Why Geography Matters in Marketing Strategy - The Spatial Dimension to Customer Communications and Marketing

June 11, 2003

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In my previous contribution to Directions on Data, I focused on why I believe geographic data is still relevant in the Customer Relationship Management (CRM) age today.This article will expand upon that argument and putting forward some ideas on the importance and utility of a spatial or geographic dimension to your marketing activity. Specifically, the article will discuss why geography has an important role to play in providing intelligence to a series of marketing and business decisions.

The aim of this article is clear; to provide some simple reasons as to why physical location is not only relevant, but instrumental in improving performance of marketing communications.

I am often reminded of a conversation I had many years ago with a nameless catalog manager for a major home shopping catalog back in the UK.It was in the mid-to-later 1990's and the internet boom was just beginning.I spent some time explaining how useful geo-demographic segmentation would be in predicting the likelihood of their customers to be shopping online in the future, and as I got towards the end of my presentation he stopped me and asked; 'What has geography got to do with the internet?'.This question surprised me on quite a few levels, but what sticks with me today is that it showed that there was a misunderstanding of the role and relevance of location in helping refine and improve the marketing communications of organizations.

Since that time, I have seen that kind of compartmental thinking prevalent in a number of situations.It's almost as if many business practitioners, including the direct marketers, the internet marketers and so forth do not see the part physical geographical location has to play in their business strategy.However, before I continue, I have seen many great utilizations of spatial information, so it's not all bad, but I do believe that through the understanding of the utility of location and the application of a few simple concepts we could see noticeable improvement in performance across a wide variety of scenarios.

What I want to do in this article is outline some reasons why spatial information and location can be highly useful in a wide number of situations. The examples I have used primarily come from the retail or business-to-consumer world, but the concepts are equally applicable to other situations.

4 Reasons why location matters in your strategy;

1.As a predictor of characteristics

The last 20 years have clearly shown that the location of an individual, a family or even a business play an important role in the prediction of the characteristics of that individual.From analyzing information from complied household databases or from the Census Bureau statistics, a detailed picture of the demographic characteristics of an area or location can be developed.This area profile has been proved to be very accurate in predicting the characteristics of the make-up of those areas.The key point to note is that much of this area demographic profile is built on the basis of where those individuals or families are - so its through knowing where they are we begin to know something of WHO they are.

In the analysis and understanding of customer characteristics, and behavior as we shall see in a moment, determining the location can be highly useful in simply knowing more about the customer than you did previously.This knowledge can then be applied in a manner of ways to improve the vendor/customer touch point and increase the performance of the transaction to mutual benefit.

2.Determining and predicting past, current and future behavior

As a development from the prediction of neighborhood characteristics, analytics have also been used to predict the potential or future behavior of an area.Using the methodologies developed to predict character of an area, behavioral predictions can be made to peer into the future likelihood of an area to behave in a certain way.Central to this calculation is the location in question and the characteristics of this location.

Behavioral predictions and understanding of character of locations have been extensively utilized by location specialists for store placement and real estate development.Point 3 below is very closely linked to this concept, but due to the nature of the market and world in which we live in today it warranted a more detailed mention.

3.The Timing and mechanics of action - extension of behavior prediction

Location can also play an important role in the timing and mechanics of the purchase decision, for example, the weather patterns dictating at what point purchase becomes likely.In addition to this, there are the mechanics of the purchase that can be influenced by location; highly urbanized areas see high levels of delivery services used.

As an extension of timing the purchase the actual products purchased is closely related to location, weather patterns, proximity to store, product range carried by location.Different physical locations need to stock a different product range to ensure appropriateness to the local conditions and local population.

In the multi-channel world in which we live the understanding of a customer's preference and likelihood to respond via a specific channel, like telephone or mail, is crucial.Location plays an important role in not only predicting behavior, as I mentioned above, but in determining the most practical means of utilizing channels to suit a consumers needs based on where they live. A very basic example is that rural customers are less likely to have access to a wide range of retail locations so they might be more likely to utilize mail or telephone services.Urban customers may have limited ability to bring large items home to their city apartment so may use combined internet/delivery services and so on.

4.Extrapolation of the known to the unknown

The final justification of the relevance of location is possibly the most crucial.Geographic location is the key factor in being able to extrapolate known information onto persons, households or areas that up to that point had little or no information.Through the extrapolation of information we are able to know, or more accurately infer, intelligence that can be crucial to business growth and organizational performance.It is through this extrapolation of information that location becomes one of the most valuable, yet under utilized, tools available to business and organizations.

This is only a very cursory look through why location is relevant in the marketing mix.It is necessary that once an organization understands the value in location that it takes the actions to ensure that the necessary pieces of locational information and intelligence are applied at the right points within the organization to ensure benefit.

The key next step is to determine some practical means of implementing location in your marketing strategy and assessing the benefits of that strategy to the organization, and that is something I shall look at in a future contribution to DirectionsMag.com.


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