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Advantages of using demographics as a basis for market segmentation

Discuss about the Demographics and Psychographics In Market Segmentation.

Research problem-market segmentation strategies need to be evaluated for effectiveness. This research will ascertain whether demographic variables are effective for market segmentation.

Limitations of the report- the report is dependent on secondary sources of information which may have subjective opinions. Therefore care should be given in when implementing the recommendations.

The sources and methods used-This report utilized secondary sources including academic underpinnings journals and internet sources.

Report Organisation-this report will first evaluate the advantages and disadvantages of using demographics as a base for market segmentation.

Advantages of using demographics as a basis for market segmentation

The first advantage of using demographics in market segmentation is that the demographics data is easily available for use and it is cost effective. Most secondary data including the census data are expressed in demographics. This makes it easy to access this form of data and apply it in identifying the target market. The census data is readily available and the costs involved in accessing this kind of data are low (Piercy, et al. 2011).

Secondly, demographics are easily measurable when compared to other segmentation factors. Considering when other variables like lifestyle and personalities are used in market segmentation their demographic characteristics have to be ascertained in order for the true characteristics of a market segment to be known (Bruwer, et al. 2007). Therefore the use of demographical data in deciding which market segment should be targeted is vital even when other factors have been considered. This set of data offers an opportunity to examine the population of different locations and develop products that suit their needs (Tigert, et al. 1971). For example, it is not enough to give the percentage of people who use Moleskine’s product range but it will be important to know their age, their gender and income ranges.

Third, the application of demographics in segmentation will lead to customer loyalty and retention. When the customer needs and wants are carefully evaluated and their trends studied, an organisation will channel its marketing campaigns towards those needs and wants (Sessler 2011). If the customers are satisfied, they will become loyal and they will tend to use the products more often. An example is the Moleskine’s product range. The company has engaged its customers in buying its non-digital products through incorporation of the products in the digital systems. For instance the MSK 2 is one of the products that customers can use to submit their art, hacks and videos on the company website. Besides, these clients can access various templates for the creation of their journals (Koenke 2006.).

Disadvantages of Using Demographics as a Basis for Market Segmentation

Fourth, demographic data reveals the ongoing trends that give a clear signal indication of business for marketers. For instance, demographics can reveal the income levels of a population and that can show the purchasing power of that population and products can be developed to suit the income levels of such a population (Barry, et al. 2009).

Finally, the use of demographics in market segmentation can save the business the costs that may be incurred in expansion. Since the population characteristics can be defined and the future predicted, the organisation can save on costs that can be incurred on further research and the losses that can be incurred through unsatisfied customers.

First, one major limitation with the use of demographics is that it is one dimensional and does not facture in product differentiation. For instance, demographics can give details on a certain product for example the aftershave but it cannot give information about a particular aftershave brand. And who exactly uses the brand (Shiffman 2013).

Secondly, demographic data is only descriptive and his limits the understanding of the consumers themselves since the data available is general and generalization cannot be used in the development of products that can be used by such a population (Sessler 2011).

Thirdly, demographic variable require that other variables are used in the development of a market segment. This is due to the weakness that is posed by only being descriptive of the data and not being detailed on the brand types that are preferred by different demographic segments (Shiffman 2013).

Lastly, demographic data is readily available and competitors can easily utilize it to copy the products that an organization may be selling in a particular market. This is a great disadvantage because the competitors may produce better products which can lead to loss of customers.

Can demographics and psychographics be used together to segment markets?

In the analysis of whether demographics and psychographics can be used together in a segment market, it is important to describe what is contained in psychographics. Psychographic segmentation is related to research on the psychological needs and wants of consumers (Narang 2010). This form of research is also referred to as lifestyle analysis. This has been an important tool that has been used in determining the most promising market segments. The promotion of such products as Colgate, KFC fast foods, Lux soap and many others relies on psychographic research which is used in capturing the potential customers’ profiles. Consumer interests, activities and opinions are some of the psychographic measures that can be used in the development of a market segment. Besides, the profiles which can be used when se factors are the ones that can be used in coming up with consumer-based products (Kumar,et al. 2008).

Can demographics and psychographics be used together to segment markets?

Psychographic and demographic can be used complimentarily. That is, when the demographic and psychographic variables are applied together, there is sufficient information that can be used in the development of products for a particular market segment. In marketing, information is important and the more information is available the more the marketing activities will be effective since the customer needs will be met. For a brand to be successful in the market, it needs to satisfy the customer needs fully. Organizations should invest more in market research in order to come up with the products that are needed by the market. It is not possible for the organization to produce products that will satisfy the customer needs if they do not conduct sufficient research on what those customers’ needs are (Simons, et al. 2016).

Using both demographic and psychographic data is also important because this technique develops a deep understanding of what needs to be put into the market. Demographics help in developing the quantities needed while psychographics will develop the needed qualities. For a market to be fully satisfied both quantity and quality have to be adhered to. A product may be of the required quality and the market demand is so high and if the quantities cannot satisfy the demand then there may be a crisis that may lead customers away from the company’s products. Also, a product may be abundant in the market yet it is not of the required standard and quality according to psychographic profiles. This also may tarnish the company’s reputation and customers will avoid such products ((Shiffman 2013).).

Moleskine is an example of a brand that fully utilizes the concept of market segmentation. This organisation used to produce notebooks and it is a popular brand name in this industry. The digital era has really affected this company but still it has managed to survive the tides that come with digitalization. Since the digital era came with a wave that could reduce the need to write in notebooks, the company did an analysis of their customer desires and lifestyles. Since these customers have a heavy presence in the online platforms and social media, the company developed products that can be used in the digital era. By doing this the company has survived through a challenge that many other companies could not survive through (Spence,et al. 2007).

When applying market segmentation as a strategy in marketing, demographic data is important and it should be used together with psychographic data. The combination of these sets of data makes it easy to identify and present products to the market will fulfil the customer needs and wants.A critical analysis of lifestyles and the [population is important in this strategy and therefore I recommend that the two sets of data should be used complimentarily for effectiveness.

Conclusion

Market segmentation is a marketing strategy that is effective in penetrating and managing a market. This is done through profiling the market needs and developing products that suit such a market. The use of demographics in market segmentation is important in determining the different customer characteristics. However, there are some limitations which need that a combination with other variables should be done in order to make sure that market segmentation is done in a way that will lead to customer and market satisfaction. When the market is satisfied, the brand easily becomes successful in such a market because it will be trusted and customer loyalty will be developed.

Reference List

Barry, James, and Weinstein Art. 2009. "Business psychographics revisited: from segmentation theory to successful marketing practice." Journal of Marketing Management 25, no. 3-4: 315-340. Business Source Premier, EBSCOhost (accessed September 15, 2016).

Bruwer, Johan, and Li, Elton. 2007. "Wine-Related Lifestyle (WRL) Market Segmentation: Demographic and Behavioural Factors." Journal of Wine Research 18, no. 1: 19-34. Business Source Premier, EBSCOhost (accessed September 15, 2016).

Koenke. Teri. 2006. "Destroying Demographics: The New Art of Strategic Customer Communications." U.S. Banker 116, 22-23. Business Source Premier, EBSCOhost (accessed September 15, 2016).

Kumar, Vishal, and Sarkar, Amitava. 2008. "Psychographic segmentation of Indian urban consumers." Journal of the Asia Pacific Economy 13, no. 2: 204-226. Business Source Premier, EBSCOhost (accessed September 15, 2016).

Mostafa Mohamed M. 2009. "Shades of green: A psychographic segmentation of the green consumer in Kuwait using self-organizing maps." Expert Systems with Applications 36, no. 8: 11030-11038. Academic Search Premier, EBSCOhost (accessed September 15, 2016).

Narang, Ritu.2010. "Psychographic segmentation of youth in the evolving Indian retail market." International Review of Retail, Distribution & Consumer Research 20, no. 5: 535-557. Business Source Premier, EBSCOhost (accessed September 15, 2016).

Piercy, Niall, Campbell, Collin, and Heinrich, Daniel. 2011. "Suboptimal segmentation: Assessing the use of demographics in financial services advertising." Journal of Financial Services Marketing 16, no. 3/4: 173-182. Business Source Premier, EBSCOhost (accessed September 15, 2016).

Sessler Jerrod. 2011. "Demographic Segmentation: Social Media In-A-Box." Franchising World 43, no. 9: 50. MasterFILE Premier, EBSCOhost (accessed September 15, 2016).

Shiffman Leon. 2013.  Consumer Behaviour, 6th Edition. Pearson/Australia, 2013-09-01. VitalBook file.

Simons, Dirk, and Zein Nicole. 2016. "Audit Market Segmentation – The Impact of Mid-tier Firms on Competition." European Accounting Review 25, no. 1: 131-154. Business Source Premier, EBSCOhost (accessed September 15, 2016).

Spence, Jacqui, and Abratt Russel. 1997. "Use of psychographics in consumer market segmentation: The South African experience." South African Journal of Business Management 28, no. 2: 33. Business Source Premier, EBSCOhost (accessed September 14, 2016).

Tigert, Douglas, Lathrope Richard Michael, and Bleeg. 1971. "The Fast Food Franchise: Psychographic and Demographic Segmentation Analysis." Journal of Retailing 47, no. 1: 81. Business Source Premier, EBSCOhost (accessed September 15, 2016).

Wilson-Jeanselme, Muriel, and Reynolds Jonathan. 2006. "The advantages of preference-based segmentation: An investigation of online grocery retailing." Journal Of Targeting, Measurement & Analysis For Marketing 14, no. 4: 297-308. Business Source Premier, EBSCOhost (accessed September 15, 2016).

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