With tourism grinding to a halt due to the Corona crisis, businesses in Gibraltar have had to rely entirely on the local market. For many businesses this has meant a change in the clientele base and a shift in the profile of the typical customer. In order to succeed in the new business environment, especially in the short term until tourism recovers, business owners must better understand the local market to ensure a good product fit. A key element to understanding the local market is understanding the market demographics.
Business owners are always looking for an edge in marketing products and services to generate more revenue and profit margins. Understanding customer demographics is one of the most important factors for improving your overall business, and it also has a significant influence on the effectiveness of your marketing strategy.
At Benefit Business Solutions we have been assisting retailers and other businesses in configuring the right product mix for them in light of the new market conditions and conducting Cost-Benefit Analysis to measure the potential effectiveness of planned marketing strategies. One such example has been a local clothing retailer on Main Street considering adding a collection of top-quality branded business suits for men as part of their new product mix. Assuming there will be negligible tourism, is there sufficient local demand to justify buying the stock of branded business suits?
It is one of the most important factors for improving your overall business.
Demographics to the rescue! We can start by assuming that the potential local market will consist of men at working age of 18-65. However, given that in Gibraltar there is also a significant number of cross-border employees, rather than looking at Census figures, a better source of information would be the Employment Survey Report as it includes figures of cross-border employees. According to the 2018 Gibraltar Employment Survey Report, there were 29,995 employees working in Gibraltar in October 2018. Out of this total figure, a total of 17,846 were men working in the Private Sector, Ministry of Defence and Public Sector. However, not all men wear a business suit for work and so a further analysis into sector breakdown was necessary, as shown by the chart below:
From the above sectors, we assume that men in Financial Intermediation, Real Estate & Business Activities and Public Administration are most likely to wear a suit for work and so the relevant figure is 4603 men. To this figure we decided also to add 8% of men from all other sectors, in line with OECD average for men in Managerial roles (who are also likely to wear a suit), which gave us a figure of 1059, and so the total potential market for men business suits in Gibraltar is 5662.
Once we unraveled the potential market figure, we were able to construct a marketing budget and sales forecast for the retailer that showed the potential return on the investment of buying this stock of top branded business suits.
We can use demographics to tell the story of people and places.
This demonstrates that we can use demographics to tell the story of people and places. Demographic stories bring data to life, helping to draw out insights, put the information in perspective, provide context, and highlight its significance (or insignificance) over time. These stories help make data more relatable and easier to communicate and understand. Above all, demographic information and stories can be used to answer complex questions organisations face such as: Where should I expand or locate my business? Such questions may appear unrelated to demographics; however, demographic information can be used spatially to highlight patterns that can answer these strategic questions. By analysing past and present demographic information, we begin to understand the changing dynamics of people and places, identifying patterns that can help us foresee demand in the future.
Businesses can use demographic analysis to:
- quantify demand for products and services, now and in the future
- identify patterns to understand where demand will be greatest
- explain what is driving changes in demand
- decide where and when to locate products and services.
In short, demographic information provides an evidence-base that businesses can use to make informed decisions about the future. A well-defined and meticulously researched segmentation allows companies to be sure they are able to devise a pitch-perfect marketing strategy, ensuring the right customers get to experience the best marketing campaign for that specific group of people. Ultimately, a thoroughly well-crafted target segmentation allows for tailored messages, more leads, increased loyalty, high customer retention, cost-efficiency, and a whopping revenue increase, promoting business growth.