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Demographic Segmentation – Why and How !!

What is demographics ?

When we say demographics for the customer base, we mean certain characteristics like age, marital status, number of children, education background, geographic area etc, to name a few, for each of the existing or prospective customers.

Why should we look at demographics of our customers?

Demographic segmentation gives businesses a head start in understanding their customer base. Right from the time the business is being conceived, segmentation helps the business determine what segment(s) they want to target, and build products and services around them.



How is demographic segmentation absolutely critical for marketing?

Businesses create their marketing plans around demographic segmentation. The product packaging, pricing, advertisements, business locations etc will be determined for each segment that the business wants to cater to. It is not possible to have marketing targeted to each individual customer. Therefore, segmentation is the most effective method to allow businesses target their marketing effort on groups having similar characteristics.

Now that we are convinced about the need for looking at demographics, let us see what demographics data we have?

We asked for age, gender, income, marital status, address etc.  We got absolutely zero data for income and gender, and age for just about half of our investor base. We cannot leave out these super important metrics from our analysis, so need to think of a way around this.

Looks like we are kicking off with the data cleanup and sanitization process.

Income – Couldn’t think of anything. If anyone has suggestions, please leave a comment and would be very happy to connect.

Gender – Manually populated for 13000 customers. Yes, I did that !! Was dead tired by the end, but well worth it, I say !!

Age Group – Used a randomizer with minimum and maximum limits for the remaining half.

Great, we have gender and age group for all our customers. The segments we create are combinations of these two metrics. Here we go !

To begin with, let’s see the segments we have at the time of registration.

Gender and AgeGroup

Age Group

Key Results –

  1. 45% of your customer base was more than 60 years old at the time of registration.
  2. There are more males than females across each age group. Roughly, they are 60:40 in proportion.

Next up, let’s look at the purchase and redemption behavior for each of these segments in the first six months of their joining. To bring about that extra twist, we will see how males and females of the same age group fare !

Purchase Behavior of Females –

Purchase Behavior Of Females

 

Purchase Behavior of Males –

Purchase Behavior Of Males

Key Results-

  • Almost 100% of investors purchase assets in the month that they register
  • From the second month onwards, there is a sharp dip and roughly 25-35% investors in each age group purchase assets in each subsequent month.
  • These may or may not be the same investors who buy each month.
  • Men purchase more than women across all age groups.

However, we do not see anything that differentiates one segment from the other. We expand the timeframe and see if some patterns emerge.

Purchase Amount 24 Quarters Since Registration

 

 

Purchase Count 24 Quarters Since Registration

Voila !! What we see is that over long term, the investors who were more than 60 years of age when they registered, have purchased significantly more than the other segments. When we combine this with demographics, we see that this segment also had the highest count of investors (45%). Since we are talking about the group that comprises our maximum clientele and gives us most business, it makes sense to have tailor made marketing, onboarding and ongoing support designed for them.



Redemption –

First looks, very few redeem in the first six months. These are so few, that it does not even make sense to plot graphs around the data. This needs more analysis, to see when exactly the investors start redeeming.

I pull redemption and purchase data – amount and number of investors who are redeeming and purchasing, for the last 24 quarters. We look at customers who have registered within last 24 quarters, so that we can observe their lifetime. The first observation is that the count of investors has gone down significantly. Because of the condition on registration date, the number of investors we can observe has gone down by a whopping 90%. I have a feel it’s not a great idea to let go of the amazing history that we have. Let’s look at the data a little more.

Check out the following graph to see how many investors redeem their investments in 24 quarters after they register –

Redemption Pattern For 24 Quarters

What do we see above ? That investors who are more than 60 years old at the time of registration are the most active when it comes to redemption. Specially, the investors who are males, are very very active. This is the group that also has the maximum number of investors, so surely, there is a lot to gain by investing heavily here.

To reaffirm our findings a little more, we expand the time frame to lifetime.

We pull the lifetime purchases and redemptions for each of these segments. Following is what we see –

LifeTime Purchase By Age Group and Gender

Looks like Gender doesn’t make any difference to the purchase pattern. Hand in hand for both. The interesting age group is 18-25. They seem to be investing a lot.

So, what are you waiting for! If an investor, who is between 18-25 years of age, is not investing enough, they should be !! Reach out with the latest on products, schemes and what not !!



Let’s look at redemptions now.

LifeTime Redemption By Age Group and Gender

Hmmm .. again, life time redemptions are the highest for investors that are 60+. Investors who are 35-50 and male, tend to redeem a little more. If you have an investor who falls in this bracket, stay in touch with them, for discussing re-investment of assets that they would be redeeming. The age group 18-25 seems to be more actively involved with their portfolios. Their purchases and redemptions are high, as compared to the other age groups. Looks like they fine tune their investments until they are sure about their financial plans. Work with them closely to help them accomplish their financial goals.

To conclude, let’s look at that activity for males and females separately.

Activity By Age Group for Males

Activity By Age Group for Females

Looks like, overall, women tend to purchase more than they redeem. Men tend to redeem more.

Interesting finds ..!! The conclusion is not to ignore the segments that haven’t been so profitable up until now, but to turn them around with specialized service and products.

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