Consumer Demographics

This article will provide an overview and analysis of the history and current relevance of the consumer demographics movement and related practices, such as psychographics, in market research. Business applications of consumer demographics will be discussed. In addition, the issue of globalization's effect on consumer demographics and market research, in general, will be covered. The phenomena of global consumers, global brands, and consumer ethnocentrism will be introduced. The role of consumer demographics in Internet-based business will also be discussed.

Keywords Consumer Demographics; Consumer Ethnocentrism; Global Brands; Global Markets; Globalization; Market Research; Psychographics

Economics > Consumer Demographics

Overview

Consumer demographics, which include categories such as age, ethnicity, gender, income, mobility, education, and social class, are considered to be predictors of consumer behavior, habits, and patterns. For example, variances in customer gender and income predictably result in higher sales in certain markets and lower sales in others. Consumer demographics are generally considered to be either antecedent or non-antecedent in nature. Antecedent demographics, such as gender, race, and nationality, refer to socio-developmental processes that may influence an individual's intellectual and emotional responses to consumer choices. Non-antecedent demographics, such as student status, home-ownership status, and political affiliation, refer to identities added during the lifecycle.

The field of market research uses consumer demographic data, and related tools, to accomplish the following value-added processes (Claxton, 1995, ¶1):

• "Identify meaningful new market segments."
• "Fit products to individual needs more closely."
• "Build better relationships with the many facets of today's complex consumer."

Consumer demographics, as a tool or a statistical grouping, are part of a larger effort to study and gather information about the consumer. Areas of related consumer study include consumer behavior, consumer characteristics, lifestyle attributes, lifecycle consumption, market segmentation, target demographics, psychographics, and consumer price knowledge. Market researchers use polls, surveys, and tracking technology to gather demographic data.

Consumer demographic data is an important tool used by marketers and advertisers in the brand-making process. Marketers create a brand through a two-step process: marketing mix and marketing implementation. Marketing mix refers to the process of researching customers and "formulating the policies for new product and service developments, distribution channel choice, pricing strategy, marketing communications, and customer servicing. Marketing implementation refers to the process of delivering products and services to consumers and involves such activities as production, supply chain management, logistics, employee training and motivation, advertising and promotions, and sales and after-sales service" (Gelder, 2004).

Consumer demographic data is gathered in the private and public sectors alike. Multinational corporations, such as Citibank and Coca-Cola, depend on consumer demographic profiles to target segments of the population with appropriate advertising campaigns and estimate consumption and distribution needs. Non-profits such as the Association for Consumer Research exist to advance consumer research in areas such as consumer demographics and facilitate the exchange of information among members of academia, industry, and government. Government agencies, such as the U.S. Department of Labor's Bureau of Labor Statistics, collect consumer demographic data on the U.S. population. The Bureau of Labor Statistics collects consumer demographic data on thirteen standard characteristics such as income quantile, income class, age, size, composition, number of earners, housing tenure, type of area, race, Hispanic or Latino origin, region, occupation, and education. The Bureau of Labor Statistics created the Consumer Price Index, which is a measure of the average variation over time in the prices paid by urban consumers to buy a market basket of consumer goods and services in order to quantify urban consumption of food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services.

Consumer demographics, and market research, in general, are increasingly important in the new global economy. Consumer demographics in the global market are a tool used by applied market researchers and corporations to maintain or increase market share. Controlling market share, which refers to the fraction of industry sales of a good or service controlled by a certain company, is becoming increasingly competitive in the global marketplace.

The following section will provide an overview and analysis of the history and current relevance of the consumer demographics movement in market research. This section will serve as a foundation for later discussions of the business applications of consumer demographic and the rise of global consumers and global brands.

History of Consumer Demographics

The study and use of consumer demographic data as a marketing and advertising tool began in the early twentieth century. Studies of consumer behavior began at the same time as mass-circulating, advertising-sponsored magazines. Consumer information became crucial currency in the advertising and media industries of the early twentieth century. From 1910-1940, weekly magazines, such as "Ladies' Homes Journal,""Woman's Home Companion,"and "Harpers Bazaar," promoted their magazines to advertisers as being representative of a certain kind of consumer. Magazines and publishers established research departments to collect data on the income and demographics of their audience. Magazine surveys, in which readers were asked to report information on family size, occupation, size of home, gardens, domestic help, car type, meal planning, leisure time, and food preparation, became common. These surveys were transmuted into reports on consumer demographics, behavior, and purchasing patterns.

During the 1930s, the growth in radio broadcasting facilitated the growth of national consumer rating research and the development of a standardized consumer typology called the ABCD system, which was used to differentiate households according to income. Income data was thought to provide associated information about lifestyle and politics. The ABCD consumer income typology included the following categories.

• A: Homes of substantial wealth
• B: Comfortable middle-class homes
• C: Industrial homes of skilled tradespeople
• D: Homes of unskilled laborers

The ABCD income system influenced the development of the Cooperative Analysis of Broadcasting (CAB) survey approach and the Nielsen ratings index. The ABCD, and its later incarnations, allowed for standardized and targeted marketing efforts. The ABCD system's popular use in market research declined in the years following World War II. In the years following WWII, American society changed in three major ways:

• Creation of consumer culture: The post WWII years were characterized by a rise in the standard of living, new materials and designs, shopping malls, and new appliances.
• Popularity of television: The post WWII years were characterized by the ubiquity of television in American households. The rise in the popularity of television transformed American media consumption habits and patterns. Television became the main conveyor of advertising messages.
• Focus on lifestyle: The post WWII years were characterized by the emerging awareness of lifestyle. The rise of consumer culture and new media culture created a new focus on youth culture and leisure time.

In response to these three changes or shifts in American society, market research grew in size and sophistication. In the 1950s and 1960s, market research expanded in an effort to gather more and better information about consumer behavior. During the 1960s, market researchers began to abandon the idea (as typified in the ABCD income system) that demographic data was the only or most important measure of consumer patterns or predictor of consumer behavior.

Market researchers began to conduct consumer motivation research which was characterized by the notion that consumer action and decision were motivated by the consumer's unconscious. The consumer motivation research approach, which depends on in-depth information to gather consumer information, asserts that consumers are engaged in a dynamic consumption process in which they are active rather than passive actors. Motivation research is based on the following beliefs:

• Consumer needs and desires are independent of environment.
• Consumer preferences are not created through structural determination.

While motivation research was responsible for the recognition that consumers have subjective experiences and are actors in their own rights, motivation research, based on interview data, was considered to be methodologically anecdotal and unscientific. Motivation research became the foundation for a field called psychographics (Arvidsson, 2004).

Psychographic research refers to quantitative research intended to place consumers on psychological, rather than demographic, dimensions. Psychographics involves quantitative research on consumer attitudes, opinions, and interests. Consumer data was generated from computer analyses of over 300 variables. Consumer habits and profiles became highly individualized. Segments and consumers were no longer determined by small numbers of categories. Variety characterized this new approach. Psychographic research, with its hundreds of variables, allows for new insights and unexpected conclusions. Market researchers who collect psychographic data are interested in the complexities of consumer personality and behavior. Psychographic research, also referred to as lifestyle, activity, and attitude research, attempts to move beyond demographic data collection and analysis. Psychographic variables include activities, interests, opinions, needs, values, attitudes, and personality traits. Ultimately, consumer motivation research and psychographics, which remain market research tools today, account for the complexity of the modern consumer when the ABCD income typology and consumer demographics, in general, cannot (Wells, 1975).

Application

Data on consumer demographics is crucial information for nearly every industry, including retail, insurance, finance, advertising, and consumer goods. The connection between subsets of demographic particulars and consumer behaviors and action is long established. For example, there is an established relationship between consumer socio-economic demographics and consumer price knowledge (Rosa-Diaz, 2004). In addition, there is an established relationship between shoppers' demographic characteristics, retailer reputation, shopping expenditure, and frequencies of store patronage (Ou, 2007).

Demographic data, along with other market research tools such as psychographic data, competitive data, shopping center data, brand sales, and site-related data, allows an organization or industry to understand and predict consumer behavior. Demographic data can be used for the following business analyses:

• Comparison of demographic data and sales regions helps to connect sales to neighborhoods and aids in creating a distribution of sales map.
• Comparison of demographic data and sales levels helps identify which characteristics are associated with high, medium, and low sales.
• Comparison of demographic data and site characteristics helps to analyze and determine which variables contribute positively or negatively to sales potential.

Regional, national, and international organizations alike depend on consumer demographics data but, at this point in the development of market research and brands, consumer demographics are rarely used as the exclusive tool to plan an advertising or marketing campaign. Instead, marketers use consumer demographics and other tools such as psychographics.

For example, the financial industry depends on market research of all kinds to understand and segment its customers or consumer base into target groups. In 1999, Citibank hired Fallon Worldwide as its bank marketer. Fallon Worldwide combined demographic and psychographic research and data to understand Citibank customers. Citibank's use of consumer demographic and psychographic data was seen in Citi's "Live Richly" campaign. This campaign cut across traditional demographic categories and targeted consumers with a "healthy" attitude toward money who sought to fulfill their values of family, friends, and shared happiness. Ultimately, demographic data, discovered through focus groups, surveys, polls, and interviews, are at their most useful when combined with consumer behavior data (Sausner, 2006).

Another example includes the social networking site LinkedIn’s “Follow in her footsteps” campaign, which was timed to correspond with the company’s sponsorship of the UEFA 2022 Women’s Euro Cup. Using market research that showed 76 percent of women wanted female role models who were more visible in popular culture, LinkedIn tailored its campaign to meet the desires of this demographic (Horberry, 2023).

Issue

Consumer Demographics & Globalization

The forces and processes of globalization affect established approaches to market research, such as consumer demographics data. The advent of global markets and global brands challenge the fixed categories of consumer demographic profiles. The intersection of marketing and diverse cultures has created the need for new demographic tools that reflect cultural, economic, and social contact and transitions. For example, the traditional demographic category of nationality is challenged by transnationalism. The traditional demographic categories of race and ethnicity are challenged by multiracial and multiethnic identities. The traditional demographic category of gender is challenged by transgender identities.

Global markets are characterized by an increasing mobility in capital, research and design process, production facilities, customers, and regulators. Global markets, created through socio-economic changes, political revolutions, and new Internet and communication technology, have no national borders. The modern trend of globalization, and resulting shifts from centralized to market economies in much of the world, has created opportunities for increased trade, investment, business partnerships, and access to once-closed global markets. Economic environments around the world are changing due to the forces of globalization. Globalization is characterized by the permeability of traditional boundaries of nations, culture, and economic markets. The fundamental economic forces and events influencing globalization around the world include the end of communism; the move away from an economy based on natural resources to one established on knowledge industries; demographic shifts; the rise of a global economy; increased trade liberalization; advances in communication technology; the rise of the Internet and the technological revolution; and increased threats of global terrorism (Thurow, 1995).

Globalization creates a turbulent global socio-political environment characterized by competing political actors, shifting power relations, and politically-driven changes in national economies around the world. Businesses work to find opportunity and profit in the political and economic changes. The political turbulence and upheaval has resulted in a move from centralized economies to a decentralized global economy and has created numerous emerging markets. These emerging markets are capital markets within developing countries that have decided to liberalize their financial system to increase capital flows from external investors.

In a fast-moving global environment, cultures around the world are changing. Economic and social migration causes individual members of various cultural groups to move from one country to another. People bring their interests, values, and distinctive behavior patterns, which result in cultural interpenetration (Craig & Douglas, 2006). Economic globalization, the first step of globalization, is followed by political, cultural, and psychological globalization. In response to the processes of globalization, individual consumer demographic categories need to be expanded, as does the overall definition of the consumer (Suh & Kwon, 2002). Scholars debate whether globalization fosters renewed nationalism or national and cultural homogenization. While people do not seem to be transcending their cultures, people engaged in cultural contact and interpenetration do seem to be creating some degree of world citizenship (Cannon & Yaprak, 2002). World or global citizenship is strongly connected to the growing trend of global brands.

Businesses, participating in the new global economy, continue to seek out new manufacturing and sales opportunities in foreign markets and countries (Sites, 1995). Economic globalization has resulted in the creation of global or world brands. The growth of world brands is challenged by the specific norms and values of individual cultures. Marketers of international or global brands face problems of consumer ethnocentrism, or reluctance to buy a foreign product. National values are shifting due to cultural interpenetration. Market research studies are increasingly incorporating international consumer demographic data to gain insight on global processes and preferences.

In many instances, cultural norms and values often conflict with a company's desire to obtain brand consistency across markets. For example, a local culture's values and norms can influence areas such as the "volume of mineral water and soft drinks consumed, ownership of pets, of cars, the choice of car type, ownership of insurance, possession of private gardens, readership of newspapers and books, TV viewing, ownership of consumer electronics and computers, usage of the Internet, sales of video-cassettes, usage of cosmetics, toiletries, deodorants and hair care products, consumption of fresh fruit, ice cream and frozen food, and usage of toothpaste" (de Mooij, 2000). The management of brands across multiple societies and geographical areas is a fast-growing area within market research. Market researchers, and the corporations who hire them, are committed to reaching the full potential of brands in diverse markets (Gelder, 2004).

The Internet and Market Research

As the twenty-first century progressed, online market research became prevalent. Corporations turned to analyzing primary and secondary data collected by tracking Internet usage and trends to support company growth. Online or digital market research can track consumers’ purchasing habits, determine what ads are most effective, and easily spot trends. Companies collect primary data through surveys and focus groups, and secondary data is obtained by methods such as analyzing competitors’ websites or reading online corporate reports. Digital market research is poised to become the dominant mode of market research in the 2020s (March & Durand, 2022).

Conclusion

Market research during the twentieth century incorporated nearly all the disciplines and related tools of social science research (including anthropology, sociology, economics, psychology, and political science) to understand and predict consumer behavior and choices in the marketplace. Market research, which was originally based on simple demographic systems such as the ABCD typology described in this article, has expanded over the last century into every industry and market. In the twenty-first century, data on consumer demographics contribute to nearly every market research process, including "target marketing, customer profiling, site evaluation, demographic analysis, market segmentation, color mapping, business and competitive analysis and sales forecasting, marketing and advertising campaign development, and strategic business planning" (Hoffman, 1987, ¶3).

Demographic profiles are standard practice in modern market research. Consumer demographics are believed to influence every part of consumer behavior. Demographic profiles, which were the foundation of market research conducted in the early twentieth century and remain an influential and much-used market research tool, are criticized for the rigidity and fixity of consumer categories and variables. Consumer demographic data is increasingly augmented with consumer behavior and consumer motivation data. Market research is increasingly interested in collecting and analyzing multi-variable consumer data on demographics, motivation, psychology, and behavior.

In the late twentieth and early twenty-first centuries, market research is characterized by single-source information services such as bar-code scans and Internet tracking software. Twenty-first-century market research is concerned with knowledge, mobility, post-modern consumer, virtual communities, branding revolution, and brand value that transcended place. The twenty-first-century consumer is virtual, mobile, and highly aware of corporate behavior and actions (Arvidsson, 2004). Demographics were found to be an important factor in some kinds of purchasing behaviors, such as for electronics, and demographics were shown to have superior predictive potential (Sandy, Gosling, & Durant, 2013) in Internet commerce. With the near ubiquity of Smartphones and tablets, researchers and marketers began to look at differences in e-commerce, which allows the collection of data tracked to an IP address, and mobile transactions, or m-commerce, which allows the collection of real-time data tracked to a device's serial number, including location, "social relationships, life style, preferences or behavior patterns" (Zhang, Chen, & Cajaejung, 2013).

Terms & Concepts

Antecedent demographics: Socio-developmental processes that may influence an individual’s intellectual and emotional responses to consumer choices.

Consumer Demographics: Categories such as age, ethnicity, gender, income, mobility, education, and social class, are considered to be predictors of consumer behavior, habits, and patterns.

Consumer Ethnocentrism: Reluctance to buy a foreign product

Consumer Price Index: A measurement of the average variation over time in the amount paid by urban consumers for a market basket of goods and services.

Income Quantile: A statistical measure of a society that includes five income rankings separate for urban areas and rural areas.

Global Brands: A brand name recognized all over the world.

Global Markets: The economic markets of countries and regions open to foreign trade ad investment.

Globalization: A process of economic and cultural integration around the world caused by changes in technology, commerce, and politics.

Marketing Implementation: “The process of delivering products and services to consumers; involving such activities as production, supply chain management, logistics, employee training and motivation, advertising and promotions, and sales and after-sales service” (Gelder, 2004).

Marketing Mix: The process of researching customers and “formulating the policies for new product and service developments, distribution channel choice, pricing strategy, marketing communications, and customer servicing” (Gelder, 2004).

Market Research: The accumulation and examination of information regarding consumers, markets, and the performance of marketing campaigns.

Market Share: The fraction of industry sales of a good or service owned by a certain company.

Psychographics: Quantitative research intended to place consumers on psychological, rather than demographic, dimensions.

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Suggested Reading

Bellman, S., Lohse, G., & Johnson, E. (1999). Predictors of online buying behavior. Communications of the ACM, 42, 32-38. Retrieved Monday, April 23, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=11872116&site=ehost-live

Black, G. (2005). Is eBay for everyone? An assessment of consumer demographics. SAM Advanced Management Journal, 70, 50-59. Retrieved Monday, April 23, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=17063790&site=ehost-live

Estelami, H. (1998). The price is right…or is it? Demographic and category effects on consumer price knowledge. Journal of Product & Brand Management, 7, 254. Retrieved Monday, April 23, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=4043329&site=ehost-live