Geodemographic segmentation

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Geodemographic Segmentation is a classification system for ranking municipalities or micro-regions based on marketing and demographic characteristics. The business applications are very broad. It can be used to analyze market potential, expansion studies, development of trade marketing actions, risk assessment, among others. Geodemographic Segmentation is essential for companies that want to frequently develop geomarketing analyses and seek autonomy and independence(Y. Kamarulzaman 2010).

Advantages of Geodemographic Segmentation

There are several advantages of geodemographic segmentation:

  • Effectiveness - This means that top companies can ensure that their marketing strategy is on point. Once the target group is defined, it is easier to know how to make the product fit into the outline of their needs. Thus, the effectiveness of the company is assured. The primary motive is to make the product sell by making the potential buyers believe that their needs can be fulfilled by the particular item. Consumer profiles are thus easier to understand and interpret.
  • Ease of operations - This means that once the target group is known, accordingly steps can be taken to ensure that their attention is caught for the product. For example. In case of an item for kids, the advertisements can be vibrant and free toys may also be provided. On the other hand, if the target is the aged, then accordingly means may be adopted. It is very important to understand the taste of the potential clients. In fact, in order to ensure ease of operations, the marketing teams may also be divided accordingly and they may further appoint and allocate responsibilities. Thus, a hassle-free execution of the assigned task is made possible.
  • Optimum utilisation of resources - Geodemographic segmentation ensures that there is no waste of time or resources. Once the target is known, steps of marketing are taken accordingly. There is no waste on the trial and error method where there is no surety of what is going to work and what isn't. Proper planning is done beforehand to save time, energy and efforts. There is a harmonious execution of all plans.
  • Lack of pressure - This pertains to those who are working for the company. Proper and timely allocation of work helps to cut down on the workload. This means that everyone knows what their role is and what is expected of them. They can this focus on their own work and not be confused as to how things are to be done.

Disadvantages of Geodemographic Segmentation

There are several disadvantages of geodemographic segmentation:

  • The very assumption that all those in a particular group, are bound to have similar needs is a big disadvantage. It is not necessary that this will be the case. No two humans think alike or have the exact same needs. Thus, geodemographic segmentation leaves very little scope to cater to individual differences. In fact, they are totally ignored. This, it is not necessary that the segregation is bound to yield good results for the company. Everyone has a different lifestyle, daily situations to face and problems to solve. Thus, these are overlooked in case a company engages in geodemographic segmentation.
  • Various tastes cannot be met through geodemographic segmentation. This is so because what may appeal to one person, may be terrible in the eyes of someone else. At times, even if a product fits the needs of everyone, it fails to meet the tastes of people. This is where a matter of choice steps in. While the first disadvantage pertains to a compulsion, this is one where the masses have the freedom to pick. Thus, there may be times when competing brands and companies come up with something more appealing to the senses. A big factor regarding this could the pricing of a product. At the end of the day, the pocket pinch matters the most to the common man.
  • At times, the information collected may be skewed. This means that it may be faulty or the population in one are may consist of too many people of the same age or profession or other likewise element. For example, in a locality of factories, the main population will be labourers and the working class while students will be the main population in a region dominated by universities. Thus, the skewed population can yield skewed data. In such cases, there is an overall misinterpretation of the area. Other factors that lead to such errors may also be a migration of population and sex ratio between the males and females. Problematic geodemographic segmentation can, in turn, lead to reduced accuracy of operations and adoption of incorrect and ineffective marketing methods. This defeats the entire purpose of the task and proves to be a total waste.

Geodemographic segmentation is significant and needs to be done strategically and wisely. Though it has both pros and cons, it can prove to be of great help to maximise the sales and profits incurred by the company(Y. Kimura, R. Saito 2011).


Examples of Geodemographic segmentation

  • The most common type of geodemographic segmentation is called PRIZM. PRIZM stands for Potential Rating Index for Zip Markets and was developed by Claritas. It divides the US population into 66 segments, each segment representing a different lifestyle and consumer group. This system helps marketers better understand the needs, wants and behaviors of different consumer groups and how to target them effectively.
  • ESRI Business Analyst is a geodemographic segmentation tool used by businesses to analyze and map customer data. It enables them to identify and target potential customers, analyze customer behavior, and compare customer profiles with other businesses. It also provides detailed geographical information and demographic data, as well as the ability to create custom segments.
  • Nielsen's Claritas Segmentation System is another popular geodemographic segmentation system. It divides the US population into 66 different segments and is based on demographic and lifestyle data. This system is used to identify potential customers, understand their needs and behaviors, and create effective marketing campaigns.

Other approaches related to Geodemographic segmentation

The following are some other approaches that are related to Geodemographic Segmentation:

  • Geospatial Analysis: Geospatial analysis is a type of analysis that uses geographic information to analyze and interpret data. It is used to identify spatial patterns, correlations, and relationships. It can be used to develop marketing strategies, optimize resources, and identify new opportunities.
  • Geographic Information Systems (GIS): GIS is a computer system used to capture, store, query, analyze, and display geographic data. It allows users to view, edit, analyze, and interpret data in order to better understand the physical and social characteristics of a place.
  • Geo-Targeting: Geo-targeting is a method of targeting customers based on their geographic location. It can be used to create targeted marketing campaigns that are tailored to the needs of a specific geographic area.
  • Geofencing: Geofencing is a technique that uses GPS or RFID technology to create a virtual boundary around a defined geographic area. It can be used to create targeted campaigns and deliver personalized messages to users within the boundary.

In summary, Geodemographic Segmentation is a classification system used for marketing and demographic purposes. It can be used in conjunction with other approaches such as Geospatial Analysis, Geographic Information Systems (GIS), Geo-Targeting, and Geofencing in order to better analyze and understand the demographics of a particular geographic area.


Geodemographic segmentation — recommended articles
Segment of the market — Analysis of customer — Market mapping — Market segmentation process — Differentiated marketing strategy — Selling process — Product research — Consumer orientation — Business model canvas

References

Author: Maria Drzazga

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