Two of the most effective ways to increase your response to your marketing efforts is knowing who and where to target. In my opinion, too many businesses focus too much of their time on the creative and the offer, and not enough time on who and where to target. Yes, the creative and the offer are important factors in a successful campaign, however, if they’re not reaching the right audience, then your campaign is going to suffer. In my previous post, we discussed how MAR (MarketAreaReports.com) figures out where to target for our direct mail lists, but we didn’t address knowing the market as a whole. At MAR, we believe that in order to make fact-based marketing decisions, you must first know your market area.
We use the term “Market Area” to mean the geographic area that your organization conducts business, based on where your clients live. Many small to medium-sized businesses can benefit from knowing who their customers are from a demographic standpoint, and where their customers are coming from geographically. By creating a demographic and geographic picture of what your customers look like as the first step to your marketing plans, these insights will help to allow you to decide which prospects to go after and which to avoid.
At MAR, we begin all of our marketing area reporting by plotting your customers on a map. After we have done this, we deploy our proprietary models to draw a theoretical boundary around the densest areas of where your clients live. Why do this? Because research shows that you are 90% more likely to attract a customer from neighborhoods or parts of town that you’re doing better in and that you’re less likely to attract a new customer from an area that you’re performing poorly in. Why is this? This is the million dollar question to which few have an answer. At MAR, we believe that you attract customers from the market area that we define because of a number of factors that you can probably answer better than we can. Example – your pricing might be better than a close competitor; your business may be easier to get to; your product offering fits well with the demographics of some neighborhoods nearby and not others. Remember this, because I’m going to say it a lot – “people live around other people that are like themselves” – think Little Italy and Chinatown. Over 80% of the people living in Manhattan’s Chinatown are of Chinese origin.
So those are obvious examples, but let’s think less obvious. Yes, right in the backyard of the community you do business in, you’re going to find neighborhoods with clear demographic distinctions – lower income families tend to live in lower cost houses; young families, usually live in starter communities with other young people and families; Seniors tend to live around other seniors. And your business operates the same way.
I exercise regularly at a local YMCA and it’s amazing to me how many people I see there who seem to fit a similar profile to myself. Yes, there are other cross-sections of people that I’m sure I can’t be “bucketed” with, however, if we look at the demographics of the members of the YMCA I visit as a whole, I’m sure we’d find many similarities around common demographics like – household income, marital status, presence of children, ethnic profile, home-ownership and others.
So if we do business in an area that has neighborhoods with clear demographic distinctions and our business is made up of a cross-section of those neighborhoods that we can clearly define, we begin to see why understanding your market area becomes so valuable. To take the point further, if our sample YMCA has 4,000 active members and the market area that we define from the membership data tells us that we have 80,000 households living in it, then that represents about a 5% penetration of the households in the market area. That means, 95% of households in the market area are not members. As a medium-sized business with a reasonable marketing budget, we don’t have the means to send a membership invitation to the other 76,000 households in the area, so we have to be selective about who we try to target. So why not select the people who look like YMCA members in both profile and neighborhood. Now that we understand the market, being selective about our prospect list is much easier.
What else can we benefit from by knowing our market area? Lots of things. We have a better idea of which publications to advertise in based on distribution; billboard location selection; which radio stations or television stations would be a better fit to advertise with, based on the demographics the channels hit; for non-profits, showing a service area for reporting community give-back to organizations that donate money to your cause; new site selection; and many others.