Customer demographics include all the measurements necessary to statistically describe the end-user base in a given market. This would include the measurement of parameters such as:

• Total number of customers
• Customers by the number of employees
• Customers by the size of production
• Customers by industry
• Customer segments by geographic area
• Customer budgets and expenditures

Almost all the data needed for these measurements is readily available through trade associations, governments, and research institutions.

What Do Customer Demographics Really Tell You?

The principal difficulty with this measurement is finding the data quickly and efficiently. Most of the data can be found in university libraries or through government sources. Extensive research into your customer base is an excellent way to determine the market potential for your product.

Case Study: Surface Mount Technology Equipment

This case history involves a manufacturer of surface mount technology (SMT) equipment. This client approached us with the standard complaint about low sales. The marketing manager had recently read a research report addressing SMT equipment markets, and had found that his company was so small it was grouped in the 'other' category in the market-share section.

This manufacturer was disappointed because he had been competing in the market for several years, his price was competitive, and the product was amongst the best in the market. The first step in our research process was an analysis of the customer base. The customer demographics survey we performed was purely a secondary research exercise. It was comparatively inexpensive and took about two weeks.

The numbers we found were certainly not startling. It was not until we began to analyze the numbers and compare them with our client's marketing structure that we identified his problem. We identified 45,600 plants in the United States that were involved in the manufacture of printed circuit boards. These numbers were further broken down by state, ZIP code, industry classification, and industrial production.

The Analysis

We began the analysis of our client's marketing structure with his mailing list, which included 8,465 plants and which had been compiled over the years through trade shows and sales calls. It was obvious that the 36,000 prospects we had identified were not on the list and therefore, had probably never heard of his company.

The manufacturer's sales force was made up of ten extremely skilled salespeople who were well versed on the technical aspects of the product they were selling. Each had been assigned a territory based on geographic and previous/prior sales figures. The company's stated goal was to make each territory approximately equal in sales potential, while minimizing the traveling time of the sales personnel. Each salesperson was given a quota/assigned a target and was very busy. It was clear that they were working at full capacity utilization of resources.

We then tried to analyze the percentage of potential customers for which each salesperson should be responsible. This investigation yielded some interesting results. The range of salespeople per customer went from a low of 1,350 to a high of 7,200. In essence, the company's territories were poorly designed if its goal was to equalize potential.

It also became obvious that the client was not employing enough salespeople. Each salesperson could visit about 350 plants per year. The goal was to visit every potential customer, so the process would take over ten years. By this time obviously, the demand for the product in question would be dead. Further research showed that each of the four largest competitors had a sales force of 30 people or more.

As part of our research process, we had broken down customer groups by industrial applications, including aerospace, telecommunications, marketing, computers, and instruments. We found that the client's equipment sold well among users that had high circuit-board densities, such as the aerospace and telecommunications industries. We also found that the sales penetration was highest in plants with over 100 employees.

The Response

The first thing the company did was to invest in the acquisition of several industry databases on electronics manufacturing firms. These databases included company names, addresses, standard industry-classification (SIC) codes, products manufactured, key personnel, number of employees, and volume of sales. From this information, the client could build a comprehensive mailing list.

The next step the firm undertook was to add 20 people to its sales force. It also redesigned sales territories based on the number of potential customers and the type of industry. It then initiated a target-account focused marketing program in which the largest potential accounts were targeted based on sales size and industry type. The aerospace industry was designated as number one potential customer for the company. The company also shifted its advertising and trade-show efforts to focus on user industries with the highest potential.

The Result

In the first year, the company incurred a loss of $1 million (we call this an investment). In the second year, the company bounced back with a $3.2 million profit and a 37 percent increase in sales. Since then, the company has been on an almost vertical growth path.