Understanding Your Customers: How Demographics and Psychographics Can Help

If retailers don't know what customers want, or ignores requests, clientele may choose to shop elsewhere. Instead, learn about consumers and their interests.
Understanding Your Customers: How Demographics and Psychographics Can Help - Articles

Updated: June 16, 2016

Understanding Your Customers: How Demographics and Psychographics Can Help

As a retailer, knowing what to stock and sell can be a daunting task. A retailer could select products based on his or her own preferences. This may work if the retailer's needs and wants are similar to its customers'. However, if the retailer doesn't know what the customer wants, or ignores requests, clientele may lose interest and choose to shop elsewhere. Instead, the ideal course of action would be to learn about their consumers and then to learn about their interests. This provides the basis for developing a product mix that would be attractive to clientele.

Though each consumer has a unique set of criteria they use to make judgments about products, the practice of classifying consumers by characteristics (based on their demographics, interests, and other factors) into manageable groups, or market segments, is common. It would be difficult to produce a product that would appeal to every consumer. Hence, successful retailers tend to focus on those consumers who are most likely going to find their products appealing and purchase them.

Existing retailers should determine what segments of consumers they serve, understand the segment's desires, and learn about products that might appeal to them. Those segments that spend significantly more money than others are referred to as 'core' or 'target' customers.

New retailers may not have an accurate understanding of who their 'core' or 'target' customers might be. However, learning about consumers and product trends pertaining to their industry is a must. By learning about core consumer segments, the retailer could better focus attention on details that appeal to these consumers and design an appropriate product mix and promotional campaign.

What are Demographics?

Demographics describe who we are as individuals, for example: ethnicity, age/generation, gender, income, marital status, education, and homeownership. These and other characteristics categorize us without describing our personality. Many demographic characteristics cannot be changed and are directly related to our physical being. A recognized definition is: "The characteristics of human populations and population segments, especially when used to identify consumer markets". Retailers will find that most of the demographic data they need in order to make business decisions can be found on the U.S. Census website.

Demographics: Generations

Members of the lawn and garden industry have promoted container gardening and the use of raised garden beds as a way for 'Baby Boomers' and 'Mature' generations to garden without having to bend over.

Evidence suggests that the volume of wine purchase annually by members of Generation Y has a greater impact on the economic viability of the wine industry than some other generations.

Terms, such a 'Gen X,' 'Generation Jones,' and 'Baby Boomers,' were created as a way of classifying "a group of individuals, most of whom are the same approximate age, having similar ideas, problems, attitudes, etc.". Marketers have discovered that they can often work with producers and retailers to provide goods and services that would appeal to a majority of members of a particular generation, based on the general needs and wants of consumers within the group. See the sidebar for examples.

Demographics: Ethnicity

For the past several years, the population of certain ethnic groups has increased, particularly those who are of Asian and Hispanic or Latino descents. These changes present opportunities for many agricultural businesses. It is necessary for agricultural businesses to understand that within the Asian ethnic group, that those of Chinese, Korean, and Japanese descent will have different languages and cultures. The same is true for groups within the Hispanic ethnic group.

  • Agricultural retailers or producers who offer foods could produce vegetables, flours, grains, and other ingredients used by ethnic groups on a day-to-day basis and when preparing meals for Chinese New year (mushrooms, bamboo shoots, and bean sprouts). If this approach is pursued, it will be important to know which vegetables are commonly used by each ethnic group. It will also be important to learn about the meaning that certain ingredients convey. Examples include: Chinese lettuce (prosperity) and turnip (good omens).
  • Those who grow plants and flowers can also market their products to ethnic groups who wish to incorporate these items into traditional ceremonies.

It will be necessary to determine that there is a large enough population of the target ethnic group in order to support the retailer's or producer's efforts. Sources such as Holidays on the Net describe the occasion, ethnic group(s) that celebrate a given event, and what products make the celebration authentic.

Demographics: Income

Disposable income (or net income) is the amount of money that an individual has available to pay for expenses minus taxes and deductions. Discretionary income is the amount of money that remains after consumers pay for "needs" (food, rent/mortgage, insurance, etc.) that are required to sustain a reasonable livelihood. In general, the higher the level of net income the greater the amount of discretionary income that would be available for a consumer to purchase 'wants,' or items not necessary to maintain their life but rather their lifestyle.

  • If the 'core' customer has a limited income then goods and services marketed to them should be within a price range that is affordable.
  • Products marketed to more affluent consumers,however, would be manufactured, packaged, and promoted in a manner that would reflect their level of quality and prestige and would be priced accordingly. Agricultural businesses that offer food items classified as specialty foods might be considered as supplying a 'want' and would have to develop a marketing strategy to appeal to consumers with a higher income level.

Demographics: Geographical

The location where a consumer lives (e.g., the southeast vs. the northwest U.S. and/or in a metropolitan area versus a rural environment) can greatly influence his or her needs, wants, and access to goods and services. Cultural 'tastes' and traditions can affect food preparation, ingredients commonly used, and availability of specialty cuisine. East Coast consumers may include seafood as a staple in their diets, while consumers living in the southwest may frequently use chili peppers. Food retailers should be aware of entrees and recipes commonly prepared in their area and provide as many essential ingredients as possible. As a greater number of consumers travel and experiment with new cuisines, they may desire to recreate the dish in their own kitchen upon their return. Specialty or gift shop retailers can offer gift baskets that include these food ingredients or sell baking mixes that customers can prepare with ease.

The availability and variety of food ingredients can also differ based on consumer's proximity to large metropolitan areas. Consumers residing in metropolitan areas, such as New York and Philadelphia, have access to a large variety of products and outlets from which to purchase. Rural consumers, however, may have fewer options. Retailers in these areas will need to become educated about current trends and predictions and what is needed to provide consumers with ingredients and information necessary to cook a popular meal or to plant a fashionable garden. Becoming a member of a national association may be a wise decision. Subscribing to free e-newsletters published by marketing associations and related sources will also provide retailer with useful information.

Demographics: Homeownership

Knowing the level of homeownership within a market area is particularly important for businesses that sell plants, vegetable seeds, and lawn and garden services. Consumers who are homeowners may be more willing than renters to: a) invest in the establishment and upkeep of their lawn and garden and b) purchase outdoor plant material and landscape services.

  • Income level and amount of outdoor space may have an influence on the amount of money spent and the types of goods and services purchased.
  • The types of plant material grown and marketed should not only be appropriate for the 'target' market's location, but should also be the right dimensions for the consumer's outdoor lawn or garden space. Horticultural business that find that there are several apartment complexes or condominiums, with limited yard or no yard at all, within their market area should consider marketing plant material that can be grown in containers, in raised beds, or have a more vertical growth habit.

Psychographic Trends

It is important to understand that just because a consumer belongs to a certain demographic group that they do not necessarily believe in or follow the customs, culture, or beliefs that are representative of the generation, gender, ethnicity, or other characteristic that describes them. Other factors, such as an individual's life experiences, personal preferences, and opinions, have a great influence on interests and demand. Therefore, along with learning about the demographic characteristics that 'core' customers share, learning about their interests and lifestyles also assists agricultural businesses with choosing an appropriate product mix.

  • Food is a major component of many agricultural industries. Food is also a necessary component for daily life, as well as a primary component for most entertaining. Many consumers seek specialty food items and ingredients that make their meals unique. Specialty foods that consumers desire often follow trends that are the focus of television cooking shows, related magazines, and creations produced by chefs, as well as the result of meals they have experienced when traveling.

It will be necessary to learn about trends and subscribe to appropriate trade journals that discuss them and associated products. To learn about appropriate sources, businesses should consult their national and state-based industry associations. Many associations offer newsletters that update members on issues that could impact their businesses. Associations may also organize annual conferences and invite speakers that inform audiences about timely topics.

Discussing Needs Directly with Customers

Once it is determined what consumer segments are, or will be, important to the business, the next step is to effectively target these consumers and convey the benefits that products offer them. Hosting focus group sessions with a small number of customers, between six and 12, is one way to discuss ideas, show product samples, and learn about awareness and interests. Discussions generated from focus group sessions shouldn't be used to make final decisions or judgments about products. Rather, conversations with this small group of individuals can provide insight into issues and offerings that might need further investigation. Retailers can then conduct more in-depth surveys and use consumer responses in the decision-making process. Continuing to consult customers and asking for their input should be a long-term goal for retailers and products.

Choosing How to Communicate with Customers

Effectively communicating benefits to the consumer is a crucial step for all businesses. Though a variety of outlets through which a good or service can be promoted exists, it will be necessary to consider the preferred media of the target audience.

  • The Internet has been credited as an important resource and provides consumers with easy access to news, information, and shopping. In 2003, certain demographic groups appeared to have increased access to the Internet; primarily consumers with a higher level of education, income, and who were under the age of 65 were using this tool at a greater rate than their counterparts (Chessman et al., 2005). Several sources also stress the importance of the Internet as a form of communicating with working women.
  • Certain segments of the U.S. population choose to learn about products through more traditional sources, such as newspapers, radio, television, and direct-mail, hence the use of these methods should be considered.

Evaluating Communication Efforts

Continued use of a certain promotional activity should be contingent on consumer response. If an advertisement was placed in the newspaper or local shopping paper, customers should be asked if they saw the advertisement. If a coupon was included in the advertisement then the coupon should be collected, preferably with the customer's name and address or e-mail as a way to build a customer list, so that the number of coupons redeemed can be compared to the number printed and expense incurred. This information will also help the retailer determine whether the amount of the promotional budget spent on the advertisement resulted in the desired return on investment. This evaluation method should also be used to determine whether in-store promotions or public relation efforts effectively informed customers about the business.

Market research will still need to be done after final product selection is made. The best way to do this is to monitor consumer reaction to goods and services offered and determine whether foot traffic and sales have changed. Additional decisions can then be made to further alter product assortment. Consideration will also need to be given to the number of 'core' or 'target' customers that live within the selected market area. If relatively few consumers within the area fit the profile of who would have an interest in the products and/or don't have the means to purchase them (i.e. true demand), then the producer or retailer may need to modify their plan. Agricultural businesses that accomplish the task of learning about these audiences will certainly experience rewards by knowing what products to offer that would interest their customers.

Further Reading

Anonymous. Chinese New Year. Retrieved 1/19/2007.

Anonymous. Chinese New Year foods: Dishes to bring good fortune to your home & family. Retrieved 1/19/2007.

Anonymous. Interim projections of the U.S. population by age, sex, race, and Hispanic origin: Summary methodology and assumptions. U.S. Census Bureau, Population Division, Population Projections Branch. Retrieved 1/19/2007.

Butterfield. 2006. 2005 National Gardening Survey. National Gardening Association. South Burlington, VT.

Cheeseman Day, J., A. Janus, and J. Davis. Computer and internet use in the United States: 2003. U.S. Census Bureau. Retrieved 1/3/2007.

Loechner, J. High Speed Internet in 60% of Online Households. Center for Media Research Brief. Retrieved 1/9/2006.

Mitchell, S. 2000. American Generations: Who they are. How they live. What they think. New Strategist Publications, Inc. Ithaca, NY.

Pontell, J. About Generation Jones. Retrieved 1/19/2006.

Washingtonpost.com, Newsweek. com, and Nielsen/NetRatings reprinted in 2005 in GreenProfit 9(2):21.

Prepared by Kathleen M. Kelley, Associate Professor of Horticulture Marketing and Business Management

Authors

Wine marketing Produce and ethnic food marketing Retail business management Consumer attitudes and behaviors pertaining to horticultural goods and services

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