Customer profiling using GIS.

Badea, Ruxandra ; Bagu, Constantin ; Badea, Alexandru 等

1. INTRODUCTION

Large organizations allocate considerable resources for focus-groups, for market-polls and other instruments used to determine the consumer's profile and its behavior. But, it's obvious that, besides the demographic information regarding: age, sex, income, family situation, etc, managers need also the geographic information to control the expansion or to optimize presence on the market. GIS has the capacity to incorporate large databases with useful information that can be further used in customer profiling (Maguire et al, 2008). In marketing research GIS applications help in knowing where clients live, in determining customer profiles based on location and in finding out how to reach the customers through promotional activities (Zeiller, 1999).

2. BACKGROUND

In Romania GIS is used in different industries but in the business sector very few companies take it into consideration. In most of advanced western European countries and the USA they are a common practice, In Romania a basis should be set. The goal is to create a synergy between the structured GIS techniques and the present Romanian economic context by analyzing the ways to create specialized data sets to be used in economic analysis by all companies (Badea et al, 2008).

3. CASE STUDY

Coral is fictional name for an electronics store situated in a Central area of Bucharest. For this store analysis were made, in order to identify customer profiles. These profiles are meant to be targeted through direct marketing campaigns.

Due to the adopted price policy the store registered high incomes, its prices being some of the smallest on the market. In these conditions, in order to raise accessibility, an e-commerce alternative was introduced through the web site. This paid results, shown in a 20% increase in the sales during the first month from launching. The subscribers of this site are the store's clients and also potential clients who subscribed to the store's electronic informative newsletter.

A marketing program through data bases was introduced for increasing sales and for expanding the clients' data base. The top management didn't want to invest a lot in this campaign so only some prospects from the database were selected for the campaign. Subscribers to the informative newsletter are considered the ideal target for these efforts. The subscribers visit the store's site and receive information on the new offerings. So, the list of the subscribers contains the users which are interested in the company's products but who haven't ordered a product until now. A direct mailing campaign would encourage these users to make a first acquisition. On our sample data a mailing test was made inserting a condition of a monthly income over a certain level, considering that this segment would more likely make an acquisition than the segments with a lower monthly income. In this way a direct mailing can be made upon a sample of 6374 subscribers which appear as selected both on the map and on the table. Their addresses can be easy used for the direct mailing campaign by using the internet. Some of them are identified only after their postal code if other coordinates are not available (Fig 1).

To take the analysis even further, demographic profiles of the informative flyer's subscribers were created to be used for aiming selected clients through the direct mailing campaign. The company didn't have too much demographical information about its subscribers as they were only required to fill in data regarding address when they subscribed. Three objectives were set:

* To use a geo demographical model in order to estimate the socio economical profile and the demographical profile of the subscribers based on the postal code.

* To use the resulting profile in order to select geographical areas (in this case the postal codes) with similar characteristics.

* To head the mailing campaign directly towards those zones. A geo demographical approach assigns demographical values to the registrations about the households (clients, potential clients or subscribers) based on the location. In this case the subscribers will be assigned values according to the postal code they live at.

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Geo demographical segmentation is a method to determine socio-economical and demographical characteristics of people based on the place they live in. The technique relies on the premises that people have a tendency to integrate in groups with similar characteristics from the socio-economical, demographic and life style point of view (Miller, 2007). Analysts use the demographic characteristics of the majority, census data or the postal code in which a household is found and estimate its demographical characteristics (Miller, 2007).

Subscribers' profiles were generated using demographic data for the area covered by Coral store. Finally the resulting profile helps the company to aim, selectively, postal codes for the direct mailing campaign.

The segmentation process is simple using GIS. On a color scale from dark green to light green, areas with large density, medium density and small density of people can be seen. Demographic data are comprised in many tables which are added to the database and can be visualized on the map. By examining the table which comprises the subscribers we find out the total number of subscribers and the number of postal codes where they live. The first step in strategic segmentation based on the postal code is defining the corresponding segments and assigning them to the correct postal codes. We use the number of subscribers to divide the postal codes into three segments: High Density, Low Density and No subscribers (Fig. 2). In ArcMap we select those codes for every segment, with a series of query operations. The development of the subscribers' profiles implies exploration of the client segments characteristics and their comparison in order to identify the elements which difference the segments (Miller, 2007). We have at our disposal both the data concerning the subscribers and the demographic data. With this data we can build the profile of each segment (Fig.3). The profile contains data about the subscriber density, the total number of inhabitant per postal code, average monthly income, and median age.

With this information we can make comparisons and build complete profiles. The next logical step is to identify the right profile and aim it through promotional campaigns.

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4. LIMITS OF GEODEMOGRAPHICAL SEGMENTATION

This method can have some limitations too. Assigning known values to postal codes can prove to be wrong as it is based in average values. Computing statistics regarding the age or the dimension of the household can generate erroneous results. These difficulties impose the analysts to interpret results as being approximate and not necessary exact. Accuracy of the geo demographical segmentation grows, as the studied segment is smaller. The estimation's accuracy within a sample of 500 households will be bigger than within a sample of 1400 or within a postal code with 14000 households (Miller, 2007).

5. CONCLUSIONS

Marketing research owns a wide range of investigation possibilities which help the firms to better know their clients and to compile a profile of the ideal consumer. In addition to those, GIS can definitely bring a plus of knowledge (Zeiller, 1999). Using internal data and census data in a GIS system can offer an important time and cost advantages which could be exploited by the marketing and sales analysts. For example demographical information about the consumers can be used in order to generate consumers' profiles. Even though clients' addresses are not available, the postal code may be used, in the same purpose, as in the analyzed case.

Consumers' profiles refer to a data collection which shows the socio-economical and demographical characteristics of a group of people. Marketing analysts can create profiles for present clients, potential clients or for general segments which can be used in tests in order to support the marketing and sales departments (Donaldson, 2005). Any element of market strategy and by default of sales strategy has to take into consideration the clients' profile. The marketing department creates products which refer to specific groups and sends promotional messages which appeal to customer's values and their way of living. All these things reflect in the sales of that particular company. Also, the decision regarding the opening of a new store and forecasting the sales are made based on the social-economical, demographic characteristics and the input behavior of that region. The prices are also settled taking into consideration the aspects previously mentioned. Knowing the characteristics of the target clients is the reference point in marketing analysis the starting point in establishing the objectives for the sales department.

6. REFFERENCES

Badea, R; Voicu, V., Bagu, C., Lungu, A. & Moise, C., (2008) Introducing GIS In Marketing Analysis And Sales Management, Annals of DAAAM for 2008 & Proceedings Of The 19th International DAAAM Symposium "Intelligent Manufacturing & Automation: Focus On Next Generation Of Intelligent Systems And Solutions", ISBN 978-3-901509-68-1, ISSN 1726-9679, pp 026, Editor B. Katalinic, Trnava, Slovakia

Donaldson, B. (2005). Sales Management: Theory and Practice 3rd edition, Codecs Publishing House, ISBN CDCS-12, Bucharest, Romania

Maguire, D., Kouyoumjian, V. & Smith, R., (2008) The Business Benefits of GIS, ISBN 978-1-58948-200-5, Published by ESRI Press, USA

Miller, Fred L., (2007) GIS Tutorial for Marketing, ISBN 978-1-58948-079-7, Published by ESRI Press, USA Zeiller, M., (1999), Modeling our world, The ESRI Guide to Geodatabase design, ESRI Press, ISBN 1-879102-62-5, California, USA