- Circana
- 4 days ago
- 5 min read
Updated: 3 days ago
Differences Between Demographic and Behavioral Segmentation
Table of Contents:
Why Behavioral Segmentation Results in More Effective Marketing Campaigns
Why Might Demographic Segmentation Be More Effective For My Brand’s Marketing Campaigns?
How Can Brands Use Demographic and Behavioral Segmentation in Unison?
Circana’s Complete Audiences Solution Offers the Most Granular Insights into Your Market
Demographic and behavioral segmentation are two separate approaches to audience segmentation, a process that divides the entire market into smaller groups based on shared characteristics. Demographic segmentation uses objective traits like age, gender, income, and geographic location to divide the market into smaller segments. Behavioral segmentation uses observable traits like past purchases, brand loyalty, and usage patterns to divide the market into smaller segments.
Demographic segmentation is typically a more affordable way for brands to segment their market because it uses more easily accessible data sourced from credit reports or surveys compared to the data that behavioral segmentation uses, which requires detailed tracking of customer actions. While demographic segmentation is usually the less expensive segmentation method, it relies heavily on generalizations that are not always accurate. On the other hand, while behavioral segmentation is typically more expensive than demographic segmentation, it can leverage real-world activities, subscriptions, and even purchase data that ultimately results in more accurate audience segmentation, and in turn, provides brands with the data necessary to improve the efficiency and return on investment from their marketing efforts.
How is Behavioral Market Segmentation Data Collected?
Behavioral market segmentation data can be collected using a wide range of methodologies, and the quality of behavioral data can vary based on which collection method was used. One of the most effective methods for collecting accurate behavioral data is by tracking purchase history, which examines what products a consumer is buying, how often they are buying those products, and how much of the product they are purchasing at a time. Behavioral data can come from a wide range of other sources, such as surveys or self-identified behaviors, online search behavior, customer feedback, subscriptions, SDKs, loyalty programs, and more. Regardless of the data collection method, behavioral insights generally require modeling to extrapolate findings and apply them effectively across the broader market or population.
Why Behavioral Segmentation Results in More Effective Marketing Campaigns
Behavioral segmentation enables greater marketing precision and drives more effective campaigns than demographic segmentation by providing brands with deeper insights into how consumers behave rather than just who they are. Demographic segmentation assumes that individuals with similar characteristics, such as age, income, or background, will exhibit similar purchasing behaviors, which is often not the case. Conversely, behavioral segmentation leverages real-world purchase data to reveal what consumers have actually bought, offering a strong indicator of future buying intentions. While past purchases do not guarantee future purchases, identifying consumers who exhibit patterns similar to previous buyers can significantly improve targeting and help exclude those unlikely to convert. Because consumer behavior is one of the most reliable predictors of future purchasing, behavioral segmentation is widely regarded as more effective than demographic-based approaches.
What are the Limitations of Behavioral Segmentation?
The commonly cited limitations of behavioral market segmentation often relate to cost and scale. Marketers may assume that acquiring precise behavioral data is prohibitively expensive and that such data cannot be effectively scaled. However, techniques such as linear regression modeling and machine learning can address these concerns by improving the scalability of behavioral datasets and enhancing the accuracy of segmentations, particularly for probabilistic models.
Another perceived challenge is the reliance on third-party partners to collect and analyze high-quality behavioral data. While engaging a third party involves additional costs, these partnerships offer significant advantages that enhance segmentation effectiveness, including access to comprehensive datasets and advanced analytics platforms, expertise in modeling and scalable solutions, improved data accuracy, and support for compliance with privacy regulations.
Why Might Demographic Segmentation Be More Effective For My Brand’s Marketing Campaigns?
There are situations where demographic segmentation can be more effective than behavioral segmentation for a brand’s marketing strategy. One common scenario is when a product targets consumers at specific life stages. For example, a baby food brand can effectively identify households with a newborn based on demographic data alone, rather than relying on past purchase behavior. Similarly, products tied to life stages, such as incontinence products for seniors or major appliances for new homeowners, can benefit from demographic-based targeting.
Demographic segmentation can also be advantageous for brands operating in highly penetrated categories that aim to reach a broad audience nationwide while tailoring messaging for certain segments. In these cases, demographic segmentation offers a cost-effective approach without sacrificing relevance.
While demographic variables such as age or generational cohort can provide some predictive value, behavioral segmentation generally remains the more reliable and effective method for precise market targeting.
How Can Brands Use Demographic and Behavioral Segmentation in Unison?
Demographic and behavioral segmentation can work together to create a more effective and scalable market segmentation strategy. This approach is particularly valuable when behavioral data comes from a relatively small sample and must be extrapolated to represent the broader market. Demographic variables serve as the bridge for this scaling process. For instance, behavioral data collected through loyalty programs or receipt panels reflects only the subset of consumers who participate in those programs. By integrating demographic variables such as age, gender, and income, marketers can model and project these observed behavioral patterns across the total population. These models often incorporate thousands of demographic attributes to ensure the projections are as accurate and representative as possible.
Circana’s Complete Audiences Solution Offers the Most Granular Insights into Your Market
Circana’s Complete Audiences™ solution uses 100% verified purchase-based data and is industry-renowned for data quality, easy customization, and proven results, delivering up to 6x ROI compared to our competitors audience targeting solutions. Our Complete Audiences™ solution also has an incredibly broad reach, providing brands with a view into nearly every national retailer. Complete Audiences™ is the most effective audience targeting solution available because purchase-based audiences consistently outperform every other type of audience in terms of incremental lift, resulting in improved campaign efficiency and improved return on investment. Schedule a Complete Audiences™ demo with Circana today.
Frequently Asked Questions About Audience Segmentation
What is Demographic Market Segmentation?
Demographic segmentation is a market segmentation method that divides potential customers into categories based on traits like age, gender, income level, education, family size, ethnicity, marital status, and geographic location. The variables used to segment a market using demographics are purely objective, whereas other segmentation methods like behavioral segmentation and psychographic segmentation use observational or subjective variables.
What is Behavioral Market Segmentation?
Behavioral segmentation is a market segmentation method that divides potential customers into categories based on interests or behavior patterns such as purchasing behavior, brand loyalty, product usage rate, and the benefits the customer is seeking. Behavioral segmentation variables are observational and come from behavioral patterns, whereas demographic segmentation uses variables that are inherent traits.
What is Psychographic Market Segmentation?
Psychographic segmentation is a market segmentation method that divides potential customers into categories based on the psychological factors that influence purchase decisions, including lifestyle, values, beliefs, personality types, opinions, and social status. Psychographic segmentation uses subjective variables that focus on why a consumer makes certain purchasing decisions, rather than demographic segmentation that uses objective variables or behavioral segmentation that uses observational variables.
How Can Audience Segmentation Enhance Marketing Efforts?
Audience segmentation enhances marketing efforts by allowing brands to target specific segments of the population and tailor their campaigns so that they resonate more effectively with specific audiences. Rather than using a one-size-fits-all approach for marketing campaigns, audience segmentation divides the population into smaller groups with shared characteristics based on demographics, behaviors, or psychological factors. Brands can then target the audience segments that are most likely to purchase their products, improving incremental return on investment and reducing the amount of marketing spend that is used on consumers who are less likely to purchase.
