Demographic Segmentation – Dividing the Market by Generations

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Customers of different ages (or generations) behave differently when they go shopping in a store or online. This aspect of human behavior and demographic segmentation are sometimes forgotten by retailers. The market for retailers is in turmoil because of changes in consumer behavior, intense competition and digital disruptions. Subsequently most retailers have to reduce the price of their products to maintain their sale volumes.

Other retailers are retrenching staff and replace them with productivity enhancing technology. The sad thing is that smaller retailers can’t keep up with these market disruptions. And, their customers are getting fed-up with shed-like stores, generic products, and unfriendly or no sale-staff. On top of that – the breadth of the product mix in big retail stores are getting narrower and depth swallower. That leaves the customers with not much to choose from in certain product categories.

Most of the big retailers have forgotten one of the fundamentals of marketing: to offer products that satisfy their customer’s needs, demands and preferences. A strategy that smaller retailers may consider is to focus on offering products according to the age group of your customers. To explain this, we first have to look at the market segmentation construct.

What is market segmentation?

The purpose of market segmentation is to identify the classification of consumption patterns by dividing a market into several homogeneous sub-markets ¹. It is therefore assumed that each segment of the market will have similar needs, and will respond in a similar way to the market offering and market strategy. In other words, when you segment your market, you want to determine which customer will buy or prefer your product.

There are four different types of market segmentation and all of them vary in their implementation in the real world writes Hitesh Bhasin in Marketing91.com. The four types are:

• Demographic segmentation – has variables such as Age, gender, family size, income, occupation, religion, race and nationality.
• Behavioral segmentation – divides the population on the basis of their behavior, usage and decision making pattern.
• Psychographic segmentation – uses people’s lifestyle, their activities, interests as well as opinions to define a market segment.
• Geographic segmentation – divides people on the basis of geography. Your potential customers will have different needs based on the geography they are located in.

Demographic segmentation is one of the simplest and widest types of market segmentation used. Hence segmentation by generation is a popular way for retailers to segment their customer market.

Demographic segmentation

According to Directory.com is a generation the entire body of individuals born and living about the same time with an average timespan of 30 years (the average period between the birth of the parents and the birth of their offspring). Generational marketing is therefore a way to segment the population as a unique strategy to target different age groups. Not every generation is alike, nor should they be treated by marketers in the same way². The four generations that will be discusses are the Baby Boomers, Generation X, Generation Y, and Generation Z.

The Baby Boomers ²

The Baby Boomers were born during 1946-1964 during the dramatic increase of births after World War II. The Boomers value individualization, self-expression, optimism, and “Be Here Now.” They have defined themselves by their careers and many are workaholics.

The shopping behaviour of Baby Boomers

When Boomers are shopping in stores, they place high importance on customer service (helpful salespeople, for example) in judging the quality of their experience (Business Insider). They are also comfortable with browsing, researching, and shopping online.

Generation X ²

Generation X was born during 1965-1977 and reached adulthood during difficult economic times ². They are likely to be self-employed professionals who embrace free agency over company loyalty. They value family first. These latch-key children grew up quickly, experiencing rising divorce rates and violence. They have taken greater responsibility for raising themselves and tend to be less traditional than any other generation.

The shopping behaviour of Generation X

Generation X shoppers can be categorized by their keen understanding of marketing and media. Research is crucial for these individuals – they use the web to reinforce their existing opinions on brands and products, rather than to form them to begin with (RetailPro).

Generation Y ²

Generation Y (or Millenniums) was born during 1977-1994 and are children of the original Baby Boomers. They grew up in a time of immense and fast-paced change including virtually full employment opportunities for women, dual-income households as the standard, wide array of family types seen as normal, significant respect for ethnic and cultural diversity including a heightened social awareness, and computers in the home and schools. Gen Y individuals are well grounded and wise for their age.

The shopping behaviour of Generation Y

Because Generation Y is tech-savvy, and well informed consumers, it is important that you engage with this generation digitally, says Egiel Nielsen SVP at SmartCentres. “They are looking for personalization, and an overall improvement in the experience they receive when shopping online. This means that communication must be significant and up-to-date”, explains Egiel.

Generation Z ²

Generation Z was born after 1994 and is the newest generation. Their parents marry later and are less likely to get divorced. They face global terrorism, the aftermath of 9/11, school violence, economic uncertainty, recession, and the mortgage crisis. They continue to experience the spread of “tweendom” including commercial exploitation of young girls (and to a lesser extent boys), that is, pushing a Tween lifestyle heavy on teen aspiration to the cost of the loss of childhood.

The shopping behaviour of Generation Z

Deep Patel writing in the Huffington Post Listed the latest buying trends of Generation Z:

1. Attention spans of a couple of seconds – it’s how their brains are adapting to their digital environment. Accommodating their window of attention is crucial for companies trying to reach them.
2. Instant gratification – any company or campaign geared toward saving them time will be a success if executed properly.
3. Prevalence of influencer marketing – retailers must use prudence when dealing with influencers: don’t go too expensive or too cheap, and focus on promoters who fit your brand.
4. Mobility: keep moving or you’re dead – when designing a website and a service, it is crucial to make the website highly mobile friendly.
5. Racial barriers are becoming non-existent – brand yourself and your company as an inclusive, diversified institution.
6. Generation Z are becoming more aware – ensure you have a quality product and service, and maintain a positive presence on customer reviews.

Concluding

Retailers that want to sell (or market) their products to a specific generation or generations need to follow trends regarding their buying behaviour closely. The advances in digital technology, online interactivity and customer mobility will pose challenges for retailers to keep up with. Lastly, it may be wise for smaller, local retailers to focus on only one generational customer segment.

Remember, you need a well researched and written Marketing Plan to get your business off to a good start, also to succeed in your demographic segmentation.

Read also:

1. Selling to the Young Ones, Generation Z
2. Shopping Behavior of The Baby Boomers
3. Know Your Clever, Less Distinctive Customers – Generation X

Notes

¹ Lin, C.F. 2002. Segmenting customer brand preference: demographic or psychographic. Journal of Product & Brand Management, 11(4):249-268.

²Williams, K.C. and Page, R.A. 2011. Marketing to the generations. Journal of Behavioral Studies in Business, 3:1

Images

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