Geographic segmentation

Geographic segmentation calls for dividing the market into different geographical units such as nations, states, regions, counties, cities, or neighborhoods The Company can operate in one or a few areas, or operate in all by attention to local variation. For example, Hilton Hotels customizes rooms and lobbies according to location. Northeastern hotels are sleeker and more cosmopolitan. Southwestern hotels are more rustic. Major retailers such as Wal-Mart, Sears, Roebuck & Co., and Kmart all allow local managers to stock products that suit the local community.

Bed Bath & Beyond

Home furnishing retailer Bed Bath & Beyond’s ability to cater to local tastes has fueled its phenomenal growth. Bed Bath & Beyond’s managers pick 70% of their own merchandise, and this fierce local focus has helped the chain evolve from one that began selling little more than bed linens to the “beyond� part – products ranging from pictures frames and pot holders to imported to imported to imported olive oil and designer door mats. In Manhattan stores, for instance, managers are beginning to stock wall paint. You won’t find paint in suburban stores where customers can go to Home Depot or Lowe’s. One Bed bath manager says that several customers have been surprised when they found out that the store is part of a national chain and not a mom-and-pop operation. That’s the ultimate compliment.

More and more, regional marketing means marketing right down to a specific zip code. Many companies use mapping software to show the geographic locations of their customers. The software may show a retailer that most of his customers are within only a 10-mile radius of his store, and further concentrated with certain zip + 4 areas. By mapping the densest areas the retailer can resort to customer cloning, assuming that the best prospects live where most of his customers come from.

Some approaches combine geographic data with demographic data to yield even richer descriptions of consumers and neighborhoods. Claritas, Inc., has developed a geo clustering approach called PRIZM (Potential Rating Index by zip Markets) that classifies over half a million US residential neighborhoods into 15 distinct groups and 66 distinct lifestyle segments called PRIZM Clusters. The groupings take into consideration 39 factors in 5 broad categories:

(1) Education and affluence;
(2) Family life Cycle;
(3) Urbanization;
(4) Race and ethnicity;
(5) and mobility.

The neighborhoods are broken down by zip code, zip + 4 or census tract and block group. The clusters have descriptive titles such as Blue Blood states, Winner’s circle, Home town retired, Latino America, Shotguns and Pickups, and back Country Folks. The inhabitants in a cluster tend to lead similar lives, drive similar cars, have similar jobs, and read similar magazines. Here are four new PRIM clusters:

* Young Digerati: Couples or single-headed households, most of them with kids, who have decided to stay in urban center rather than flee to the suburbs. This sector

* Includes a high proportion of affluent, tech-savvy, 20-somethings, who tend to hold master’s degrees and live in fashionable neighborhoods on the urban fringe. They are staking out territory in once forgotten neighborhoods in cities such as new York, Chicago, and Atlanta.

* Beltway Boomers: Now in their forties and fifties, these college-educated, upper-middleclass owners married late and are still raising children. They live in comfortable suburban subdivisions and are still pursuing kid-centered life styles.

* The cosmopolitans: Continued gentrification of the nation’s cities has resulted in the emergence of this segment, concentrated in America’s fast-growing metro areas such as Las Vegas, Miami, and Albuquerque. These households feature older homeowners, empty nesters, and college graduates who enjoy leisure-intensive lifestyles.

* Old Milltowns: Just as America’s once thriving factory towns have aged, so have their residents. Old Milltowns reflects the decline of these small, once industrial communicates, now filled with retired singles and couples living quietly on fixed incomes. These home-centered residents make up one of the top segments for daytime television.