Demographics and Its Role in Understanding Consumer Behavior - Essay Example

Demographics and Consumer Behavior "Demographics and consumer behaviour. Generally, to be considered as a valid market segmentation basis, as a given variable needs to satisfy certain criteria: responsiveness, accessibility, identifiability and stablitiy (Engel, Fiorillo & Cayley, 1972; Wedel & Kamakura, 2000). In research to date, demographics have been frequently dismissed for lacking resposiveness or predictive power. For example, earlier studies indicate that members of different demographic segments do not exhibit differential buying behaviour (Frank, Massy & Wind, 1972). Recntly, Wedel and Kamakura (2000) concluded that the relationships between demographic segments and purchase behaviour/marketing variables are often too weak to be of any practical value. Despite these criticisms of demographics, there is a reasonable amount of supporting evidence which indicates that demographics are indeed good predictors of consumer behaviour. From utilitarian perspective, demographics are known to be cheaper, easy to measure and collect (Mitchell, 1996) and such their application requires lesser knowledge and skills than more complex segmentation bases. Introduction: This paper is an analysis of journals to understand the demographics and its role in understanding consumer behavior. There has been an ongoing debate in recent years about the demographics and its exact role in consumer behavior studies. Demographics offer basic criteria to differentiate customer group from one another. “The primary objective of service provider and marketer is identical to that of all marketers to develop and provide offerings that satisfy consumer needs and expectations thereby ensuring their own economic survival.” (Zeithmal and Bitner, 2000) Concepts of segmentation, targeting and positioning are vital for any marketer. The first effort of any marketer is to find out an identifiable market segment which is responsive, accessible and stable. According to Wilkie (1990) segmentation depends on number of factors like personal characteristics of consumer like demographics, culture, and other factors, benefit sought, behavioral measure of consumer, competitiveness within the segment and operational aspects. Demographic divides population on the basis of its size, geographic distribution and structure. Demographic structure includes factors like age, occupation, gender, income and education Marketer looks at all the factors on the basis of profitability and growth. Brooksbank (1994) states positioning strategy should be based on three main components i.e. customer targets, competitor targets and competitive advantage of the product. Analysis of Journals: In segmentation or positioning or any other marketing strategy there is a basic need of understanding target customer. The efforts of understanding start with the demographic details of the consumer. In a broad way the age group categorizes product or services offered. For instance diapers are the product directly related to the age group of the consumer; infant / young children or people from old age group with specific problem of bed wetting need this product. Now for each category (children and old people) targeting strategy would be different according to the segment. As the results of study conducted by Balabanis and Reynolds (2001) in Journal of Business Strategies for understanding consumer attitude for multi-channel retailers websites , the first thing mentioned was the age group of the respondents 18-32 and gender (56% males; 44% females). This provides a general idea of the respondents. The findings of the study have been directly applicable to the respondent’s age group. Consumer behavior and their need within specific demographic profile will be closer to each other. This has been studied in the past as well by various academicians and researchers. Eastman and Walker (2003) in an article published in Journal of Broadcasting & Electronic Media, state, ‘The analyses of the structural variables for different demographic groups suggest that promotions for programs attracting predominantly younger viewers should be frequently repeated, while those targeted at older viewers may actually be hurt by too much repetition.’. In the study various aspects of television viewership, advertising and promotions has been studied. Results revealed that demographics have impact on the way people would like to watch any advertisement between their television programs. Table 1: Demographic factors and consumer behavior studied in various journals. S.N. Name of Journal Authors/ publication date Article title Demographic factors Impact on Consumer behavior 1. Journal of Business Strategies George Balabanis , Nina L. Reynolds/ 2001 Consumer Attitudes towards Multi-Channel Retailers' Web Sites Age, gender Different age and gender show difference in the role of involvement, brand attitude, internet knowledge and visit duration 2. Journal of Broadcasting & Electronic Media James R. Walker , Susan Tyler Eastman/ 2003 On-Air Promotion Effectiveness for Programs of Different Genres, Familiarity and Audience Demographics Age, Gender Program genre and impact of demographics. Different age group and gender show difference in their viewing behavior for on air promotions 3. Review of Business Vicky L. Pagel , James J. Nance/1997 Changing Demographics of Financial Service Customers Minority ethnic group, income level, age group, difference in family structures, Change in Latin American population is quick in response to their demographic variables like income and age; marketers need to focus on the same. 4. Journal of Advertising Research Linda F. Alwitt , Paul R. Prabhaker/1994 Identifying Who Dislikes Television Advertising Age, income, Demographic characteristics alone cannot be used to identify dislikers 5. SAM Advanced Management Journal Gregory S. Black/2005 Is eBay for Everyone? an Assessment of Consumer Demographics Regions, urban, rural or specific location, gender Conclusions based on a larger sample size, role of gender and location in on-line consumer behavior and eBay bidder behavior. 6. Southern Economic Journal Thesia I. Garner , Javier Ruiz-Castillo , Mercedes Sastre /2003 The influence of demographics and household-specific price indices on consumption-based inequality and welfare: a comparison of Spain and the United States. Income, household size, income inequality comparisons, location or region highlighted the role of demographics, differences in demographic factors can be very important in international comparisons 7. Journal of Economic Issues Roger Mason, /2000 The Social Significance of Consumption Analysis of various work of academicians and scholars on economic, demographic variables and their impact on consumer behavior Analysis of various articles on demographic variables and their impact on consumer behavior 8. ABA Banking Journal Penny Lunt/1994 The New Demographics age Impact on changing financial habits 9. Phi Delta Kappan Mark F. Goldberg/2000 Demographics - Ignore Them at Your Peril: An Interview with Harold Hodgkinson Age, income implications of demographics for education are enormous Demographic variables like size, age; income of particular population was studied by Nance & Pagel (1997) Journal ‘Review of Business’. They have conducted a study on demographic variables of Latin American population and its impact on consumer decisions making of financial services. “Because of the different growth rates among Latin American ethnic groups, the ethnic composition of the Latin American population is constantly changing [7]. Also quick to change are the corresponding demographic variables, such as income and age. While Cuban Americans may need financial service advice, Mexican Americans and Puerto Ricans may not. It is crucial that financial service providers understand and target these differences.” The study revealed that demographic factors influence the consumer decision making process. Decision making of investment or use of any financial service requires high consumer involvement. The level of involvement may differ with demographic factors like age and income level of the consumer. In another study published in Journal of Advertising Research, Demographics and Reasons for Disliking TV Advertising Alwitt and Prabhaker (1994) state that demographics are typically used by advertisers to target their audiences because demographic variables are easily available, measurable and relatively less expensive to obtain. Demographic variables are often, but not always, fairly good predictors of product/ service and brand choice. Black (2005) SAM Advanced Management Journal “This study examines a large sample of eBay transactions to determine if certain external variables serve as predictors of eBay outcomes. The predictor or independent variables examined include gender of the consumer, whether the bidder lives in a rural or urban area, and in which of the six U.S. regions the bidder resides.” In the same studies it was evident that consumers from different regions tend to behave differently when it comes to eBay purchasing and the impact of gender on the buying behavior. Females are more likely to purchase on eBay on the other hand males are more willing to pay higher prices. The results of the study conducted by Garner, Castillo and Sastre (2003) published in Southern Economic Journal suggest that differences in demographic factors can be very important in international comparisons.’ In today’s scenario when companies are going global, competitions have increased due to open market boundaries of various nations. In international market a company serving different market place has to cater different consumer groups with different products and services. These consumer groups have altogether different demographic profiles. In such scenario demographic profiles and environment studies become an important factor for deciding on the marketing strategies. Demographics are directly or indirectly offer an important input for the marketers. Understanding age, income level, status and gender helps marketer to find out the market segment. The area where demographics lack is the responsiveness. But all the other attributes of segmentation is being covered by the demographic factors. As indicated in various journals these are easily measurable and obtainable. There are certain products and services where the demographic variables have more impact on consumer behavior than others. In the study conducted by Alwitt and Prabhaker (1994) on television advertising, one of the findings was “Demographic characteristics alone cannot be used to identify dislikers.” Demographic characteristics may not be providing complete information on segmentation, but it provides important part of it. Conclusion: Demographics provide easy, simple and obtainable data. It is easy to understand and infer. These data help in consumer profiling and segmentation process, which are inputs for any marketing strategy like product launch, re-launch, benefits to be offered, product modifications and many others. Demographics does not provide exact pattern of consumer behavior and prediction of behavior is not always very accurate. The factors are not responsive. But still the drawbacks of use of demographic variables are much lesser than the benefit these offer. It provides information on broad perspective and in broader sense the consumer behavior can be predicted. Demographic variables will continue to be important in understanding consumer behavior due to the benefits its offers. Reference: Eastman, Susan Tyler & Walker James R (2003), On-Air Promotion Effectiveness for Programs of Different Genres, Familiarity and Audience Demographics, Journal of Broadcasting & Electronic Media. Volume: 47. Issue: 4., Page Number: 618+. Mason, Roger (2000) The Social Significance of Consumption: James Duesenberry's Contribution to Consumer Theory,. Journal of Economic Issues. Volume: 34. Issue: 3. Publication Year: 2000. Page Number: 553. Balabanis, George and Reynolds, Nina L. (2001), Consumer Attitudes towards Multi-Channel Retailers' Web Sites: The Role of Involvement, Brand Attitude, Internet Knowledge and Visit Duration, Journal of Business Strategies. Volume: 18. Issue: 2. Publication Year: 2001. Page Number: 105+. Alwitt, Linda F. and Prabhaker, Paul R.(1994), Identifying Who Dislikes Television Advertising: Not by Demographics Alone, Journal of Advertising Research. Volume: 34. Issue: 6. Publication Year: 1994. Page Number: 17+. Nance, James J. and. Pagel, Vicky L (1997) Changing Demographics of Financial Service Customers: The Latin American Segment, Review of Business. Volume: 18. Issue: 4. Publication Year: 1997. Page Number: 25+. Lunt, Penny (1994) Publication Information, The New Demographics, ABA Banking Journal. Volume: 86. Issue: 1. Publication Year: 1994. Page Number: 34+. Black, Gregory S. (2005) Is eBay for Everyone? an Assessment of Consumer Demographics. SAM Advanced Management Journal. Volume: 70. Issue: 1. Publication Year: 2005. Page Number: 50+. Goldberg, Mark F (2000), Demographics - Ignore Them at Your Peril: An Interview with Harold Hodgkinson, Phi Delta Kappan. Volume: 82. Issue: 4. Publication Year: 2000. Page Number: 304. Garner, Thesia I., Castillo, Javier Ruiz and Mercedes Sastre (2003) The Influence of Demographics and Household-Specific Price Indices on Consumption-Based Inequality and Welfare: A Comparison of Spain and the United States, Southern Economic Journal. Volume: 70. Issue: 1. Publication Year: 2003. Page Number: 22+. Mason, Roger (2000), The Social Significance of Consumption: James Duesenberry's Contribution to Consumer Theory, Journal of Economic Issues. Volume: 34. Issue: 3. Publication Year: 2000. Page Number: 553. Zeithmal and Bitner, (2000) Services Marketing, Integrating Customer Focus Across The Firms, 2nd edition, McGraw-Hill: New York Brooksbank R, (1994) Marketing Intelligence & Planning, Volume 12, Number 4, pp. 10-14(5) Wilkie, W.F. (1990): Consumer Behavior, New York: Wiley. Read More