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Zip Codes: a Key to Better Understanding and Targeting Your Customers

Zip Codes: a Key to Better Understanding and Targeting Your Customers

How well do you know your customers? Do you know what potential customers you’re missing out on? What if you could zero in on one key piece of information — a zip code — that would give you insight into the income and purchasing habits of nearly everyone?

For decades, zip codes were used by businesses primarily for direct mail pieces, most of which were drowned out by the tremendous amount of competing junk mail. Junk mail became the butt of marketing jokes, and many post offices created recycle bins right in their lobbies so people could chuck them without reading them. A zip code, however, can still be a powerful piece of information. Here’s how they can be used to improve marketing:

  1. Understand your customer demographics better. Knowing a customer’s zip code can help you understand buying behavior. The old adage “birds of a feather flock together” applies here. It is a common saying marketers often repeat that “you are where you live,” because consumer behavior can be segmented by zip code. People who live in the same area often have comparable incomes, family types (children or no children), rent or own their home, and share similar behavior patterns. Once you capture your potential customer’s zip code, you can use a Web site like city-data to learn more about the income levels and disposable income of certain zip codes. Nielsen’s PRIZM helps you understand the behaviors of your potential customers. You can also try Nielsen’s free tool ZIP Code lookup to understand the neighborhoods your customers generally come from and what segments of the population live there.
  2. Use your marketing dollars wisely. If you have reliable data on the zip codes of your potential customers, you can make your marketing more precise. Social media advertising is more accurate when you use zip codes to target the areas your customers are coming from, sparing you from paying to put your message in front of people who will never be near your store. Your direct mail campaigns can also be targeted at people who are more likely to become customers, and the most underused weapon in sales today, cold calling, can be made more effective for B2C retailers.
  3. Compare your existing customers to those passing by your store.
    You already have the data on your existing customers, and if you’re using a customer relationship management (CRM) solution, you can analyze their home zip codes and buying behaviors. Use a foot traffic tool to compare your customers to consumers who are passing by but not buying from you. Your marketing is obviously working for your current customers, and you have captured their zip codes already. Comparing your dominant customer zip code base to zip codes of passing consumers who you aren’t converting to customers can give you insight into how you might change your messaging to attract them. How do they differ from your strongest customer base? Do they live in areas where they are less or more likely to have children? Is the median income of their zip code drastically different than your existing customers?

Of course, data is no use if you don’t know what to do with it, and one thing that worries me is that big business does know what to do with it. Small business must catch up if it is to compete.

There is no doubt that the amount of data out there can be overwhelming, especially for smaller organizations that have more to do than there are hours in the day. The thing is, you don’t need to be overwhelmed by ALL of the data; you just need the key data to help you better understand and reach your customer with the right message.

Learn how to confront and solve seven of the most common problems all retailers face with this free eGuide from SAP. 

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