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If The Name Fits...

''New eco-topia''...''Old money flats''...''Kids & cul-de-sacs''...if these areas don't sound familiar, listen to what Michael J. Weiss has to say: Your customers live there.
March 1, 2000
URL: http://www.entrepreneur.com/article/19262

Marketing meeting: Take One. "We sell electronic organizers so we should market to anyone who needs organization or likes gadgets. Let's send a flyer to everyone in town." marketing meeting: Take Two. "We've cluster analyzed ZIP codes in a five-mile radius of our store. Area one and four are mostly seniors and blue-collar families, so we'll focus on areas two, three and five professional singles and white-collar middle class and affluent families who buy personal electronics. We'll target 30 blocks with three separate mailers." isn't it nice to know the person you're marketing to may actually want your product or service?

Geodemographics, also known as cluster or lifestyle marketing, jolts demographic marketing up a few notches. "Geodemographics is kind of a holistic approach to marketing," says Michael J. Weiss, author of The Clustered World: How We Live, What We Buy, and What it all Means About Who We Are (Little, Brown and Company). "It doesn't just consider demographic information like age, income and marital status. It also looks at the effect of whether people live in a city, a small town or a rural area. It looks at lifestage whether you're young and single, a couple with kids, or a retiree. And it also looks at other factors, specifically how you behave in the marketplace."

Weiss, a freelance writer by trade, initiated his study of geodemographics after interviewing Jonathan Robbin, founder of Claritas Inc. Robbin, a social scientist, merged census data, marketing surveys and ZIP codes into a lifestyle segmentation system called PRIZM (potential rating index for ZIP markets), the basis for cluster marketing in the United States. Intrigued by the geodemographics concept, Weiss took on the marketing-science beat.

We've asked Weiss to provide the lowdown on cluster marketing to help you make the most of your marketing efforts. So, who are the people in your neighborhood? Keep reading to find out.

LAURA TIFFANY:Why is cluster marketing more effective than other types of marketing?

MICHAEL J. WEISS: It's based on a powerful sociological phenomenon that birds of a feather flock together. That is, people who live on the same block tend to share similar backgrounds, values and consuming patterns. So by looking at what clusters are found in a given trading area, an entrepreneur can learn from surveys what the residents tend to eat, drink, drive and think about. And that information can help a person decide whether to open a store in a particular area, what products to stock, what music to use in a commercial and even what colors to use when they're designing a brochure.

It's much better than intuition, which is what a lot of small-business people use when they're trying to plan their marketing. And it's more powerful than demographics because it considers lifestage and urbanization.

TIFFANY:The number of PRIZM clusters increased 55 percent from the 1980s to the 1990s. Do you see a similar increase in the approaching decade?

WEISS: I really think we're becoming more and more diverse in this country. I think we'll see a continued population growth out in exurban America, so you're going to see more telecommuters countryside taking their city tastes with them. Also, the high cost of housing inside the nation's beltways is pushing younger families out to rural America.

Baby boomers are going to start entering their retirement years come 2005 and 2010. As a result, we'll see more active retirement communities in the Sunbelt. Boomers will also want to retire to college towns where they have great memories and are near a cultural center. There's also going to be a group of boomers who have no desire to leave their neighborhoods in cities and suburban areas.

Another big trend that's going to create more clusters is the increase in immigration. Half of all U.S population growth in the next 50 years will occur among immigrants coming to America. A lot of people don't realize Hispanics will be the largest minority group in this country, so we're going to see more second generation Hispanic Americans who are upper middle class and affluent with their own lifestyle types.

TIFFANY:In your book, you say there's a "thriving homogenized culture" exemplified by places like Wal-Mart and Home Depot. How does this mesh with the idea of clustering?

WEISS: Basically you have several different cultural phenomena taking place. America still has a very thriving homogenized culture, and you can see it in all the cookie-cutter malls you see off the interstate, and in the spread of McDonald's and Home Depot and Wal-Mart stores all around the country. But the reality is that a lot of these mass-appeal businesses really don't reach dozens of the clusters.

So you have these two tracks going on in American business--a booming homogenized mainstream business culture, as well as numerous specialty stores and boutiques, which are really catering to these cluster niches. I think the nation is big enough to support both kinds of business types.

TIFFANY:As the country becomes even more clustered, will the Wal-Marts and McDonald's still have mass appeal?

WEISS: I see two conflicting trends taking place. This whole notion of shopping as entertainment will still draw people to the big-box stores and megamalls in the same way that town centers drew people to be around their neighbors 100 years ago.

On the other hand, the blossoming of niche marketing, where you have dozens of cable television channels and Web sites that reflect very specific tastes and values, also reflects the fact that more and more Americans want to be targeted in the way they receive information. There's so much information clutter out there that people are going to want to have a filter. I see a real boom in Internet-based marketing, specialty-boutique marketing and very narrowly focused stores in the business community.

TIFFANY:Which clusters are the trendsetting ones?

WEISS: The rich and sort of funky clusters in the big cities are the real trendsetting cauldrons. These are areas where you have a lot of art galleries, specialty boutiques, museums, small theaters and colleges nearby, so you have a very receptive climate for new products, services and technology. These are areas where you have the early adopters, like the Urban Goldcoast, Bohemian Mix, and Money and Brains clusters, who are the first to glom on to different ideas and trends. The products and services then slowly filter out from the city centers to the hinterlands, down the socioeconomic ladder to smaller towns and more downscale areas where they're spread out to the entire populace.

TIFFANY:In your book, you give an example of a camera store that should market to Winner's Circle addresses (the second most affluent cluster, residing in new money suburbs), whereas the local hardware store might do better marketing to Kids & Cul-de-Sacs addresses. Isn't this limiting your possible sales? Shouldn't you explore all your options--not just the most likely?

WEISS: That's a very critical question because I really look at cluster-based marketing as a risk-lowering device. When you do a cluster analysis of a trading area, you are finding people who are most likely to be interested in your product or service. But then the question becomes, what happens after you've saturated that audience? How do you reach out to new kinds of consumers for your product? That has to be part of your cluster-based analysis.

The great thing about clusters is when you do a profile of your trading area, you can find that out of 62 clusters, there are 35 that are nowhere near this area. They're just not interested in a lawnmower in city neighborhoods or a swing set in a singles area. So the clusters can really help you focus in on the people who you want to go after, in addition to those who you really know are completely outside your area.

TIFFANY:If someone can't afford to hire a cluster marketing firm, how can they use this method themselves?

WEISS: First of all, companies like Claritas sell very basic trading-area profiles for only a few hundred dollars. But I believe in guerilla marketing, and you can do some of your own analysis right from your own cash register. Look at receipts and the people who are coming into your store, and try to map your own trading areas.

Then do some test-marketing: Send out a flier featuring one kind of product or service at your current price or at a discount to the area and see which kind of customers respond. Then do a bigger mailing to the different neighborhoods or the different ZIP codes that reflects what you found.

Small businesses should do focus group research, even if it just means bringing a dozen friends to your house and asking them if they like this cookie or that one, this book or that hammer. Find out exactly what they like about it, and then figure out where these people live to do your own cluster marketing. I'm a firm believer in the idea that homegrown cluster marketing is a lot better than no-target marketing and a lot better than intuition.

TIFFANY:What types of things should you ask your customers when you're analyzing them at the purchase point?

WEISS: Talk to people who are regulars and ask them where they live, what they like about your store, what they don't like about it, what they wish you had in the store, and what other kinds of stores they like.

Or, if you think people will be sensitive about answering personal questions, you may say, `What kinds of people live in your neighborhood? What kinds of stores are really popular? What kinds of cars do people drive? What kinds of homes are in the neighborhood?' So you're not just asking what the particular customer is doing.

TIFFANY:Can you explain the idea behind global clusters?

WEISS: There are now cluster systems in 25 countries, and it's possible for multinational companies to target the same kind of consumer in one country or another.

Nearly every country has its neighborhoods of Old Money Flats and New Family Suburbs and Working Class Villages and Waterfront Retirement areas. And the consuming patterns of each of these lifestyle types tend to be the same, whether you're in Australia, Italy or England. So a company can now find the lifestyle type that's most receptive to its product or service in America and then pick and choose the same kind of lifestyle type in Spain, France or Italy, and market its product there as well using similar kinds of messages. There's even a global cluster system called MOSAIC, from Experian Information Solutions Inc., which has classified 14 common lifestyles in 19 countries. This is the way of the future--doing cluster-based marketing throughout the global village.

TIFFANY:How can global clustering help Internet marketers?

WEISS: There are now Internet marketers using clusters, and they're able to learn where people live by using cookies on the Internet and getting demographic data from people who fill out applications and customer profiles. So you don't have to use a geographic-based address to reach people in the different clusters. They can came to you in what historian Daniel J. Boorstin has called consumption communities: communities based on people with shared tastes and consumer behavior.

TIFFANY:Some arguments against cluster marketing include concerns about privacy and that clustering stereotypes and oversimplifies consumers. How do you dispute this?

WEISS: Cluster systems are very good arguments against concerns about privacy since they're based on geography. They don't really care about what individual households are doing because clusters are based on the theory that birds of a feather flock together--that, essentially, you reflect the neighborhood where you live.

When it comes to the concern about being pigeonholed into these classification types, I see that concern as reflecting good news and bad news. The bad news, of course, is that Americans hate to be pigeonholed, and they really resent that they can be so easily targeted into one of these different lifestyle types. The good news is that we're really a very diverse people, and there are at least 62 kinds of us in any appreciable number in this country.

We have to recognize that marketing technology is able to identify patterns of behavior and different lifestyle types within the great American population. That's a good thing because businesses have a way of getting out products and services that we're interested in as opposed to a lot of stuff that we really don't have time for. I look at that as a positive force.

Latino America

The United States is the fifth-largest Latino nation in the world with 31.1 million residents. In 2009, Hispanics are expected to surpass African Americans as the largest U.S. minority group.

All the more reason to pay attention to the Latino America cluster, which, as 1.3 percent of the nation, is comprised of younger Latino middle-class families. Usually found in metropolitan areas like Los Angeles, New York City and Chicago, money can be tight. Leisure time is important; nightlife is bustling, though often dangerous. One resident with whom author Michael J. Weiss spoke says Latino America is "an immigrant gateway community," with families building a better life for themselves and their relatives.

Source: The Clustered World: How We Live, What We Buy, and What It All Means About Who We Are (Little, Brown and Company) by Michael J. Weiss

Kids & Cul-De-Sacs

The largest cluster in America, these minivan driving, Disney-worshiping families center on the pint-sized set. Three percent of the population, this cluster creates the common definition of suburbs: predominantly white and Asian, upper-middle-class professionals, soccer moms and barbecue dads. Weekends are comprised of trips to Price Club to spend $150-plus on groceries, renting videos for their two or more VCRs, ordering pizzas, organizing the kids' activities, and trekking to the local theme park or zoo.

Source: The Clustered World: How We Live, What We Buy, and What It All Means About Who We Are (Little, Brown and Company) by Michael J. Weiss

Bohemian Mix

One of the trendsetting clusters, Bohemian Mix are real-life Friends, the young singles and couples who dress hip and frequent coffee bars, microbreweries and arthouse movie theatres. This cluster is open to new things. With almost three-quarters of the Mix single or divorced, and almost a third gay, author Michael J. Weiss notes this cluster is "a haven for alternative lifestyles." This is where the Gay Pride parade will be held, the multiethnic clothing boutique located, and the McDonald's and Wal-Mart willfully rejected. Also called "the young and the restless," these singles consume almost twice the national average in alcoholic beverages, enjoy aerobic activities to work those imbibed calories off, and lead sales in condoms.

Source: The Clustered World: How We Live, What We Buy, and What It All Means About Who We Are (Little, Brown and Company) by Michael J. Weiss

New Eco-Topia

City dwellers are returning to the good life in small-town, rural America. New Eco-Topia, comprising one percent of the United States, mixes an interesting bunch of folks: those escaping downtown and those who've never lived downtown, or as author Michael J. Weiss says, "a mix of granola and grits." Although they're earning middle-class incomes ($35,300), the Eco-Topians bring a touch of big-city tastes to the back country with a penchant for imported cheese and organic gardening, AOL and public broadcasting, Subarus and Humvee trucks.

Contact Sources

Koplovitz & Company, (212) 551-3585

National Foundation for Women Business Owners, (301) 495-4975, ext. 13, http://www.nfwbo.org

Viridian Capital, 220 Montgomery St., #946, San Francisco, CA 94104, (415) 391-8950