True Micromarketing with Desktop Mapping:
A Power Tool for Customer-Focused Decision-Making in the 21st Century
By Robert Welch
President, Synergos Technologies, Inc.
Increasingly, the marketing decisions retailers make fail when they do not
match their products and promotions to their specific customers' profiles.
The main problem is that retailers do not understand exactly who their
customers are. However, there is a powerful business tool that retailers
can use to understand who their customers are with precise detail and,
thereby, succeed in their ongoing challenge to market the right products to
the right consumers. Desktop mapping -- a dynamic, emerging field within
the geographic information systems (GIS) industry -- is revolutionizing the
way businesses see their customers -- literally. Desktop mapping precisely
locates customers on colorful, thematic market-area maps, giving businesses
the opportunity to view their customers from three strategic perspectives:
demographic, psychographic, and geographic. The value of this in-depth
pictorial information is immense. It impacts the full spectrum of marketing
decisions, from selecting products to creating promotions. In fact, it can
help businesses make the most accurate decisions on each of the traditional
five Ps of marketing -- product, pricing, packaging, positioning, and
promoting. This means business executives no longer have to rely on their
best guess or third-party information to make critical decisions on what
consumers will or will not buy. By applying GIS-based mapping techniques to
marketing activities, retailers can make much more informed decisions based
on first-hand facts about who their customers actually are. The result is
the ability to conduct "true micromarketing" to sell a product or determine
the potential for selling a product. This will increase overall revenues
because businesses are actually getting products to the people who will buy
them. And at the same time they are decreasing the expense of selling
products to those consumers, because they are not wasting their time or
money to promote to people who will not be interested in its specific
products. Cutting edge businesses are already using desktop mapping to make
more informed marketing decisions, which means they have invested in the
software, demographic tools, and data products that allow them to
cost-effectively conduct this high level of consumer research on-demand
from their desktops. They will be the leaders in markets across the country
in the 21st century as competition continues to reach unprecedented levels.
This white paper will explore true micromarketing with desktop mapping. It
will provide retailers with the foundation of information they need to
fully understand the marketing potential of this rapidly emerging business
tool, to learn the positive impact it can have on their businesses, and to
find out how to bring it onboard as part of their ongoing marketing
programs. Businesses who already use desktop mapping will see how this
advanced application can bring a whole new level of customer-focused
decision-making to their businesses -- and how this will positively impact
their bottom lines.
True Micromarketing
Who are your ideal customers? Where do they live? What products do they buy
and what products will they buy? If you do not know the exact answers to
these three basic business questions, you are losing more than you know in
the way of existing customer loyalty, new customer acquisitions, and sales.
One of the most powerful and dynamic tools available to businesses who want
to fully understand their customers and, thereby, strategically position
themselves to win the ongoing competition for existing customers' mind
share and for new customers market share is true micromarketing. This means
targeting your marketing activities at specific, well-defined consumer
groups. It means understanding your customers at a previously unavailable
level. And it means making marketing decisions based on knowing what will
appeal to your customers. True micromarketing is feasible for any business
that understands its customers to such a detailed level that they can
accurately select products for them, then price, package, position, and
promote them in the most effective ways possible. Today, true
micromarketing is a reality thanks to the availability and affordability of
GIS desktop mapping.
Desktop Mapping
The primary benefit of desktop mapping is that it allows businesses to
geocode, or place, their customers on a wide variety of market-oriented
maps. It also provides retailers with demographic and psychographic reports
on the consumers who live in these areas, and with zip-plus-four address
identifiers for each of the known customers. Retailers can use this
in-depth consumer information to, for example, make optimal product
selections, determine ideal selling prices, choose the most appealing
product packaging, decide the best positioning strategy, and create the
most effective promotions. All of these activities are vital to helping
businesses retain their current customers, attract new customers, reduce
marketing costs, and increase sales.
Essentially, GIS-based mapping brings business data to life. Mapping is a
powerful way to link information with a geographic location and, therefore,
literally see data in its context -- from area's as small as a neighborhood
to areas as large as the entire United States. Further, mapping is a highly
flexible analysis tool that presents data in a variety of visual
presentation styles such as different shades of color, as symbols of
different sizes, as dot patterns of varying densities, or all of these at
once in multiple layers. So, instead of conducting marketing analyses based
on data listed in dry tabular formats, desktop mapping places the data in
vivid maps of your trade areas -- allowing you to see your customer
information from whole new perspectives. As a result, you will not only
have the specific numeric information you need, but you will now also see
geographic relationships that you may not otherwise have been able to see,
such as buying patterns and overlapping markets. Unlike any other marketing
tool, GIS-based maps give businesses a highly strategic tool that lets them
precisely identify -- and literally see -- customer data from three
perspectives: demographic, psychographic, and geographic. All of these
perspectives impact what you're selling and how you're selling it.
- Demographic data.
GIS-based maps answer all of the fundamental questions of who your
customers are based on where they live, including their income levels,
nationalities, ages, household sizes, the types of cars they drive, their
consumption patterns, and how they pay for purchases. When you see your
customers spatially identified on a map, you can conduct a number of highly
valuable studies. One of the most common is "clustering," which is based on
the principle that birds of a feather flock together. In other words, if a
group of your customers live in one zip-plus-four area code, it is highly
likely that their neighbors include consumers who fit their same
demographic profile and, therefore, could likely become your customers, as
well. The idea is that if you know precisely who your customers are, you
can use desktop mapping to find other similar consumers in your markets,
then market directly to them.
- Psychographic data.
GIS-based maps include consumer reports. Based on the demographic data,
these reports begin making inferences about the targeted consumers'
behaviors, such as identifying their key drivers to making purchasing
decisions. In other words, the reports help determine what motivates them
to shop at one store versus another, or to select one product over another.
This information will help retailers make more informed decisions on what
products their customers are likely to buy in the future.
- Geographic data.
GIS-based maps give you pictures of exactly where your customers live. With
this information you can conduct a variety of market analyses such as
looking for clustering patterns or overlapping markets. In addition to the
visual data, the geographic information from desktop mapping includes
zip-plus-four customer identifiers. Zip-plus-four areas are the smallest
geographic levels available to businesses. These are the zip codes with
four extra digits added to the main five-digit area code. To understand the
significance of the difference between the two zip code levels, consider
that a traditional five-digit zip code area contains between 1,000 and
5,000 households, and crosses through many demographically diverse
neighborhoods. On the other hand, a zip-plus-four area code contains
between four and 12 households. At this significantly smaller geographic
level, you are virtually assured that the list represents a single
demographic and psychographic consumer lifestyle in most markets. This
dramatic quantitative difference between the two zip levels gives
businesses an unprecedented ability to literally hand-pick the consumers
they will include in their promotional activities. Further, by
understanding their customers and potential customers at such a detailed
level, retailers can create specific advertising messages to fit their
exact buying needs, wants, and behaviors. For example, you can send baby
product promotions to new families and send senior citizen specials to
households with older family members.
Micromarketing Versus Mass Marketing
Today's consumer-oriented businesses face the unique challenge of marketing
to customers in an era saturated with mass marketing. Several decades of
mass marketing across the country has had an increasingly negative effect
on businesses, including forcing many products' margins to drop to
dangerously low levels and making customer loyalty a near impossibility.
Mass marketing sounded like a good idea back when every family seemed to
have 2.5 children, a home in the suburbs, and two cars in the garage, and
before every other retailer was doing it. The idea was a simple one:
estimate the general demographics of your markets and then blanket multiple
markets with general product selections and promotions. Two problems arose
after a few decades of mass marketing: consumers become much less
homogenized in markets across the country, and every major retailer was
engaged in similar mass marketing activities, frequently with the same
products. As a result, the effects of mass marketing have diminished
greatly over the years. This problem became painfully clear as retailers
spent more money to achieve less response. To counteract the dulling
effects of mass marketing, many retailers have been adopting micromarketing
tactics in an attempt to market to specific, well-defined groups. However,
the gulf between what is called "micromarketing" and true micromarketing is
vast. The bridge to cross this gulf is desktop mapping. Not since the days
of the neighborhood corner grocer has there been a better opportunity to
truly understand who your customers are. Like the corner grocer, who knew
his customers' exact wants, needs, likes, and dislikes, you can understand
who your customers are at an in-depth level with today's emerging
location-oriented power tool -desktop mapping.
Desktop Mapping and the Five P's
By directing micromarketing activities based on the information provided
from GIS-based maps, you can positively impact the decisions you make
regarding each of the five Ps -- product, packaging, price, positioning,
and promotions. The precision it brings to informed decision-making in each
of these areas can sharpen your marketing activities to a razor-sharp edge.
The end result will be a significant reduction in wasted marketing dollars,
a dramatic increase in marketing success, and major increase in profits.
- Product.
Retailers can apply GIS-driven micromarketing to determine if their stores
are delivering the right products to their consumers. Accurate product
selection increases the probability that consumers will actually buy the
products you bring into your stores, because they have been selected
specifically to suit their specific needs and wants. In addition to
selecting the right products for your customers, retailers who are in a
position to customize products can ensure they are making appropriate
modifications to fit the profiles of the people who will walk into their
stores.
- Positioning.
GIS-driven micromarketing allows retailers to accurately position their
products, product categories, and even their stores. Because they
understand the consumers' demographic characteristics and psychographic
behaviors. As a result of desktop mapping, they can prioritize the
variables that are important to their customers, and correctly position
products and the store itself based on those factors. For example, for
large families with low incomes, price may be a dominant factor in making
purchase decisions. Whereas, small families with large incomes may be
driven by specific product quality factors, such as brand names or health
trends.
- Pricing.
Like product choices and positioning angles, product pricing can be done
most effectively when retailers understand their customers' demographic
characteristics and psychographic behaviors. Demographically there are
distinct groups of consumers who are very cost conscious and groups for
whom the price of a product is not a top driver in their buying decisions.
In fact, there are a number of industry studies that show which pricing
strategies, for example, value pricing or cost-plus pricing, work best with
which consumers. With this data retailers can determine how price-sensitive
their customers are in specific areas of their markets. As a result, they
can effectively apply GIS-based micromarketing to determine the ideal price
for products in a given area of a market, no matter which pricing method
they are using.
- Packaging.
Who your customers are can dictate which product packaging, including the
physical container and the messaging on the package, will be the most
appropriate for them. Through GIS-based micromarketing you'll be able to
determine how you can ensure a product's packaging is the most convenient
and will deliver the message in the strongest way to those particular
customers.
- Promotion.
There are certain industry-acknowledged levels of effectiveness for the
various methods of advertising. By applying GIS-based micromarketing to the
creation of their promotions -- including the message, promotional vehicle,
and targeting the audiences -- retailers can significantly increase the
results of the advertisements. Not only are you benefiting from the direct
impact of creating highly customized promotions that talk to a well-defined
neighborhood or class of consumers, but you are avoiding creating
psychological barriers in your customers' mind when you present them with
promotions that do not fit their psychographic profiles. Further, retailers
can select the most appropriate advertising vehicles to deliver the
messages to their targeted audiences, such as direct mail to reach a highly
select up-scale consumer with a new, expensive line of olive oils or using
bus advertisements on specific routes in the city to sell convenience foods
to low-income working mothers.
Related Marketing Disciplines
There are many marketing disciplines that can work in conjunction with
GIS-based micromarketing to enhance retailers' marketing effectiveness,
such as consumer research, lifestyle segmentation programs, frequent
shopper programs, and category management.
- Consumer Research.
Consumer research allows you to define exactly who your customers are,
including their perceptions, attitudes, and suggestions about your stores
and store networks. There are many techniques available to retailers to
collect various types and quantities of consumer research, including direct
methods such as outbound, inbound, or face-to-face surveys. Several highly
skilled companies, such as Dakota Worldwide, have created efficient and
effective systems to collect this in-house data for retailers. Indirect
research methods also exist such as credit card database searches. However,
retailers must consider the risks and limitations of these methods, such as
the possibility for receiving skewed information, in other words, the data
will reflect only those consumers who have and use credit cards. The
advantage of doing direct research is that retailers get specific answers
related to their businesses to learn what is right or wrong about a
product, category, store, or a store network. Too many businesses discount
the capabilities of in-house customer research to help them market more
effectively, but they do so at their own peril.
- Lifestyle Segmentation Programs.
Lifestyle segmentation programs are a proven marketing tool that have been
around since the mid-50s. Many retailers have used them with a great deal
of success. These programs, such as Prizm and MicroVision, group customers
across the country into categories based on demographic, psychographic, and
geographic factors. Retailers can identify which consumer categories most
accurately fit the descriptions of their customers, then find where these
groups live in their specific markets. The third step of effectively using
lifestyle segmentation programs, and the one most retailers don't take, is
to call on the services of syndicated research organizations, such as RL
Polk or Simmons Research Bureau, to define the consumer clusters in terms
of their propensity or probability of purchasing your specific products.
- Frequent Shopper Programs.
Unlike lifestyle segmentation programs, frequent shopper programs are not
yet a proven marketing tool. They have only become popular in the 90s as
more retailers realize the value of identifying their customers. However,
no one has yet determined an efficient and effective way to process all of
the data these programs are generating. So far, about the only use
retailers have drawn from frequent flyer programs is to identify where
their customers are coming from geographically and to identify their
general shopping patterns. However, frequent shopper programs lend
themselves to much more potential for the companies who find ways to tap
into the vast quantities of information they generate.
- Category Management.
One of the current hot topics in retailing is category management, which is
the management of products and services by categories versus by a single
product or service. Here, too, understanding your customers is the key to
increasing the success of category management, because you'll better
understand which specific categories, such as olive oils or baby products,
will appeal to targeted consumers. Also, GIS-based micromarketing allows
retailers to identify and examine spatial variations and buying patterns by
product categories at a higher, more informed level. When you effectively
manage your product categories, you'll increase your total category sales
and, thereby, generate greater store profits.
Desktop Mapping User Scenarios
To illustrate how GIS-based micromarketing can be applied in the real
world, we're presenting three user scenarios. However, these scenarios
represent just a few of the many ways that micromarketing with desktop
mapping can dynamically impact a retail enterprise. Each retailer should
examine his or her business's short-term and long-term goals, and the
capabilities of micromarketing described in this white paper, then talk to
GIS desktop mapping experts to determine how to best apply this powerful
discipline to his or her business.
- Micro-Positioning Healthy Foods.
One suburban grocery store learned that to appeal to its large audience of
middle-class housewives it had to sell many categories of low-fat food
items. The grocery store took this idea a step further and positioned the
entire store as the "health-conscious" neighborhood grocer. Then it bought
targeted zip-plus-four mailing lists and conducted direct mail campaigns to
these consumers with phenomenal success.
- Micro-Promoting Swimming Pools.
Some products by definition do not have mass appeal, for example, swimming
pools. Only a select category of consumers will have the necessary criteria
to own one, namely, the desire, the money, and the land requirements. In
this case, advertising to an entire city, say through a newspaper
advertisement, will be a largely wasted expense, because the vast majority
of the newspaper's readership will not fit the necessary criteria. One
swimming pool retailer took a GIS-based micromarketing approach to
promoting his business. He first identified the neighborhoods where people
who owned pools already lived. From this data he purchased the
zip-plus-four mailing lists surrounding these areas, then send a direct
mail package that appealed to their desire to own a pool "just like your
neighbors do."
- Micro-Pricing Petroleum Products.
Pricing petroleum products is one of the most extensive pricing games in
any town. The goal of every petroleum company is to make the greatest
profit while still being the most competitively priced. Desktop mapping
helped one petroleum company in Austin, Texas, maximize every opportunity
to price its gas at the optimal levels at all of its stores, which were
located in many geodemographically varied parts of the city, because it
knew in which areas its potential customers where more price sensitive and
where they were more convenience oriented. In other words, the
convenience-oriented consumers would buy its gas because it was near home
or on the way to work, where as the price-sensitive consumers would drive
miles out of their way to pay a few cents less. So, the gas station chain
priced its product accordingly for maximum traffic and profit.
GIS-Based Micromarketing Steps
Micromarketing with desktop mapping is an accessible and affordable
marketing strategy for nearly all retailers. The fundamentals of all
GIS-based micromarketing include the following four steps:
- Choose your marketing objective.
The first step of micromarketing with desktop mapping begins with
identifying your specific goals. In other words, which of the five Ps do
you want to focus on first? For example, do you want to determine which new
products your customers will buy, assess your product packaging issues,
fine-tune your pricing strategies, review your store or a specific
product's positioning, or create targeted new promotions?
- Define your customers.
To conduct true micromarketing, you need to know exactly who your customers
are. There are several ways to gather both first-hand and indirect customer
information including in-store and telephone customer surveys, frequent
shopper programs, lifestyle segmentation programs, and the United States
Government Consumer Expenditure Survey. The combined results of your
consumer research activities will form a substantial, fact-based foundation
for all future marketing decisions.
- Place your customers on a map.
With desktop mapping you can easily geocode your customers, in other words,
place them on maps. As a result, you will have the specific geodemographic
information you need to, for example, purchase targeted zip-plus-four
mailing lists and to find relationships among your consumers that you may
not have otherwise been able to see, such as buying patterns and
overlapping markets. In particular, using the clustering concept (which is
based on the idea that birds of a feather flock together), you'll be able
to infer more detailed customer profiles.
- Apply the results to your marketing activities.
With your GIS-based maps in hand, you can now put your data to work. For
example, a restaurant may see that it's surrounded by middle-age consumers
who are health-oriented. By adding more health food items on its menu, it
can increase its overall total sales. It can even position itself as the
"healthy" neighborhood alternative to better attract this clientele. On a
promotional level, you can create several small, but highly targeted direct
mail pieces designed to appeal to your consumers who live in the specific
zip-plus-four areas you've targeted. Or you can determine that a new line
of high-margin products, such as ethnic foods or gardening supplies, will
appeal to your targeted consumers.
GIS-Based Micromarketing Results
GIS-based micromarketing activities will allow you to make the most
accurate marketing decisions possible. The results could put you in a while
new category of success.
- Reduced marketing expenditures.
With GIS-based micromarketing, you'll be able to create fewer ads, but to a
better targeted audience because you can talk to specific consumers versus
canvassing an entire area. As a result, you'll decrease your total cost of
selling products to your customers, because you're not wasting the dollars
or the time trying to market to people who will not be interested in them.
For example, fine-tuned promotional activities let you avoid blindly
sending your direct mail promotions to a general mailing list that may
include part of your target audience, but also thousands of people who do
not fit your business's demographic profile. Considering that each piece of
direct mail can cost from $2 to $5, the cost savings resulting from
applying true micromarketing with desktop mapping to direct mail alone can
be tremendous.
- Increased promotional results.
When retailers target their products to specific audiences, they increase
the chance that this group will be interested in the promotion and the
chance that they'll respond to it, thereby, retailers dramatically increase
the probability of a successful promotional campaign.
- Expanded customer loyalty.
When you market specifically to consumers based on their exact needs and
desires, you dramatically increase the chance that those consumers will
become long-term customers, who are loyal to your stores. Customer loyalty
is a highly prized commodity in today's increasingly competitive
marketplace, where mobile consumers will suddenly shift their shopping
patterns based on any one or more in a wide variety of factors.
- Increased new customer acquisitions.
Because you know who your best customers are from a demographic,
psychographic, and geographic standpoint through GIS-based micromarketing
activities, you can easily find more consumers in your markets who fit
their profiles and then market directly to them. The possibility of
attracting a large number of these like-minded consumers can be high for
retailers with well-crafted promotions.
- Increased sales.
By reducing marketing expenses, increasing promotional results, expanding
customer loyalty, and acquire new customers, the bottom line results will
be every retailers ultimate goal -- increased sales.
Conclusion
Any business that sells products and services to consumers is fully aware
of the many challenges of maintaining a viable business, and today these
businesses are demanding power tools to deal with the intense market
conditions. The bottom line is keeping current customers and attracting new
consumers in the face of ever-increasing competition. One of the keys to
maximizing gains and minimizing losses is to understand exactly who your
customers are as precisely as possible. Armed with this information,
businesses can appropriately market to their exact customers and potential
customers. In the past several years, desktop mapping has emerged as a
powerful capability to help retailers compete in the fiercely competitive
retail playing field. Virtually every market in the United States offers
unlimited marketing opportunities to the location-oriented business who
assemble the resources necessary to tap into them. In whatever ways you
determine that micromarketing with GIS mapping tools can positively impact
your bottom line, there's no time like the present to get started. Today's
intense competition for customers is only going to become more fierce. Many
cutting-edge businesses have already begun employing desktop mapping to
stake out the competitive edge in their markets, and they are enjoying
their vastly reduced marketing expenses and dramatically increased
marketing effectiveness. With the accessibility and affordability of
desktop mapping today, nearly every business should explore how and in what
ways this powerful marketing tool can impact their businesses -- and help
them maximize every opportunity to target the right products to the right
consumers.
About Synergos Technologies, Inc.
Synergos Technology, Inc. (STI) is a desktop mapping consultant, developer, and
service provider,
with headquarters in Austin, Texas. STI's product line
includes several innovative desktop mapping tools created by the company's
interface designers and developers. STI's team helps businesses bring the
power of GIS in-house, where they can make fast and accurate market
decisions from their desktops. The company serves clients in a broad range
of industries including restaurant, grocery, mass merchandising, and real
estate. More information on the company, its products, and the desktop
mapping industry is available at www.synergos-tech.com.
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