Demographics for business

A key factor in the success of the B2C (business-to-consumer) segment is consumer demand, which is partly due to the number concentration of the population in the field. A comprehensive business understanding of the location of its key audience and demographic trends is important for making the right strategic, marketing and managerial decisions.

One of the most detailed and accessible population databases contains information about the population of Kazakhstan by district and city administration (200 territories*), type of locality (city/village) by gender and five-year age groups in a dynamic series (the beginning of 2009 and 2020 used here). Based on this data alone, it is possible to draw various conclusions and answer business questions. For example, in which areas should we expand now or where the demand is expected to fall?

Demographic "prospects" of districts and cities for doing business
The "prospects" of districts and city administrations (hereinafter referred to as cities) in terms of demography is measured by the population and its growth rate. This shows which markets are the highest priority for further expansion, and where the population and, consequently, demand are expected to decrease.

Figure 1 shows how the districts are divided into 4 quadrants**. The most "prospective" markets are 37 districts and cities in the first quadrant (upper right corner). These areas have a large population with positive growth rates. Most of them are cities of national significance and regional significance. There are also some districts of Almaty, Zhambyl, Turkestan and Mangistau regions. For business, these areas and cities are the most attractive, as they already have a relatively high demand, which will only increase in the future.

The second quadrant (lower right corner) contains districts and cities with a large population but negative growth rates. These include the territories of the Turkestan region: city of Turkestan, Sairam and Tolebi districts. For businesses, these areas may be interesting in the short term as large established markets.

The third quadrant (upper left corner) includes districts and cities with a small population but positive growth dynamics. These include 61 districts and cities of Kazakhstan. Among them, the highest growth rates are observed in Tupkaragan and Beineu districts of Mangistau region and Tselinograd district of Akmola region. These areas may be interesting for business in the medium term. This may be linked to plans for parallel expansion of the business itself or for businesses with a small population coverage.

The least "prospective" districts and cities are located in the fourth quadrant (lower left corner). These are small population areas with negative growth rates. This quadrant contains the largest number of territories – 99 districts and cities. When operating in these areas, businesses must take into account the potential drop in demand in the future.

The "prospectiveness" on the map of Kazakhstan

The specifics of some products and services limits the ability to enter markets over long distances. The reasons may be perishable goods (for example, food items), unprofitability of long-distance transportation, or the need of supplier and customer proximity (for example, hairdressers). As a result, businesses can not always afford to choose "prospective" areas for sales, and must make a balanced decision taking into account the distance factor.

When drawing the "prospective" matrix on the map of regions and cities of Kazakhstan (Figure 2), spatial trends begin to be traced.
- data from some districts of the Turkestan and Almaty regions (highlighted in grey) were merged with the districts before their administrative separation in 2018.

First of all, the most bright, "prospective" points across the country are cities. Secondly, there is a high level of "prospectiveness" of the districts around Almaty (in the South-East of the country) and Shymkent (in the South).

Third, almost all areas with an average level of "prospectiveness" (a large population with negative trends and a low population with positive trends) are concentrated along the southern arc (incl. southwest). One of the reasons is the high birth rate in these areas.

Fourth, most of the least "prospective" areas are located in the regions bordering Russia. This is linked to the relatively low birth rate and high migration of the population. For businessmen of these regions, it is necessary to consider entering the southern markets of Kazakhstan and exporting to the border regions of Russia, taking into account the large number of large cities nearby (Saratov, Samara, Orenburg, Chelyabinsk, Omsk, Novosibirsk).

* taking into account adjustments for changes in administrative borders and unification of districts of cities of national significance
** priority threshold for the population is more than 100 thousand people; priority threshold for average annual growth rates is more than 0% per year.