B. “Demographic Data Analysis”
Emphasis is on the development of marketing environment information for marketing
decision-making. This is based on examples of particular approaches in developing
demographic-based market research and leads into a discussion of the implications for the
introduction of other research opportunities to the firm and the industry.
Teaching Objectives
Highlight the role of demographic analysis in marketing decision-making.
Stimulate thinking concerning the critical issues in utilizing demographic analysis.
Consider the steps in proceeding with a demographic analysis.
Discussion
INTRODUCTION
For virtually every product or service, demographic data is an important element in the marketing
equation. Demographics can help marketers learn more about the current and potential customers,
where they live, and how many are likely to buy the product or service based on prior consumption of
various products and services. Demographic analysis also helps marketers serve their customers better
by enabling them to adjust to their changing needs.
There are four primary steps in the demographic analysis process:
Identify the population or household characteristics that most accurately differentiate
potential customers from those not likely to buy.
Find the geographic areas with the highest concentrations of potential customers.
Analyze the purchase behavior of the potential customers to establish some
understanding of the cause and effect behind their purchasing patterns.
Determine media preferences in order to find the most efficient way to reach the
potential market with an advertising message.
In a mass marketing approach there is one message communicated via the media: newspapers,
radio, and broadcast television. The assumption is that the message will reach everyone. No
special effort is made to ensure that the message will appeal to or reach the most likely
customers.
The result of mass marketing efforts is that substantial resources are expended on marketing
products and services to groups in the population that did not want or need them. For example,
a motorcycle company expending advertising budget on prime-time television also would
reach housebound elderly as well as the young adult target market. Likewise, a swimsuit
manufacturer placing ads in a national magazine would reach potential consumers in Alaska as
well as Florida. The obvious point is that a “shotgun” approach is not the most efficient use of
marketing resources.
Target marketing clearly has replaced mass marketing. The guiding principle is “Know Thy
Customers.” It is essential to obtain answers to a number of important questions about your
target market: How old are they? Where do they live? What are their interests, concerns, and
aspirations? The answers to these questions provides the basis to determine the specific
advertising media and/or marketing approaches most likely to appeal to those customers and
whether you are targeting the right customers. It is also possible that the firm will have more
than one group of target markets. Research shows, for example, that young women purchase
low-fat frozen dinners for obvious diet purposes, but retired people also purchase the product
because they only want a light meal.
The principle also applies in the situation where a firm knows that its customers are
predominantly college graduates, and that the firm also knows the zip codes of the existing
customers. This information can be utilized as follows:
First, obtain a tabulation of the number of college graduates by zip code,
available through various research organizations and information providers such
as the American Demographics Directory of Marketing Information or the U.S.
Census Bureau.
Second, for any metropolitan area, establish the percentage of all college
graduates in the metropolitan area who reside in each zip code. The process is:
oCalculate the percentage of existing customers who reside in each zip
code.
oDivide the percent of college graduates in each zip code by the
percentage of customers in the zip code (and multiplying by 100). This
provides an index of penetration for each zip code.
oIf the index of penetration is 100 or above, the market likely is
specific area.
Demographic information is now readily available for various personal computer systems and
formats. Demographic statistics are obtained on CD-ROM or via the Internet, complete with
software for accessing the data. The software for highly sophisticated analysis of the data is
also readily available.
pizza.
CUSTOMIZED MARKETING FORECASTING, BASED ON DEMOGRAPHIC AND LIFESTYLE DATA
With the proper analysis techniques and capabilities, it is possible to merge primary census
data with more detailed customer data to form a clearer picture of the market and its potential.
This could involve the following:
or a household.
Refrigerators, for example, are household products, and most households have only one or two
refrigerators. On the other hand, everyone within the household has his/her own toothbrush and
million households.
Those classified as “family households” include married couples with children
(26 percent), married couples without children (29 percent), single parents
living with their children (9 percent), and brothers and sisters or other related
family members who live together (7 percent). “Non-family households”
unrelated roommates (5 percent).
Different types of households are more prevalent among certain age groups. For
instance, the majority of women who live alone are over age 65, while the
majority of men who live alone are under age 45.
Household types differ between generations as well. Younger people today are
or lovers.
Everyone in the United States (except for the homeless) lives in either a household or group
quarters. Many businesses ignore group-quarter populations, reasoning that nursing-home
patients and prison inmates probably do not engage in much shopping. However, if the market
is computers, beer, pizza, or any number of products that appeal to young adults or military
the product or service. Demographic analysis enables the firm to refine the market definition,
the potential market, and how it likely will change over time.
In general, forecasting the U.S. market or that of a specific state is easier to estimate accurately
than populations for small areas, such as neighborhoods, which often experience greater
trends such as the baby boom and baby bust cycle. Accordingly, it is important to understand
the differences between a generation and a cohort. The events for which generations are named
occur when their members are too young to remember much about them (i.e., the Depression
generation includes people born during the 1930s). Cohort groups provide classifications that
BABY BOOMERS
To illustrate, consider baby boomers born between 1946 and 1965. In their youth they
experienced a growing economy, but they also dealt with competition and crowding in schools
and jobs due to the sheer numbers in the cohort. Their lives were shaped by events such as the
civil rights movement, the Vietnam War, the women’s movement, and the Watergate scandal.
no longer are accurate. Beliefs concerning certain consumption patterns, such as “coffee
consumption increases with age”, and “younger people drink cola,” no longer are as valid as
they once were because people who grew up on cola often continue to drink it. The same is
true for ethnic foods and a host of other products.
and will continue to change.
If the firm is marketing a product to a certain age range, it should be aware that the people who
will be in that age range in five or ten years will not be the same as the ones who are there now.
A strategy that has worked for years should be rethought as one cohort leaves an age range and
another takes its place.
market of the next cohort and the next generation.
Background Articles
Issue: Marketing Research in the Online Environment
Source: “P&G Puts Spin On Web Coupons,” Brandmarketing,
October 2001, p. 6.
better target offers.
Online promotions are an integral part of two of P&G’s big online multibrand endeavors,
Home Made Simple and S -magazine. Both are being marketed to consumers in the form of
e-mail newsletters that include content, coupons, and samples. Last month’s Home Made
Simple newsletter, for instance, offered decorative painting techniques, packaged lunch ideas,
external brands. For instance, a current issue featured Rosie and Spiegel magazines, as well as
Iams pet food. Other issues have offered discounts for Betty Crocker and Eddie Bauer.
P&G has aggressive plans for S-magazine, saying it wants to more than double the magazine’s
current 3 million subscriber list by the end of the gear, according to one of the brand managers.
assuring any kind of repeat behavior.
While Home Made Simple (www.homemadesimple.com) has been operating for nearly one
year, P&G recently strengthened its couponing and sampling features by partnering with
FreeSamples.com, San Francisco, an online targeted marketing solution. FreeSamples takes the
sampling orders, fulfills them, and provides P&G with information on the consumer who
requested them.
each consumer’s needs. They learn as much as possible so that they can get as targeted as
possible.
Along with its multibrand sites, P&G also uses samples and coupons at several of its
brand-specific sites, including Tide.com. Under a new promotion launched in conjunction with
understands the value of consumer-specific marketing.
Issue: Brand Paring in a Changing Economy
Source: “Sears to Cut More Brands,” DNR, October 29, 2001, p. 3.
includes laying-off about 4,900 salaried employees—or 22 percent of the total salaried work
force—and reconfiguring both the selling floor and the store’s legendarily complicated chain of
command.
The apparel initiatives include significantly cutting back on career merchandise and refocusing
said Lacy. “We don’t want to be that anymore.” What Sears wants to be, however, is less clear.
“We’re not a discounter and we’re not a department store,” said the Chairman.” To clarify, the
division head of the 860 full line stores commented that: “We want to be Sears.” She also noted
that the store is looking long and hard at Kohl’s as a model for its soft-lines business.
the apparel world.
Lacy said the changes were necessary due to shifts in the market over the last few years,
adding that “the discounters have gotten better and the department stores have gotten more
promotional. We need to address these changes.”
Specifically, he said Sears’ margins and expenses are out of whack, meaning that the store has
offer centralized checkouts in many stores while continuing to have cashiers in certain
departments.
Sears currently has 860 full-line stores around the country and total annual sales of more than
$25 billion. According to Lacy, about 250 of those are smaller locations of 65,000 square feet
be closed.
In terms of the chain of command, the store is flattening hierarchies in some areas and
simplifying and combining management levels at the stores. Currently, a typical store manager
earnings to $1 billion by 2004.
Case:
“Talbots – A Classic”
HBS Case: 500-082 TN: 5-502-060
Teaching Perspectives
The case traces the decisions that led to the strategy of attracting a younger customer segment,
the reaction from the customer base, and the decisions taken by management to remedy the
situation. Additionally, the case provides considerable information on the Talbots customer,
store operations, and the Talbot supply chain, enabling students to make recommendations on
expansion strategies for future growth.
related to attracting a younger customer segment had resulted in net income falling from $63.6
million for the year-ended February 1, 1997, to $5.8 million for the year-ended January 31,
1998. Faced with these disastrous results, Talbots, an upscale women’s apparel retailer with
673 stores worldwide, re-focused efforts on its ‘classic’ clothing for middle-aged customers,
and by January 30, 1999, income had rebounded to $36.7 million. Having solidified its core
positioning, Talbots’ senior management was focused on a strategy for future growth. Talbots
believed that there were several venues for growth including new stores within the current
Talbots concepts, the development of new concepts, and the expansion of new channels (such
as the Internet). Given its recent poor performance, however, senior management also knew
that it needed to make the right choices — an unforgiving marketplace would not allow another
failure.
Traditionally, Talbots had been a high quality, higher end retailer of classic women’s clothing.
The company had a very loyal customer base, but over time, customer research showed,
Talbots had an increasingly difficult problem attracting new customers. In 1997, this lack of
growth in new customers had led to the development of a more fashion-forward merchandise
line. Not only did the clothing fail to attract the desired new customers, it also alienated the
core customer base. Compounding the problem was Talbots’ position as a private label retailer
(98% of goods in stores were sold under the Talbots label). The company, known as a full price
retailer with limited sales events, owned the merchandise. And in 1997, in an unprecedented
action, it was forced to take markdowns and write-offs to clear the merchandise from the
stores.
A full analysis of the case should include an investigation of what happened in 1997, an
analysis of the Talbots customer and the internal processes designed to support that customer,
and recommendations for the future growth of the company.
Questions
1. What went wrong in 1997? Was it flawed strategy or execution?
that customer?
3. How should Talbots grow in the future?