The Slow Death of Demographic Segmentation

In 2007, I wrote an article for Drew McLellan’s popular Marketing Minute blog called Is Demographic Segmentation Dead? Fast forward five years and the debate over the lifespan of demographic segmentation is still going on. Market segmentation is more complex than ever and the “old rules” are continually questioned. The “new rules” of segmentation have yet to be fully defined. In fact, it’s a constantly moving target, and marketers have to be more flexible and intuitive than ever.

market segmentation piecesBack in 2010, AudienceScience reported that 80% of marketers were using behavioral targeting techniques, 76% targeted by geographic location, and 75% used demographic information for targeting. The report also found that most marketers believed behavioral and demographic targeting were their best options.

Jump ahead two years to 2012, and a new study by Catalina Marketing reports that marketers are wasting millions of dollars by relying on demographic targeting. According to AdWeek, the study found:

“Just 36 percent of television ad exposures are delivered to the households that account for the vast majority (98 percent) of CPG purchases. This is a direct function of marketers’ overreliance on demographic targeting, said Todd Morris, executive vice president of brand development and marketing innovation for Catalina.

“’Demographic targeting tends to treat all consumer groups equally, no matter how active they may be in a given category,’ Morris said. ‘Instead of super-serving the relevant ads to the most active consumers, the impressions are spread out equally among viewers who happen to coexist in the same demographic. It’s an incredibly wasteful and inefficient way to do business.’”

Eric Holtzclaw, CEO of User Insight, sums up what’s happening in the world of market segmentation succinctly in his article on CMO.com. He wrote:

“To thrive in today’s fragmented marketplace, you first have to admit that reliance on demographics and traditional segmentation no longer works. The ‘typical consumer’ is no longer typical. Today’s consumers are multichannel, active, engaged, and in control. Now that these consumers can choose their experiences with your brand, your success or failure is determined by how well you really know your customers.  You no longer sell to them: They choose to buy from you.”

Marry Demographic, Psychographic, and Behavioral Segmentation

The best solution to the market segmentation debate is one that marries demographic, psychographic, and behavioral segmentation. Whether a brand is choosing media placement or conducting market research, there are ways to identify and target audiences based on demographics, behaviors, and more.

For example, the AYTM survey tool enables brands to create custom pre-qualification questions to target specific behaviors among respondents. That’s in addition to 2,016 house tags that include a variety of demographic, psychographic, and behavioral criteria. For example, a financial company that previously could only target survey respondents using demographic criteria such as age and income could create custom behavioral tags using the AYTM survey tool like “actively saving for retirement” or “worried about whether you are saving enough money for retirement.”

Using behavioral segmentation along with traditional demographic segmentation in your market research surveys yields more useful data that tells a more complete story than demographics alone can provide. Bottom-line, demographic segmentation isn’t dead, but it’s extremely limited in what it can deliver. It used to be the only way marketers could segment customers. That’s not the case anymore, and marketers, companies, and consumers will all benefit from more complex segmentation with better aligned offers. What’s not to like about that?

Image: Artem Chernyshevych

ABOUT THE AUTHOR: Susan Gunelius
Susan Gunelius, MBA is a 25-year marketing and branding expert and President and CEO of KeySplash Creative, Inc., a marketing communications company. She is the author of 10 books about marketing, branding and social media, and her marketing-related articles appear on top media websites such as Entrepreneur.com and Forbes.com. She is also the Founder and Editor in Chief of WomenOnBusiness.com, an award-winning blog for business women.