In the United States, ZIP +4 assists marketers in targeting customers by city, neighborhood, or street, but geospatial location intelligence can help marketers perform much deeper analysis. And “analysis” is where the real value of geospatial lies.
A ZIP + 4 code according to Wikipedia; “uses the basic five-digit code plus four additional digits to identify a geographic segment within the five-digit delivery area, such as a city block, or a group of apartments.” And since the introduction of ZIP + 4 in 1983, this feature has assisted direct marketers (not to mention the USPS) in saving millions of dollars in costs.
While some marketers may decide that ZIP +4 is enough for customer targeting purposes, they’re missing out on a whole level of analysis available from geospatial that can help squeeze more return on investment from scarce marketing dollars.
The term “geospatial” describes a specific type of analytical software combined with geographic data. Going much further than simple ZIP +4 formats, geospatial comes to life via the transformation of a customer address into geographic coordinates (latitude and longitude). With geospatial, a whole host of marketing analytics is now available to marketers.
Examples include:
- Map locations. By overlaying geospatial data types with a mapping tool (such as Google Earth) marketers can pinpoint store or office locations in proximity to customers.
- Calculate distances between locations. Stores, offices or distribution centers can be precisely calculated and then evaluated to examine if they are too close or too far apart. For example, marketers can determine the midpoint between two stores to meet the needs of an under-served customer segment. With geospatial, there’s no guessing, whereas it’s pretty difficult to calculate the distance between locations with ZIP +4.
- Marketing by the mile (or less). Suppose you have a specific store location and you want to market to households 5.1 miles to the north, 2.5 miles to the south, etc; essentially building your own polygon for direct marketing purposes. With geospatial capability, you can do this exercise; ZIP +4–not so much.
- Disaster planning. When an event occurs, let’s say a hurricane is brewing, will you be able to see which stores will be in its path? How about households? How might this event affect your ongoing or future marketing campaigns?
- Risk management. Customer concentration or density analysis (Fig 1) can identify specific areas in which you may be taking on too much risk.
Figure 1. A visual example of density analysis. Source
Some marketers want to know, in comparing ZIP +4 vs. geospatial–which is best? The answer depends on your specific problem, resource constraints, and level of analysis required.
ZIP +4 can help a marketer drill down towards a fairly small area for targeting and the process of converting a mailing list to ZIP +4 is relatively inexpensive. Whereas, adding geo-spatial capabilities usually involves use of an analytical infrastructure (database and hardware), software applications (i.e. data integration and visualization tools), and both technical and business know-how to perform analysis and act upon newly discovered information.
ZIP +4 may work best as an inexpensive way to improve customer targeting. However, as seen from the above marketing examples, geospatial capabilities open a whole host of analytical options for marketers that ZIP +4 just cannot match.
Questions:
- With three billion mobile phone users in the world (and growing) will “location” become an increasingly important component of marketing in the next 3-5 years?
- A business intelligence infrastructure is a necessary pre-cursor to geospatial analysis. What does this say about the skill sets marketers will need in the future to perform such analysis?
Tags: analysis, analytics, Direct Marketing, geospatial, segmentation, targeting, visualization tools, zip +4
Nice post, Paul, and an interesting topic. Like you, I wonder whether “location” is going to be a major factor in marketing going forward in some sectors. For one thing, many people are getting increasingly comfortable making purchases online now. The convenience of buying from home 24/7 365 days per year is likely making the location factor less relevant. That isn’t to say that brick and mortar locations aren’t totally irrelvant. In specific retail areas like grocery stores and certain service areas like banks, location will continue to be relevant. Even where it is, will businesses will want to invest in a new business intelligence infrastructure? Or will they see this as another marketing set of bells and whistles that may yield great intelligence, but may not yield any significant actionable results?
What I’m wondering, Paul, is who will be responsible for making decisions based on this intelligence, if companies do decide to review geospatial analysis? Will they see this as a worthwhile investment in the first place? If so, in a time of employee cut backs, how will the marketing department be able to take on another ongoing review of data? Finally will CEOs and company presidents leave it to the marketers to decide on locations, or will they want to make decisions themselves? I think your post raises more questions than anything.
Hi Claire, as always, I appreciate your contributions to the discussion!
Will the “location factor” be more or less relevant in the future? Some great food for thought. With a society on the move, the emergence of 3G networks, mobile phone explosion etc, the “location” of goods in transit, finished products and services, stores and customers for that matter, location may matter much more than we think. Another angle to consider, with the housing bubble bursting and gas prices at $3 gallon (maybe more in the future) people will re-evaluate the distance they’re willing to travel and commute. Will “the burbs” contract? Will urbanization take on added importance? And what do these trends mean for “location” considerations?
Holy Cow, Paul – where do you find these topics???
Somehow you made this “quant” one interesting and understandable – there should be an award for that!
Anyway, as good as this is, it still needs the overlay of demos and behaviors to be great. I think of all those articles about mobile marketing where a pizza joint can ping my phone as i’m walking by – with no understanding of who I am or what I eat? etc etc
But I do see this as a convincing way to get zip “traditionalists” to look at more effective ways of geo-targeting, nonetheless (as long as you are doing the explaining !!!
Kevin, thank you for commenting and appreciate the compliment! I think you’re referring to an article like “GPS Revolution: Benefit or Bane?”
http://www.mpdailyfix.com/2009/03/most_telecommunication_compani.html
Ted, thank you for adding to the discussion. You bring up a terrific question; Who will be “responsible for making decisions based on this intelligence, if companies do decide to review geospatial analysis?”
I have long argued, and perhaps unsuccessfully, that marketers need a whole new skill set to meet future requirements. As far as resources are concerned, the marketing dept of the future may not necessarily require more headcount, but instead rely on new skill analytical skill sets coupled with a deep understanding of technology. Productivity and efficiency improvements will come from use of technology allowing marketing depts to do more with less.
To paraphrase Marshall Goldsmith; What got us here won’t necessarily take us forward.