Mar 10, 2016 | Customer Loyalty Research

Why Zip Code Marketing Research is Making Money for Small Businesses

by Margaret Link — Marketing at Thanx

Zip Code Marketing Research — Zip Codes reveal surprising insights about your customers. Here's how businesses are using this data to make big decisions.

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Zip Code Marketing Research is hugely lucrative, not hard to do... yet puzzlingly underutilized. Businesses looking to understand how their customers vary across different locations can use this valuable data for anything from planning targeted marketing campaigns to buying real estate for a new storefront. While it might seem obvious that more affluent zip codes would spend more money, the results are actually way more interesting (and sometimes shocking). Like everything in marketing, personalization matters (and data is your friend). 

 

Zip Code Marketing Research in Action

Businesses can't afford to miss out on customer data, and zip code data is no exception. Access to this type of insight opens the door for a creative marketer: location-dependent campaigns, better customer information... the opportunities are endless. When you start crunching the numbers, you'll find that the differences between customers at different restaurant locations is alarmingly high, and maybe not what you'd expect. 

Now, the fun part: we dug into zip code data from four restaurants across the country, and here's what we discovered: 

1. For some locations, differences between zip codes really matters- there are some huge differences between average spend by zip code at certain locations. At one of our merchant locations, we observed a 558% difference between their best performing zip code and their worst performing zip code.  Even though this big number was a bit of an outlier, the average zip code range was about 250% — very significant no matter how you slice it.

2. That difference becomes less pronounced at other locations — sometimes, there's not a huge difference in between zip codes. What this means is that this isn't a predicable phenomenon — it's a data pattern that you can decipher only when you have access to the complete  customer data profile. Zip code effects aren't something you can generalize broadly — each one of your stores will experience it differently. Storefronts within the same brand family would often have one store with a huge discrepancy between best and worst zip codes, and then a storefront down the street would see much less variation. This definitely needs to be evaluated on a case-by-case basis.

2. Zip code data doesn't behave like it "should". Rich neighborhoods, poor neighborhoods — the relationship between median income and spend isn't clear. It's unwise to make assumptions about marketing to certain zip codes before you understanding their spending patterns at your business. 

 

Now that you're aware of the insights you can gain from tapping into this incredible source of data, let's understand exactly how to unlock the achievement of making this data work for your business.

I have the data... now what?

You've pulled the data and you're seeing huge trends among shoppers (and if you're anything like our customers, you'll be really surprised by what the data reveal). Now, go from having exciting data to making smart marketing decisions from it.

Here are the four things you must do with your zip code data as soon as you have it:

1. See where your fans are

You might find that your marketing is resonating with people in a particular neighborhood. Maybe you have more promoters who live there (and you know how much promoters can contribute to business because you're a Thanx blog reader). Perhaps the demographic of that particular zip code just loves whatever you're offering (learn more about the demographic tapestry of neighbohoods from this amazing interactive app from ESRI). 

Once you have all this information at your fingertips, you can start zeroing in on where the magic is happening. Are your urban zip codes outperforming suburban ones? You might learn something about how to speak to your biggest fans based on where you're a big hit. 

2. Even the playing field

Bring parity to underperforming zip codes. Adjust your marketing — maybe you're not speaking to them in a way that resonates. Encourage overspend by sending specific offers to people in worse-performing zip codes. Get those customers them to tell their friends about your restaurant by soliciting feedback and referrals. Participate in their community and make a concerted effort to try something new for marketing in lower-spend zip codes. You might even use a targeted winback campaign, if you're feeling ambitious.

3. Know where to grow

Are you crushing it in a certain location in particular? Looking to open up a new location (as many Thanx merchants are)? Get smart about your growth, and make sure that your expansion is based in good data. Zip code data can guide you into making intelligent real estate decisions by entering markets that are similar to zip codes who seem to love what you're offering. I'm sure Target wishes they had this information before they tried — and failed — to expand their business into Canada.

Here's how to claim zip code data for your business:

There are a few ways to go about this, depending on what information you require of your customers. If you have an e-mail program, you might already ask for zip code information during the sign-up process (if not, I suggest you A/B test adding zip code as a signup field so that you can have this data). The problem is, with self-stated sign up information, your accuracy goes down (when people bother to give that information anyways). If you use a card-linked rewards program, you can grab the information from transactional data. If you're a Thanx merchant, we can help you do this. Ultimately, inviting customers to sign up for a rewards program is the best way to obtain this data- whether you make them enter this information manually, or if it's generated effortlessly through credit card transacitonal data.

Loyalty programs give you valuable customer data while also delighting your customers — this is a total win-win. If you're interested in learning more about how customer loyalty programs can generate profitable customer insights, give us a call! We'd love to nerd out about customer data with you.

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