Demographic segmentation divides the market into groups based on demographic variables including age, gender, family size and life cycle.

The following four variables are examples of demographic factors used in market segmentation:

1. AgeConsumer needs and wants change with age. The marketing mix may therefore need to be adapted depending on which age segment or segments are being targeted.

   Case Study : The lure of generation Y

   With a plethora of anti-ageing products flooding the market, catering for society's baby boomers would appear to be at the fore of new trends within the cosmetics and toiletries industry. However, manufacturers have also set their sights firmly at the other end of the spectrum, on the tweens and teens market, as they increasingly segment products across all age groups. The underlying factor making Generation Y an ever attractive demographic is its growing purchasing power. The trend is being fuelled by higher disposable incomes resulting from more generous allowances and teens opting to work part-time during schooling, less reliance on parents to make purchases, and heightened media awareness....     click to read more

2. GenderDividing a market into different groups based on sex, has long been common for many products including cosmetics, clothing and magazines. In the 1960's car companies such as Toyota began to realise the purchasing power of women, creating marketing campaigns, and then cars, specifically targeted at the female market. Many suggest that the range of interior and exterior colours schemes, and emphasis placed on safety factors by car manufacturers today, is due to in no little part to their desire to market cars to women, as well as men.

3. Life-cycle stage. Dividing a market into different groups based on which stage in the life-cycle, presented in the table below, reflects the fact that people change the goods and services they want and need over their lifetime.

   Life-cycle stages
   Bachelor Stage	young, single people not living at home
   Newly Married Couples	young, no children
   Full Nest I	youngest child under six
   Full Nest II	youngest child six or over
   Full Nest III	older married couples with dependent children
   Empty Nest I	older married couples, no children living with them
   Empty Nest II	older married couples, retired, no children living at home
   Solitary Survivor I	in labour force
   Solitary Survivor II	retired

4. Neighbourhood and dwelling classification.Divides the market into groups, based on the assumption that the type of dwelling and area a person lives in is a good predictor of their purchasing behaviour including the types of products and brands they might purchase. The ACORN system as it is known (A Classification of Residential Neighbourhoods) classifies homes, rather than individuals, as a basis for segmentation. It analyses the 10-yearly population census that is undertaken during every year ending with one - the most recent census data being generated in 2001. The system was developed by Richard Webber for Consolidated Analysis Centres Incorporated (CACI). It breaks down the census of population into various categories of homes as shown in the table below.

   ACORN
   A. Agricultural areas	3% of UK population
   B. Modern family housing, higher incomes	18% of UK population
   C. Older housing of intermediate status	17% of UK population
   D. Poor quality older terraced housing	4% of UK population
   E. Better-off council estates	13% of UK population
   F. Less well-off council estates	9% of UK population
   G. Poorest council estates	7% of UK population
   H. Multi-racial areas	4% of UK population
   I. High status non-family areas	4% of UK population
   J. Affluent suburban housing	16% of UK population
   K. Better-off retirement areas	4% of UK population
   U. Unclassified	1% of UK population
   Each of the above classifications is sub-divided into smaller groupings. For example, Group C Older housing of intermediate status, is broken down into:
   C8 Mixed owner-occupied and council estates, C9 Small town centres and flats above shops, C10 Villages with non-farm employment, C11 Older private housing skilled workers

   Businesses which use this system include the large supermarkets who use ACORN to determine suitable store locations.