What Are Demographics?
Demographics are, by definition, the study of a population based on factors such as age, race, sex, economic status, level of education, income level, and employment. It should always be the first step in estimating your potential, limitations, and focus. They are among the most critical and relatively easy factors to consider in your marketing, planning, and strategic decision making.
Uncovering key demographics can be a bit like taking a look in your professional closet. You probably have an impeccable wardrobe, but it’s tough to see all that potential when there’s a giant elephant standing in your way. It’s time to deal with the elephant.
Where to Start
I regularly see business plans that begin with defining their market as the 320 million people who live in the United States and eat, dress, or consume something. No matter what industry you’re in, that is the wrong place to start. You have to dive deeper from the very beginning.
Even if you’re not at the very beginning stages of building your business, you should be studying demographics often and delve deeply into the information at hand. It’s crucial to the success of your marketing efforts.
Here are some staggering statistics that will make you question the audience you’re marketing to, according to the US Census Report. Out of that 320 million people who live in the United States:
- Between 2015 and 2025, the U.S population is projected to grow from 321 million to 347 million.
- 18 million or about 70% of the growth will be over 65 years old between 2015 and 2025
- As a comparison, between 1970 and 1980 the 15-35 population grew 19 million showing the start of the baby boomers as the bubble in the population.
- In contrast the under 65 population will only grow about 8 million people or less than 3%.
- Similarly, the Hispanic population has grown from 3% to 10% of the population.
- Since 1980 States like Florida, Texas and California are dramatically growing while rust belt cities like Cleveland and Detroit are rapidly losing population.
- 50% are one gender, which frequently reduces the market size
- 30-50% of are frequently too poor to buy many products or services.
- Approximately 40% of the U.S. population is between the prime purchasing ages of 25-54.
What’s the point here? The beginning number you should be starting with is actually more like 30-40 million people versus 320 million people before you analyze factors like geography, lifestyles, and ethnicity. This increased diversity demands that you differentiate the totals from your market.
Understand Your Audience
Studying demographics is an ongoing process. Once you’re at the base line of understanding your potential customers, you must have your ear to the ground and start to identify trends.
For example, If you live on places like Orlando or hurricane regions, this can have a profound effect on your business. It is estimated over 100,000 people moved from Puerto Rico in the last few months. You will not see that number reflected in U.S. Census data.
You can’t just look at the numbers. You have to understand the people that the numbers represent and try to look at the factors that they deal with that you may not dealing with.
Here are some key things to consider when you’re studying demographics for marketing purposes:
- Income: The reality is that the top 1% of the population accounts for about 80% of income and continues to increase while the lower 20-40% continues to struggle. Marketing to struggling service workers requires far different strategies than marketing to Silicon Valley millennials.
- Social Changes: Women and minorities have not always been treated with dignity as consumers. My wife still remembers going to buy a car and being ignored by dealers and being called “honey.” Today, women and minorities comprise a significant portion of both car buyers and dealership employees. This demands respect.
- The Internet of Things: The internet and its usage especially among younger people will continue to explode. Nearly every consumer-based market is dominated by businesses that are capitalizing on the internet of things like Amazon and Google. Recently, UPS increased its Christmas delivery time from 1-2 days because it could not handle the increased demand, which was highly predictable. Similarly, services like Uber, Air B&B, Amazon, and thousands of other businesses are disrupting their individual markets.
- Analytics: Chances are that your competitors are already taking advantage of a myriad of advanced analytical tools. CRM systems are completely changing the game and giving businesses new opportunities to understand their customer base.
Ignoring demographics and demographic trends, whether on a small scale or large scale will be done at a business’ peril. You must make certain to constantly evaluate relevant demographics and demographic trends as they relate to your business both in the now and in the future. This includes both local and national trends. Demographics can be one of the keys to your business’ success or failure.
Contact me to learn more about how you can research demographics in order to help you market your business more effectively and remove that old elephant from your closet.
Dr. Bert Shlensky, president of Startup Connection (www.startupconection.net) is a graduate of Sloan School of Management at M.I.T. He served as the president of WestPoint Pepperell’s apparel fabrics business & President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he focuses on working with select start up and small businesses.