans and market to them. You may even find that the answer transcends the demographic itself. Imagine discovering that age isn’t actually the predictive factor that boosts your sales at all, and that it turns out to be something behavior based, such as finding out that people who buy and sell stock are more likely to buy luxury sedans. Now the power of behavior-based information becomes clear.

Finding The Balance: Combining Both Approaches

There is nothing wrong with using demographic data as the basis of a marketing campaign – in fact, it is a time-tested strategy for narrowing the scope of where you spend your marketing dollars. But once you have that general level of information, it is time use it to generate the kinds of behavior-based questions that help you understand why people in a particular demographic spend their money.

Use the power of suggestive data to lead you to predictive patterns. If you do this properly, you’ll gain a better understanding of how to connect with people who will become your powerful repeat customers in the future.

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