Published by MBA Skool Team, Last Updated: May 16, 2020
What is Geodemographics?
Geodemographics is the study of the population and its characteristics, divided according to regions on a geographical basis. This involves application of clustering techniques to group statistically similar neighbourhood and areas. The main source of data for this study is the census. However, periodicity of census data being high, other sources like country court judgements, property valuation and household council tax bands data are also used.
In the field of marketing, geodemographics can be of immense importance in market segmentation. Following such segmentation, the prevalence and preference of each group can be determined. Among these, the high preference areas can then be identified and subsequently targeted for marketing and sale.
Importance of Geodemographics
Geodemography is a hybrid study of the demography, geography and sociology in a particular location on Earth and classify them for their use in business, social research and public policy. It is the study of population characteristics which are divided on geographical basis. Demography is the study of the population. The variables are size, division, composition in terms of age and gender, literacy rate and other human factors. Geography is the study of the location and space vis-a-vis the variation in both physical and human phenomena.
Geodemographic segmentation in marketing relies on the following assumptions of consumer behaviour:
1. People residing in the same area and in same conditions will naturally have similar requirements and similar demands than are two people located far apart. E.g. Snow shovels for removing snow will be sold to colder geographic areas rather than to consumers in the tropical belt.
2. People from same neighbourhoods will have similar characters even when widely separated. E.g. Spicy curry can be sold to an Indian consumer who has migrated to Europe for long. Geodemographics also finds use in demand and sales forecasting.
Geodemography is used in marketing to analyze survey data of a particular geographical area and profile the demographic characteristics of the population living there. The Concept is particularly useful when there is too much demographic variation relative to the geography. The taste, choices and preferences of people may vary across regions and also the composition and preferences of the society in general. Preferences are usually affected by climatic conditions of the place. In such cases, marketers get a fair idea post the geodemographic study of how to design their products to suit different markets. Basically, the attempt is to segment markets and identify the markets with greater preference for the product for carrying out targeted marketing and sale.
Advantages of Geodemographics
Many businesses do not have accurate customer data. They are not able to collect and analyze personal customer information. Therefore, there is low predictability of the market demand in different places. But Geodemography helps leverage on the already built geographic and demographic data of all places. Once the population characteristics is known, the business can then segment the market and identify the target markets or customize its products to suit different markets. Other usefulness of this is that the results are measurable and the segments can be used for mass marketing.
Example of Geodemographics
When McDonald’s started its business in India, it was wary of the huge geographical and demographic differences in India. This was evident in the differences in the preferences and food pattern of people. Geodemography survey helped McDonald's develop products as per geographical areas. It realized that half of Indians are vegetarian and hence offered limited meat products. It developed the Veg Maharaja Mac. The trademark burger comes in different flavors in different geographies across India as well. In north, we can find more spicy McDonald’s stuffs than south and on the west, veg items are more common, hence offering the right food to the right people and at the right place.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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