Is behavioural data killing off demographics?

The death – or otherwise – of demographic targeting is a topic with no shortage of reading material. In fact, Marketing Week even named ‘post-demographic consumerism’ one of its 2015 trends at the start of the year.

Marketing Week columnist Mark Ritson recently explained how customer information derived from past search activity, website browsing or Facebook interactions relegates the relevance of a consumer’s gender or age to an afterthought. He said: “[You] can buy eyeballs based on what [people] have previously looked at, rather than the age or gender of the skull that they happen to reside within.”

Yet he also pointed out that old-fashioned demographic segmentation is far from over the hill as it is still necessary for defining a target audience when buying traditional media such as TV.

The debate, then, is still a live one.

The case against demographics

The basic argument against demographic-driven marketing is that while it was the only way to reach a segmented audience in a world of pre-digital media, the digital age and big data have changed almost everything marketers do. Armed with individual behavioural information, it is hardly surprising that many are questioning the relevance of broad-brush techniques to targeting, since behavioural segmentation can adapt to an individual’s changing interests while demographic segmentation cannot.

However, Chris Duncan, CMO at News UK, argues there are reasons why demographics will not disappear. He says: “I don’t think I would want to sell stairlifts without some kind of demographic cut. There are logical markets where age and income, for example, are key. There are large areas where those [kinds of] broad metrics are still relevant.”

These include marketing channels such as TV, radio and print where data is less prevalent.

Indeed, rather than extinction, many marketers are talking about evolution. “We are a long way from demographic segmentation becoming redundant,” says Hannah Fisher, head of marketing at MoreThan. “It is built into our systems and processes across industries and is a uniformed way of buying TV, print and radio. However, the industry is evolving and we are finding new ways to build on the traditional demographic approach.”

Tom Lowes, head of online marketing at Sykes Cottages, also sees a shift in approach among some in the marketing industry. The company works with Marin Software on its segmentation models. He says: “Rather than seeing demographic segmentation as outdated, I prefer to think of it as no longer the holy grail of marketing. Demographics are an important piece of marketing and the customer portrait, but that’s just it – demographics are a piece, they are no longer the whole.”

So how have data and digitalisation changed the approach to demographic segmentation and how are brands using the new tools to better target their core customer groups?

Behaviour changes, demographics don’t

Footwear brand Dr. Martens has been working with Sailthru to create more accurate shopper profiles, rather than lump big groups of people into “buckets” according to family status or income. “I’m much more interested in behavioural segmentation,” says global digital marketing manager Brogan Savage. “Behavioural segments are dynamic, whereas demographic segments are much less so.”

Savage explains how she is a white, female Londoner and that “won’t change for the foreseeable future”. What can change more rapidly is how she shops, surfs and socialises online. “The impact on marketing is that brands must work to be more fluid in how they communicate. Not just in which channels they use but also in the way they present themselves,” she says.

Lowes at Sykes Cottages says: “A person cannot change their gender, age, race or income instantly. But they are free to change what they desire whenever they want, change their behaviour however and whenever they want and intend to do anything they want, whenever they want. If we have access to this individual consumer data online, everyone is our demographic.”

That is both a blessing and a curse for today’s marketers. Lowes continues: “We shouldn’t feel constrained by our demographic [data] but often many of us are. A marketer who can define precisely what their demographic is will be able to drive effective marketing spend. However, a marketer who understands the current demographic and allows it freedom to be moulded by new signals and data will ensure the continuation and growth of the company.”

Indeed, traditional demographics do not change frequently enough to give one brand the edge over another, but spotting the change in behaviour within a demographic can mean the difference between success and failure.

An example is the rise of the discount retailers, such as Aldi and Lidl, which have responded to signals in the market. Earlier this year, research by marketing consultancy Him found that 31% of Aldi and Lidl shoppers were from the most affluent AB demographics, 28% were from the C1 category at the next level of income, while only 27% were from the DE group at the bottom of the scale.

Kantar Worldpanel says its data shows that the demographic of an Aldi or Lidl shopper is “just as close to the average [consumer] as Tesco and Morrisons at the moment”. Customers are not only from the £20,000 household income bracket, but also from the “£40,000-plus bracket”.

The fact that traditional social grading no longer provides a reliable indication of which consumers are interested in discount grocery shopping reinforces the point that demographics were only supposed to be a means to an end.

If attitudinal research shows a relevant consumer preference to be more prevalent within a certain demographic group, there are good reasons to target that group with marketing.
If it doesn’t, then there aren’t.

Lisa Ravenscroft, head of marketing planning at William Hill, says: “Ultimately, almost every proposition is interacted with by a far broader audience than we would realise from demographic segmentation. Meshing business data, customer behaviour and known preference is what post-demographic consumerism is all about. In the short run, the challenge will be in using this effectively across paid media.”

Of course, with big data marketers can get closer than before to their customers. Huge amounts of information can be captured and used to target the right messages at
the right customers, at the right time. “Data provides the ability to target individuals rather than segments, which of course will dramatically change all of our digital marketing plans,” says MoreThan’s Fisher.

Continuous segmentation

“Marketers have much more access than they have ever had to detailed insight, information and data,” adds News UK’s Duncan. “This enables them to build complex profiles of an audience and have the ability to carry audience segmentation much further into operations than before.

“When you’re in digital, you have more of an ability to keep continuous segmentation running because you can use data that is available within digital channels to ensure you are targeting messages specifically to segments you can manage. If you are mostly using broadcast channels, you can segment as much as you like but you’re going to buy in the currency that you can buy media in.”

This will change, but it will take time. In 2015, digital advertising is expected to grow by 12%, making the UK the first country in which £1 in every £2 will be spent on digital media. However, that means 50% is used for more traditional channels – TV, radio and print – that are sold to marketers based on demographics.

Emilio Sanz, chief technology officer at SalesGossip, believes programmatic marketing – being able to target ads by audience rather than media platform – is “definitely taking over the digital marketing world”. He says: “First search engine marketing, then display advertising and now video advertising. TV and radio will follow the same path.”

Sanz says shoppers are increasingly using a mix of online and offline media to consume content. “Most TV packages provide access to the online version of the channels. Many people also listen to their favourite radio stations online or read their favourite magazine online,” he explains. “It is still in the early stages but over the next five years, the use of online behaviour to segment offline media will become more [widespread], mainly driven by the push from marketers looking for new ways to segment their audiences and increase efficiency.”

“Demographic targeting has its place but focusing on this at the expense of the insights that big data can provide around behaviours means marketers miss out on significant opportunities – particularly online.

How people behave and, crucially, the motivation behind that behaviour provide a much stronger base on which to tweak marketing messages so they resonate more with consumers.”

“Demographic data has been built up over many years and has real value.

However, the advent of tools such as Google AdWords Planner and other online trend tools allows much greater insight into behaviours in real time, and provides the ability to jump on trends far quicker than demographics.”

“Demographics are a great broad filter, which then enable you to sub-segment to a more detailed level to get meaningful differentiation between segments. That means your messaging, creative and where you get your ideas from are meaningfully differentiated between those segments.”