Zip Code Forensics: The Southwest United States

If you're a multichannel marketer based in New England, you probably don't spend a lot of time thinking about customer behavior in Utah, Colorado, New Mexico, or Arizona.

Hillstrom's Zip Code Forensics (free to marketers who contribute anonymous zip code data, $5,000 for all other marketers --- compare to Claritas Prizm NE here) has a favorable view of the Southwest United States.

Multichannel evangelists suggest that direct marketing works well among customers who have access to retail.

Zip Models suggest otherwise. Notice that the bright orange (traditional direct marketing / catalog) and bright green (online marketing / e-commerce) areas are largely outside of urban areas, away from concentrated retail strongholds.

Honestly, folks, we've been led astray by mainstream multichannel "best practices" thinking. We survey a thousand customers who buy across channels, those customers tell us that they love multiple channels, then we tell retailers we should pursue these customers via $379 research reports and vendor white papers. Who benefits from this form of marketing? You know the answer.


We have an opportunity to think more about what a customer "needs", thinking less about what we want to "give" to a customer. What does the customer living fifty minutes outside of Flagstaff "need"? Does our industry explore this angle? Have you read a research report on the needs of the rural mountain customer in the Southwest United States?

Unlikely.

Final Pricing Strategy For Hillstrom's Zip Code Forensics

I received your feedback about Hillstrom's Zip Code Forensics, arriving at a final pricing strategy for the cutting-edge direct marketing zip code model segmentation strategy.

Beta Clients: Free, plus your own customized zip marketing model. Not too bad, eh?

Hillstrom's Zip Code Forensics: Free to those who contribute anonymous sales by zip code. Did you read that correctly? Yes you did! Free! FREE!

If you do not wish to contribute anonymous sales by zip code, the cost is $5,000 per year, a price that is dramatically cheaper than what you'll pay for PRIZM clusters/segments available from Claritas!

Did I mention that if you elect to contribute anonymous sales data by channel by zip code, you receive the product for free? Show me anybody else in the industry who is trying to help you through a challenging economic environment by offering something of significant value ... for free?

Hillstrom's Zip Code Forensics offer six segments that span all zip codes in the United States.

• Catalog Crazies: Zip Codes that have customers who crave catalog marketing and spend twice as much as the average zip code.

• Online Bliss: These folks are all about e-commerce --- spending nearly twice as much as the average zip code.

• Catalog Fans: Average performing zip codes with customers who like catalog marketing.

• Online Spend: Average performing zip codes comprised of consumers who prefer e-commerce.

• Catalog Preference: Urban and rural zip codes with customers who only spend 1/3 of the national average, skewing toward catalog marketing.

• Online Preference: Urban and rural zip codes with customers who only spend 1/3 of the national average, skewing toward e-commerce.

Based on results obtained from folks participating in the beta test of the product, e-mail marketers, direct marketers, and catalog marketers may experience profit increases when applying Hillstrom's Zip Code Forensics to lapsed customers (those who haven't purchased in more than a year) as well as prospect lists.

The chart at the end of this post illustrates the average improvement in performance across lapsed customers, if customers in the top two segments (catalog crazies and online bliss) are targeted.

If you are interested in participating, please contact me for instructions on obtaining the free version, or to purchase the $5,000 version without providing your anonymous sales totals by zip code by channel.

Zip Code Marketing: Claritas PRIZM and Hillstrom's Zip Code Forensics

Some of you are wondering about the differences between Claritas PRIZM Clusters/Segments and Hillstrom's Zip Code Forensics. Here's a quick comparison of the differences.

Claritas PRIZM Clusters/Segments: Each zip code (or zip+4) is categorized into one of more than sixty different lifestyle segments. Each segment is given a clever name, describing the type of person who lives in that segment. Demographic studies, surveys, and data are compiled to create a profile of the type of person who lives in that segment. The segments are well defined, and help the user understand "who" lives in a particular area --- you hear the segment name "Shotguns And Pickups", and you have an immediate image of the demographic of that area. This segmentation scheme can be used to improve direct marketing activities, as each brand is likely to align with customers who spend a lot, and live in specific segments. The cost of using PRIZM clusters is reasonably expensive, though marketers can gain an acceptable ROI.

Hillstrom's Zip Code Forensics: Each zip code (not at a zip+4 level) is categorized into one of six different performance and channel preference segments, similar to traditional zip code models used in zip code marketing programs.

• Catalog Crazies: Highly productive zip codes that prefer traditional direct marketing.
• Online Bliss: Highly productive zip codes that prefer e-commerce and online community.
• Catalog Fans: Average zip codes with a traditional direct marketing preference.
• Online Spend: Average zip codes that lean toward e-commerce.
• Catalog Preference: Zip codes with customers who do not spend much money on direct marketing, but do prefer traditional direct marketing (i.e. catalogs).
• Online Preference: Zip codes with customers who do not spend much money on direct marketing, skewing toward e-commerce if they buy something.

The direct marketer will use Hillstrom's Zip Code Forensics to target geographies that have higher-spending customers --- especially when the direct marketer is looking at marketing activities that perform at or below break-even levels.

The direct marketer can expect to reduce marketing expense by about seventy percent by targeting only Catalog Crazies and Online Bliss zip codes --- while improving sales performance by about ten percent, yielding a significant increase in profitability.

Hillstrom's Zip Code Forensics is based on anonymous sales data by channel, at a zip code level, from leading catalog brands across the United States. Mathematical Algorithms and Census Data combine to yield the six segments mentioned earlier in this post.

Hillstrom's Zip Code Forensics is FREE (yes, I said FREE!) to customers who contribute anonymous, annual sales data by channel by zip code, with free quarterly updates as catalogers continue to add their sales data to the algorithm. For marketers using the segmentation scheme across at least 200,000 in annual marginal catalog circulation, it is expected that a positive ROI will be achieved, based on beta tests conducted earlier in 2008.

Folks who do not contribute anonymous, annual sales data by channel by zip code will be charged a fee of $5,000 for an annual license.

Contact me (kevinh@minethatdata.com) for details or to participate.