Demographics for business

Key success factor for B2C segment (business to consumer ) is consumer demand, which is partly due to the numerical concentration of the local population. In addition to the total population, businesses are interested in certain population groups based on their demographic characteristics, such as gender and age. As a result, the primary factor for making the right strategic, marketing and management decisions is a comprehensive understanding of the location of the population, considering demographic indicators and recent trends.

Based on population data, several questions interesting for businesses can be answered, such as:

•     what locations should I expand in? 
•     is demand expected to fall? 
•     which consumer groups should be targeted? 
•     what trends are there? 

 

This article presents 5 blocks, which reveal demographic opportunities and risks for businesspeople:

1.     Promising districts and cities
2.     Promising population groups
3.     Portrait of the population of territories
4.     Relative concentration of the population
5.     An example for businesspeople 

 

1

Prospective 
districts and cities

Perspectivity of districts and city administrations  (hereinafter - cities) from the point of view of demography can be measured by the population number and growth rate. This shows which markets are the highest priority for further expansion, and which are expected to reduce the population and, consequently, demand.

Figure 1 shows similar perspectivity for districts . There is a general trend: the larger the population, the higher the growth rate. In general, the population is concentrated in large cities and districts and decreases in small ones.

Figure 1. Perspectivity for districts and cities at the beginning of 2020
 
average annual growth rate in numerical value (0.02 = 2%)

 

1.    Cities are the most promising areas for doing business

In the first quadrant of the most promising territories are 22 administrations of cities of republican and regional significance. They show positive growth with an already large population.

When implementing the urbanization trend, this thesis is logical and expected. This is due to the availability of jobs, relatively high incomes, and a higher quality of life .

The list of these cities includes Almaty, Nur-Sultan, Shymkent, Aktobe, Karaganda, Pavlodar, Taraz, Atyrau, Semey, Ust-Kamenogorsk, Uralsk, Kyzylorda, Kostanay, Petropavlovsk, Kentau, Aktau, Temirtau, Taldykorgan, Kokshetau, Zhanaozen, Ekibastuz, Rudny (full list in Appendix 2).

From the point of view of space, the specifics of some goods and services limit the ability to enter distant markets. For example, the production of perishable goods (certain foods), the unprofitability of long-distance transportation or the need for close proximity of businesses and consumers (for example, hair salons). As a result, businesses should make decisions considering the perspectivity of territories and the distance factor.

 

2.    Areas around cities have an average level of prospects

In neighborhoods adjacent to cities (Figure 2) there is a high and medium level of prospects (figure 1: quadrants I, II, and IV).
 

Figure 2. Perspectivity map of districts and cities for the beginning of 2020 
 
This is due to the positive effects of cities that extend to nearby areas. These include: job creation, a better standard of living compared to remote areas, and lower costs compared to cities. As a result, part of the population lives according to the principles of "pendulum migration"  . Also, these territories can be a "buffer zone" (for example, a village -> a district center –> localities near major cities –> a major city) for gradual migration with the possibility of maintaining the usual way of life.

Therefore, businesses should focus on areas located near cities as major markets. For example, Talgarsky and Iliysky districts near Almaty, Tselinogradsky district near Nur-Sultan, Ordabasinsky, Kazygurtsky and Tolebiysky districts near Shymkent, Baizaksky district near Taraz, Munailinsky district near Aktau, Kostanaysky district near Kostanay, Baitereksky district near Uralsk, Alginsky, Kargalinsky, Khromtausky and Martuksky districts near Aktobe.

 

3.    Territories in the South and West are promising

A large number of districts with average perspectivity  are observed in the southern and western regions of the country (figure 2). One of the reasons is the high birth rate in these regions .

The second quadrant contains districts and cities with large populations but negative growth rates. These include the territories of the Turkestan region: Turkestan, Tolebiysky and Sairamsky districts. For businesses, these areas may be interesting in the short term as relatively large established markets.

The third quadrant is territories with a small population, but positive dynamics. These include 61 districts and towns in Kazakhstan, most of which are concentrated along the southern arc. At the same time, the highest growth rates are observed in the Tupkaragansky and Beineusky districts of the Mangystau region. They may be interesting for business in the medium term if there are plans to gradually expand the business or target a limited number of consumers.

 

4.    Areas in the border areas with Russia and Central Kazakhstan have low prospectivity

The least promising areas and cities are in the fourth quadrant (figure 1). These are small territories with negative growth rates in terms of population. There are 99 such districts and towns. Many are located in the regions bordering Russia, as well as in the Akmola and Karaganda regions. 

This is due to the relatively low birth rate and high emigration of the population . Migration occurs in two directions – to the cities of Kazakhstan or Russia.

When operating in these areas, businesses should consider the possibility of falling demand. One of the solutions is entering the markets of the southern regions of Kazakhstan and export to border regions of Russia (major cities: Saratov, Samara, Orenburg, Chelyabinsk, Omsk, Novosibirsk). 

 

2

Prospective
population groups

Expanding the business base of its consumers requires understanding which groups of the population are the highest priority. Same as when entering new markets, it requires understanding of their demographic structure.  To do this, an additional characteristic was added to the territories of residence by district – five-year age groups .

Age group perspectivity in this case are calculated using the current population size and the expected growth of age groups by 2025 . In Kazakhstan, the groups are very different (figure 3), distributed across 4 quadrants. However, it is noticeable that groups within large segments have similar characteristics: children (0-14 years ), adult population (35-54 years) and seniors (60-70 years old ).
 

Figure 3. Perspectivity of age groups
 
1.    Children are the most promising group for targeting

Children are the most numerous and growing population group, which makes them the most attractive target audience. Especially different are children aged 0-4 (the most numerous) and 10-14 (the largest increase).

Products and services for them will be in high demand for another 5 to 10 years: diapers, toys, children's clothing, stationery, children's media content, etc. Among the services, it is worth noting kindergartens, development centers, children's leisure and entertainment centers, etc.

 

2.    High growth in the number of young people 15-19 years old and adults 

Age groups of young people have different patterns of growth and current numbers. Thus, the group aged 15-19 is expected to have one of the highest increases among all strata (an increase of 31%).

Almost the entire adult population occupies the third quadrant, which indicates its positive growth by 2025. 

This group of the population is the most solvent and financially independent, which makes them attractive to businesspeople. Moreover, the needs of the adult population are more uniform among five-year groups. For example, the demand for equipment, cars, clothing styles, leisure activities, and more.

 

3.    Senior citizens - the “blue ocean” of age groups

In Kazakhstan, seniors are a small group. There are several reasons for this: low life expectancy (73.2 years), historical events and upheavals. 

However, a significant increase in the number of seniors is expected due to the gender and age structure of the population, an improvement in the socio-economic situation and an increase in life expectancy.

The current supply of goods and services for seniors is limited due to low demand and lack of concentration of seniors at certain points. However, in the future as the number of seniors increases, demand will increase for a certain range of goods and services, ranging from healthcare, recreational centers, pharmaceuticals, leisure and entertainment items. It is possible for businesspeople to occupy this niche with little current competition.

 

4.    Decrease and "stagnation" are expected in four age groups

The largest drop is expected in the age group youth aged 25-29 - by 22%. This age group includes "fresh" staff, newlyweds and first-time parents. This circumstance may lead to negative consequences in the labor market (lack of young staff) and the restaurant business ("toi business"). 

A similar situation is expected for the group aged 20-24, which will not change much and has similar needs to the group of youth aged 25-29.

Another group aged 30-34, despite the current number, expects a decrease of 7%. However, since this population group is part of the adult population, there are no critical consequences for business.

The pre-retirement group aged 55-59 will remain unchanged in number by 2025.

 

These trends are relevant for most districts and towns. However, if a business is interested in certain territories, it requires a separate study of each of them. Districts and towns, in addition to changes in fertility, are subject to population and resource flows (under the center-periphery model) (see company blog). 

 

3

Portrait of the population
of territories

One of the classic marketing tools is to identify the client portrait. For initial analysis, businesses can create a demographic portrait of territories based on characteristics of gender, age, and type of locality. This is necessary to understand demand or compare territories. For more detailed demographic structure of the population, see Appendix 1.

 

1.    The average age of the population of the territories varies significantly

The average age of the population varies greatly by district and town. I.e., the country's indicator is in the range of ages 30-34 , but the maximum difference between districts and cities reaches 16 years (25.3 years in Turkestan and 41.4 years in Lisakovsk, Kostanay region).

The data in Figure 4 allows to differentiate districts by population and average age, depending on business needs. For example, most towns fall under the category of populous (more than 100 thousand citizens), and the average age exceeds the national average. 

Figure 4. Average age of the population of districts and towns
 

2.    "Young" South-West

The spatial distribution of the population by average age (figure 5) shows regional patterns. Thus, there is a noticeable concentration of young people in the southern and western regions. Turkestan, Kyzylorda, Mangystau and Atyrau regions are particularly prominent.

The key reasons are high birth rates and earlier marriages .

Separately, it is worth noting the relatively "young " Nur-Sultan, which differs significantly from the surrounding areas by 10 years. A logical assumption is that there is a large proportion of young internal migrants (especially from the South) with a large number of children.

For businesses that target a young population, these areas may be the most interesting for promotion and marketing.

The youngest territories are: Turkestan and Saryagashsky district of Turkestan region and Mangystausky district of Mangystau region (25.3 years).

Figure 5. Average age of the population in districts and towns 
 

 

3.    “Old” North-East

The North and East of the country have an average adult population. These districts and cities include the territories of the East Kazakhstan, Pavlodar, Akmola, North Kazakhstan and Kostanay regions, and one district in the West Kazakhstan region.

The “oldest” locations are Lisakovsk in Kostanay region and the Altai district of East Kazakhstan region, where the average age exceeds 40 years. 

The reasons for this situation are a combination of interrelated factors: high emigration of the young population to other regions and countries (especially to Russia), low birth rate and low income . 

 

4

Relative concentration of the population by sex and age

For a more detailed picture of the districts, in addition to the average age, we can consider the relative concentration of the population for each individual gender and age group.

The relative concentration of districts is the ratio of the share of one gender and age group in an area to the share of this gender and age group in the country. For example, if the proportion of girls aged 5 to 9 is 5% in one district but 3% in the country, the relative concentration will be 1.7 (5%/3%).

This indicator shows which areas of a particular group have more and which have less than the country in general. For businesses, this data will help them more accurately determine the potential audience in the cities and districts of interest.

 

1.    Relative concentration correlates with geography

When studying the graphs of the relative concentration of men and women by districts (Figures 6 and 7), the sequence of conclusions based on the data on average age of districts and cities becomes noticeable. The relative concentration of children is higher in the southern and western regions, and the adult population is higher in the Northern and Eastern regions.

Figure 6. Relative concentration of men by district and town
 
Seniors were excluded from the schedules, as their concentration reaches 10 due to their small number.

Figure 7. Relative concentration of women by district and town
 

2.    Children predominate in large territories

A detailed analysis (Figure 8) shows a trend that the proportion of boys aged 0 to 14 is growing faster than the increase in their number (same for girls).

This is observed primarily in the cities of Nur-Sultan and Shymkent and the districts of the southern regions. Thus, the highest relative concentration of children is observed in Turkestan, Tupkaragansky, Beineusky and Mangystau districts of the Mangystau region.

On the other hand, the lowest proportion of children is observed in the Northern regions, in particular in Lisakovsk, Mendykarinsky, Uzunkolsky and Sarykolsky districts of Kostanay region.
 

Figure 8. Relative concentration of boys (aged 0 to 14) by district and town
  

5

An example 
for businessmen

Let's consider an example of analysis for a businessman from Karaganda:

1.    The population of Karaganda is 497.95 thousand people (5th place among cities and districts);

Women's share - 54.0% (in Kazakhstan in general- 51.5%); men's share - 46,0% (48,5%).

2.    The city is promising, as it has a slight but positive growth rate of 1% per year for 2009-2020;

The city's population increased by 8% in 2009-2020.

3.    The nearest territories with a high level of prospects: Temirtau, Nur-Sultan, Semey, Ekibastuz, Pavlodar, Balkhash, Zhezkazgan, Satpayev;

The nearest territories with an average level of prospects: Saran, Shakhtinsk, Abaisky and Zhanaarkinsky districts of Karaganda region, Tselinogradsky district of Akmola region.

4.    The share of children is 23.2% (in Kazakhstan in general- 28.8%), youth– 19,1% (20,5%), adults– 41,7% (38,7%), seniors - 16,0% (12,0%). The age structure of the city is represented by adult age groups and has a small number of children.

5.    The average age is 35.0 years, which is higher than the national average (30 to 34). This is higher than in most of the surrounding districts and towns (with the exception of Abaisky district and Temirtau).

 

An example of the conclusions:

The city of Karaganda is one of the most promising markets in Kazakhstan. However, the population has not changed significantly in recent years. In the near future, high growth due to natural increase is not expected.

Within a radius of 500 km from the city there are other promising markets, mainly towns of the Karaganda region. These markets are the highest priority, taking into account distances, prospects and opportunities for competition.

The city is dominated by the adult population, which is caused by a low birth rate and a high level of emigration of young people among the population.

Depending on the specifics of the product and services the business needs to:

- enter new territories in three directions: nearby promising areas, southern regions of Kazakhstan, export to Russia;

- the key audience for targeting is the adult population.

If the product targets children, is perishable and expensive to transport, then it makes sense to think about moving production to the southern regions.

 

Conclusion:

The purpose of this article was to demonstrate the importance of taking into account the demographic portrait and trends of the population that shape the demand for goods and services. Districts and cities of Kazakhstan differ greatly in these indicators, so it is necessary to study and take into account these data in order to make the right decisions.

Links:

Data - Statistics Committee of the Ministry of national economy, 2020

Cover – Unsplash.com website

This article on our website - https://crcons.com/rus/demographyforbusiness  

 

Appendix 1. Demographic structure of the population of Kazakhstan at the beginning of 2020

 

 
Appendix 2. The most promising territories

 

Author:

Aldiyar Auezbek 
Analyst 
aldiyar@crcons.com

Contact us:

Website:     www.crcons.com
E-mail:    info@crcons.com
Phone:     8 (717) 27 25 002
Address:     Republic of Kazakhstan, Z05H0T3, Nur-Sultan, 
8 Kabanbai Batyr str., office 117
Facebook:    @CenterResearchConsulting 
LinkedIn:    @center-for-research-and-consulting