Geocoding Challenges: Why Accuracy Matters

April 21, 2004

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The importance of geocoding accuracy stems from the need of every user, whether business or individual, to correctly identify a location that is important to a business process.Whether the location represents a store, a business or the location of a friend they are going to visit, accuracy is of the utmost importance in each implementation.

Since the introduction of geocoding into everyday business decisions, the requirement for enhanced accuracy has continued to increase.In the not so distant past most companies were ecstatic to have any geographic representation of a customer or store address.Even if the geocode was only accurate to the ZIP Code level, that was still the most granular intelligence they had ever utilized.The ability to know the general vicinity of the customer-enabled businesses to position them on a map, usually represented by a "ballpark" version of street networks, and analyze them to better understand their needs and services.

Today, the requirements are significantly more demanding for a multitude of reasons - among them financial, security and legal.As businesses became aware of geocoding, they began to explore all possible uses within their area of expertise and responsibility. GIS departments became common in large- and medium-sized companies, driven by business users creating requirements for improved geocoding accuracy to support the business needs defined by both internal constituents - senior management, legal and marketing - as well as external constituents such as customers and partners.

In today's business environment, a "general" geocode is no longer sufficient; the "most accurate" geocode is a requirement for nearly all applications.The level of accuracy must be defined in meters and feet because the inaccurate placement, and the subsequent incorrect tax or insurance rates assigned to that location, will cost utility and insurance companies millions every year in governmental penalties and risk exposure.Not to mention a dissatisfied customer base.

The lost opportunity or cost of manual qualification for a potential customer wanting DSL, or the penalty for incorrectly assessing tax requirements for a telephone customer, are recognized and legitimate expenses that companies will no longer tolerate. As we have seen in recent months, companies that deliver services tied to a customer's location pay heavily for incorrectly assigning tax rates. The taxing authorities take it very seriously, and now many customers expect nothing less than correct tax assessments.These customers are more than willing to go public, creating a public relations nightmare for the taxing company.

Likewise, the insurance industry stands to lose millions in a catastrophic event if their customers are not accurately positioned, due to the fact that premiums are set based on the actual risks associated with that location.Being able to quickly and accurately assess corporate risk is vitally important when and if such an event occurs.Another concern is tied to corporate viability.Heading off any reactions from Wall Street is also tremendously important to the success and financial well being of every insurance company.

A major challenge for providers is that a large percentage of locations in the U.S.are not critically located on or near borders of tax or risk areas.They are either comfortably inside or outside of the geographic area.In most situations these locations do not require highly accurate positioning.The critical locations are those that reside on or near borders between differing risk areas.These require not only accurate geo-positioning, but also effective analysis tools to enable risk managers to know exactly where each one is located relative to these areas.

When discussing geocoding you have to consider differing types of accuracy.With the advent of readily available GPS devices you can easily determine exactly where you are on planet Earth, within a few feet.This is positional accuracy and is for all practical purposes irrelevant for most business geographics applications.

On the other hand, relative accuracy is extremely important in all business applications.Most companies utilize one or more of the top four geography providers to produce street maps and polygon, line or point data relative to their business needs. The importance of aligning the geocoded point with their spatial data makes relative accuracy vital to the implementation.Positioning the geocode correctly, relative to the associated data being used to analyze the location for risk or assessment, ensures its accuracy for the implementation.Utilizing geocoding data generated from the same geographic source as the street network, polygon, point and boundary data will ensure the relative accuracy of the geocode and satisfy the requirements of the decisions made in today's geographically savvy business model.

Another consideration of accuracy is the ability to transform an address into a geocode.The benefits of a larger world from which to choose will make the difference in the geocode accuracy.Most often the input to a geocoding process is a customer's address.That address is almost always synonymous with the address assigned to their home or business by the United States Postal Service (USPS).The USPS neither has nor cares about the geo-positioning of the address to which it delivers mail.The closest thing to concerns about location for the USPS is knowing where and in which delivery route the address is located.

To make it even more difficult to translate an input address into an accurate geocode, the USPS database supports delivery to consolidated locations such as General Delivery and PO Boxes.In such cases, the actual physical address of the house or business is not even in its database.Gated communities are a perfect example of these 'missing' addresses.Deliveries are not allowed in most gated communities; therefore the mail is delivered to a central location.The streets and houses all exist in these communities but the USPS does not have them in its database.Obviously a better method of geocoding an address would be to draw upon a universe of data that combined the USPS data with that of a street network provider that has all of these non-USPS streets and addresses in their database.

On the other side of the coin, the geographic street network providers have a daunting task to identify, digitize and verify every street and address range nationwide.While all of them provide very thorough databases of street geography, none has 100% coverage or 100% accuracy.If for no other reason, houses and business are being built at a rate that surpasses the update frequency of any provider.

Because of the lack of a relationship between the initial input address and the desired geocode, several transitions have to take place before the geocode can be assigned. The most important is identifying the USPS address that is associated with the geographic street range that references the geocode point.The most accurate and efficient way to make the transition is to relate the USPS addressing to the geographic street network data allowing the best of both worlds.Relating these disparate sources of data together provides the benefits of the USPS addressing and the geographic positioning of the street network represented as one data source.The relationship between input address and output geocode are then easily and accurately identified.

While accuracy really matters, it is important to understand what 'accuracy' really means and how it applies to the needs of your business.Assigning a geocode that is accurate relative to the spatial analysis being performed in order to resolve a business question is a complex undertaking.Understanding how accuracy fits into your operational environment is critical to the success of all location-based business decisions.


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