Geo-demographic clustering of markets

A retailer could benefit from setting up a newcomer program to identify new arrivals and make contact with these families before their shopping habits have been rebuilt. Such a program could include (1) offering to extend check cashing or credit privileges, (2) delivering a gift to the home, (3) providing coupons redeemable in the store, and (4) offering a price cur or refund in items purchased.

By using computer geo-mapping software in conjunction with sophisticated demographic databases, marketers are able to better understand market diversity and target potentially attractive segments. The combination of geographic and demographic consumer information is known as geo-demographics and is a important segmenting tool. Applications of this technique have included improving media plans, choosing retail sites and predicting sales at new locations, introducing new products, planning merchandise mixes, and segmenting customer lists. For example, Sears uses geo-demographic analysis by coding its credit card customer base to find its best customers and identify growth segments for targeting. They can also analyze which merchandize is best suited to an area’s needs. General Foods has also undertaken database marketing. It has a name and address list of 25 million consumers who have, at some time, sent in for refund offers, and so on that is, made a response to a consumer offer.

Geographic clustering services are available from major vendors, such as Claritas Corporation (which offers PRIZM) and Donnelley Marketing Information Services (which offers ClusterPLUS). These similar services combine over 100 demographic socio-economic, and housing characteristics from the 260,000 US neighborhood block groups with consumer behavior (e.g. product purchase and media usage) data to define less than fifty kinds of homogeneous market segments, each consisting of consumers with a unique pattern of purchasing, consumption, media, and financial behavior. Users can identify on a map where any kind of segment is located in any area of the United States, including states, counties, zip codes, census tracts, and block groups. Demographic clustering system. It provides a brief description of each cluster, its share of US population, median income and home value, and percent of college graduates. Figure maps of these clusters and illustrates how various dimensions of these segments are markedly different. Not only are demographic differences considerable between the two groups, but the consumption index patterns (100 = average) are considerably different for a wide range of products, services and media .for example, bowling has far below average usage among “blue blood estates” but above average usage among blue chip blues. Consequently, bowling centers would generally target their promotion to the latter group. The following example illustrates how geo-demographic clustering was used by a financial services institution.

When Perpetual Savings Bank of Washington, D C decided to shift its perceived market position from just another savings and loan toward a full service bank, it stressed convenience and innovation with a new consumer lending product whereby consumers could get loans over the phone in as little time as 15 minutes. Perpetual chose to market its telephone loan services to residents of the PRIZM cluster entitled “Furs & Station Wagons” — a group that is generally cash poor with heavy mortgages, fine credit rating, and luxurious tastes. Prestige symbols such as home improvement, luxury cars, and power boats were featured in Perpetual’s newspaper ads to attract upscale customers.

With the Census Bureau’s TIGER (Topologically Integrated Geographic Encoding and Referencing) file many companies will be able to develop even better GIS (geographic information system) products. TIGER a digitized street map of the United States will be integrated with demographic data to allow a marketer to produce, for instance, a map where concentration of households with over $45,000 income are shaded in red. Then, the company’s GIS could tell the marketer if these concentrations are linked in pending patterns.