Lifestyle Segmentation

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One of the greatest advantages of geographic information systems is the ability to incorporate the many different types of data that define a population into a comprehensive model for analysis. This revolutionary idea of consumer modeling is best represented by a divisional system of clustering, known as lifestyle segmentation. Standard U.S. Census Bureau demographic tabulations tell us that in 1985 the average American household (determined by dividing the Census totals for income, household, etc., by the number of Americans) consisted of a married couple and one child. Dad, age 30, worked as a blue collar worker in durable manufacturing and Mom held a job as a white collar clerk. Both were of West European ancestry, high school graduates, and had a combined salary of a little over $22,000. Their $57,000, three-bedroom house was located in a midwest suburb, had an air conditioner, dishwasher, and clothes washer. While many households in the United States fit this portrait, this method of consumer profiling bears little resemblance to the reality of individuals living in the U.S. Clearly, over generalizing the Census Bureau data obliterates the many individual characteristics that make American communities unique. The basic premise of lifestyle segmentation revolves around the concept that people tend to live in clusters of similarity, both economically and culturally. And that these geographic groups or clusters are inhabited by individuals who share similar purchasing power and buying characteristics. As a society, we have a tendency to seek our living spaces in regions that reflect our economic status, belief systems, and ethnic orientation. Our educational and occupational backgrounds are part of the determining process, influencing where we live and what we like and buy in the marketplace. The best examples of consumer segmentation lie in the inner-city boroughs of New York. The plurality of ethnicity there is great, but the segmentation is well defined by the natural clustering habits of the population. There are neighborhoods that are distinctly Italian, Jewish, Catholic, and young Bohemian, where you will probably find a commonness of income and education levels, as well as a distinctive pattern in buying trends and purchasing power. The lifestyle segmentation system combines the U.S. Census Bureau data with current year aggregated consumer demand data to form a comprehensive database of consumer purchasing trends. On a yearly basis, new information is incorporated to adjust for the changes in economic conditions, growth, and migration. This precision tool may be used for demographic targeting studies by businesses in any industry. It accurately classifies every U.S. household into a unique market segment and can be integrated with industry survey research data to give a comprehensive picture of a company's best customers and prospects. By using a cluster segmentation system, a company can analysis small demographic areas to pinpoint precise locations for improving its odds of finding prospective consumers. Or it can reverse the concept and plot sales records to learn the lifestyle characteristics of its customers. Either way a company can gain valuable insight into who is buying what, and where exactly those purchasers live.