From the course: Marketing: Customer Segmentation

How to complete geographic customer segmentation

From the course: Marketing: Customer Segmentation

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How to complete geographic customer segmentation

- [Instructor] Knowing where your customer lives can save your business time and money. This knowledge can also give you a significant competitive advantage. Geographic segmentation is a method of dividing your customers or people who are not yet your customers into groups based upon where they live. There's one thing that every person in the world has in common. We all have a ZIP code that corresponds to the location of where we call home. If you're like me, you get mail at an address in that ZIP or postal code. In much of that mail is not something you requested. You call it junk mail, but the people that sent it to you call it marketing material or direct mail. The reason marketers use geographic segmentation is because people tend to live near other people who are like them. We congregate in locations where we have a high likelihood of being around other people who have some more cultural values as we do, similar levels of education, similar tastes in housing, and similar income levels. One of the keys to success in marketing is being able to efficiently spend your marketing dollars by hitting those customers who are most likely to respond to your message. Geographic segmentation can help you target the right customers in the right locations, and it isn't just for consumer marketing. You can use geographic segmentation for business to business marketing as well. It also makes sense if you have a retail shop, you would want to target those people who live near your location for your promotional messages. And there are many business leaders with a web presence who want to target a specific socioeconomic or even racial group. Do you occasionally get an envelope full of coupons in your mailbox? Or do you subscribe to a magazine? The advertisers using these media are employing geographic segmentation as part of their marketing program. There are direct marketing firms with the ability to target specific ZIP codes in their mailings. Many newspapers and magazines have the ability to print regional additions for those advertisers who want to target a specific area. Even social media sites have the ability to target users at the ZIP code level. So, if your marketing plan contains a strategy of reaching people in certain geographic areas, there are many ways to get this done. So, now we've covered why you might want to use geographic segmentation. Let's talk about how. We're specifically going to look at the United States, by going to unitedstateszipcodes.org, click on ZIP code database. This allows you to download a spreadsheet with all the ZIP codes in the United States. If you're using this simply for personal curiosity, you can download a basic file at no charge. The enterprise version has significantly more data, such as population and housing counts, age, gender, and race statistics, income, education levels, and home costs all by ZIP code. We're going to click on find ZIPs in a radius to show how this can be used. Let's say you're working for an organization that wants to reach people in Cincinnati, Ohio. You can type in Cincinnati and this will show you the surrounding area. We want to see everything within 10 miles. So, now we see all the ZIP codes in the Metro area. But let's say that our funding is from the state of Ohio and so we want to remove the ZIP codes in Kentucky. Now we can see the map and also on the right, we have all the ZIP codes of interest. We right click on that to copy and then go over to our ZIP code database file and paste it in. This gives us all the information on the ZIP codes. And we can see here, the total number of people living in this area. If you have the enterprise or small business version of this database, you could further drill down to see the number of housing units, age, gender, race statistics, income, and education levels, as well as home and rental costs. Using this information, you can specifically target the neighborhoods that match your ideal customer with a direct mail message. This can also be useful for any outdoor advertising that you may have planned. The US Postal Service has programs that allow you to deliver direct mail material to the ZIP code level. If you do an online search for advertising by ZIP code, you'll find a number of companies that specialize in this area. The next time you collect your mail, pay attention to who's sending you coupons and advertising material. They're using the geographic segmentation tools we just covered and give them your business, they'll appreciate it.

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