What Are Demographics?

What are demographics?

Demographics are statistical characteristics of a population. They can include almost any descriptive trait, but the usual data points include gender, age, race, ethnicity, income, education level, occupation, marital status, religious or political affiliation, and hobbies or interests.

Governments, health care providers, and businesses rely on demographic information to make planning and marketing decisions.

• Governments use demographics collected via census surveys to track and project population trends. Those projections, in turn, can affect tax policy, state funding, government spending on education, senior care, health care, and workforce development.
• Health care providers use demographics to improve the quality of care. A review of a patient's demographics alongside other data points can help identify high-risk situations. Early identification of risk vastly improves patient outcomes.
• Businesses analyze demographics to identify product opportunities and refine their marketing initiatives.

How demographics are collected

Demographics are collected primarily through surveys and polls, both online and offline. You've likely seen survey requests at the bottom of a fast-food or retail purchase receipt. Those surveys ask about your experience in the store but will often collect your age and gender, too.

Online demographics collection is a big business. E-commerce retailers routinely send survey requests, often after you make a purchase.

There are also several apps that will pay you to complete surveys. Those surveys may collect information about your shopping habits or product opinions, for example. That data is then cross-referenced to your demographic information to build profiles of shoppers like you.

Know that some online surveys may disguise themselves as other things. For example, online insurance or loan quoting tools that offer to compare rates often sell your demographics to multiple providers. There are also websites that ask demographic questions before giving you access to their content.

Your online browsing behavior also contributes to demographic profiles. When you browse and shop online, websites store tiny files of data in your browser. These files, called cookies, hold information about your online activities -- and, often, your demographics. Advertising platforms then use the data to show you ads that resonate with other people with similar demographics.

Demographics and data privacy

The rampant collection of demographics and related behavioral data online has led to new legislation governing data collection and usage. The European Union initiated its Global Data Protection Regulation (GDPR) in 2018. Since then, California, Colorado, Utah, and Virginia have also pushed through data privacy laws.

The spirit of privacy legislation is to mandate transparency with respect to data collection and use. In other words, you should know when a business collects your information and how the information is used. You should also have the right to request the removal of your information from the business's records.

Businesses provide that transparency to varying degrees. Some, unfortunately, tuck the disclosures away deep in paragraphs of fine print.

The responsibility is usually on you, the consumer, to be cautious any time an online source asks for personal information. Often, there's a business purpose behind the request. Read through privacy policies and click away if you don't like what you see. You can also periodically delete your browser cookies.

Related investing topics

Demographics and artificial intelligence (AI)

There is a lot of investor excitement around the power of AI to streamline data processing and analysis. That power can help businesses identify new opportunities and unlock new efficiencies.

AI does not operate in a vacuum, however. It requires data. Data can mean many different things, of course. But in the context of consumer behavior, demographics are at the core. Qualities like age and gender are typically used to categorize other data points. You've likely seen this in practice, with simple shopping statistics like "women make 85% of car-buying decisions."

ARK Invest Founder Cathie Wood talked about the connection between data and AI in a February 2023 interview. In Wood's view, investors looking for AI exposure should seek out companies that hold proprietary data sets. Wood believes the owners of data will be the winners in an AI-powered world.

If Wood's thesis is accurate, the business value of demographics and related data will only grow. That's likely to increase the need for consumer vigilance and legislative action going forward.