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Analyses - May 12, 2006

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May 2006

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Customer segments,

Make the most of market segmentation with geomarketing

As marketing experts promote the benefits of segmentation and niche marketing, the tourism sector would do well to investigate geomarketing. This new approach classifies and geographically pinpoints population groups to both identify potential markets and determine the best ways to reach them.

There’s “geo-info”…

Although it is crucial for companies in the tourism industry to know their markets and clientele, many of them view compiling lists of client postal codes as an onerous task.`

It is, however, well worth the effort since grouping clients geographically enables companies to pinpoint their current markets. Knowing the regions and municipalities their clients come from enables marketing executives to more effectively target their advertising messages. While this time-honoured practice provides companies with information about their current client base, it does not allow them to identify and penetrate new markets – the primary basis for growth.

… and then there’s geomarketing!

Briefly, geomarketing is a marketing concept that uses geographical data to analyze consumer behaviour and expectations. The value-added factor derives from the application of location-based information, combined with segmentation.

By examining demographic, economic and sociological data through the filter of the environment in which client segments live, geomarketing enables tourism companies to make new connections between geography-based market data and client segmentation based on consumer habits.

Birds of a feather…

One of the principles of geomarketing is that people with similar tastes, values and behaviour will tend to congregate. It therefore follows that, once the company has compiled information on its customers’ lifestyle types, it can use geomarketing to identify the neighbourhoods where this type of clientele represents a significant percentage of the population.

Consumer segmentation systems by lifestyle types

The current popularity of this marketing approach has led a number of research firms to develop consumer segmentation systems by lifestyle types. Some of the more well-known ones are:

  • PRIZM CE from the Canadian company Environics Analytics, based on the PRIZM system developed by American company Claritas. This system classifies Canadians into one of 66 groups (www.environicsanalytics.ca);
  • PSYTE@ADVANTAGE, by Mapinfo Corporation and Compusearch Canada, divides the Canadian population into 65 different lifestyle segments (www.mapinfo.com);
  • FOCUS, by Quebec’s Optima Marketing, has a different approach; it divides the population along provincial and territorial lines, with 20 segments in Quebec alone (www.optimarketing.com).

Each of these companies has drawn on information from a variety of sources, such as Statistics Canada or the Print Measurement Bureau (PMB), in order to develop client segmentation systems that take into account demographic, economic and consumer data.

What can it do for you?

If your company or organization wants to try this approach, read on for a basic introduction to geomarketing:

Step 1: Find out where your clientele comes from:

  • Determine which segment(s) of your clientele you want to target by this approach (pleasure or business, summer or winter, etc.). This classification usually focuses on a number of factors: reason and frequency of visits, choice of activities, services used, average spending, etc.
  • Use postal codes to determine where the clients in each of the segments come from. Choose a research firm to create a map that represents this information visually.
  • Identify the areas (regions, cities or neighbourhoods) with a high concentration of your clients. Note absolute values as well as penetration rate (percentage of clients in terms of total population).
  • This will help you pinpoint your “success areas”, i.e., those areas where your company’s clientele comes from.

Step 2: Next, identify the client lifestyle types originating in each of these success areas:

  • Find a company that specializes in geomarketing and choose a segmentation system that identifies lifestyle types by residential area.
  • Have the geomarketing specialist help you analyze each of your chosen geographical areas and identify the lifestyle types that represent the highest percentage of area residents.
  • Compare these sociodemographic descriptions (habits, interests, consumer profile) with the characteristics displayed by your clients on-site, in order to identify the lifestyle type(s) that correspond to these clientele segments.
  • This will enable you to identify the lifestyle types of your clientele – or, at least, that segment of your clientele targetted by this process.

Step 3: Find new areas where clients from the same lifestyle segment are likely to live:

  • Have the geomarketing specialist help you draw up a list of places where much of the population has a lifestyle profile similar to the one displayed by your current clientele.
  • You will obtain a list of areas (regions, cities or neighbourhoods) in which the residents are more likely to be interested in your product or service since they have the same lifestyle profile as your current clientele.

If your company plans to follow up by implementing a marketing plan, geomarketing tools can also generate the kind of information that will maximize your campaign’s effectiveness. For example:

  • Identifying the postal codes of high-potential areas means you can pinpoint the best strategies to use for mass-mailings or newspaper inserts;
  • Combining a specific aspect of a consumer profile (such as interest in a certain activity) with a list of pre-selected postal codes enables you to purchase or rent address lists for a targetted mailing;
  • Identifying the reading habits (newspapers, magazines, etc.) of your selected profiles enables you to maximize the effectiveness of your media advertising budget;
  • Identifying purchasing habits not related to travel and tourism also paves the way for the creation of non-traditional business alliances and partnerships.

Make your client database work for you

The more varied and specific kinds of information you have about your clients, the more marketing opportunities you have at your disposal. Since it is increasingly becoming both impossible and unprofitable for companies to try and reach every customer out there, it is high time they focussed on currently available client data. Geomarketing could be an interesting way for some of these companies to put that data to use.

Sources:
– Institut d’analyse géographique (ISG). Qu’est ce que geomarketing?, [www.iag.asso.fr] www.iag.asso.fr/questions/geomarketing.htm.
– Latour, Philippe. Geomarketing, vite!… mais pas trop, [www.visionarymarketing.com] visionarymarketing.com/articles/geomarketing.html.
– Niot, Carine. Géomarketing: un nouvel outil au service des entreprises, Indexel [www.indexel.net], January 3, 2002. www.indexel.net/doc.jsp?id=1341.