Geodemographic Research & Predictive Modeling

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GEODEMOGRAPHY is a concept used for targeting small areas (neighborhoods) based on lifestyle and behavioral similarities and differences that translate to differing potentials for products, services and media. The basic marketing premise associated with geodemography is

If One's place of residence is known, One's basic lifestyle can be reliably predicted.

If One's lifestyle can be predicted, One's behavior can also be predicted.

Social scientists began formulating empirical evidence to support this theory as early as the 1930's when the School of Human Ecology was founded at the University of Chicago. During subsequent decades, pioneering work was done at the University of California at Berkeley and at CCNY. However, it was not until the 1970 census data were released for the first time on computer tape, that a small area typology could be mathematically modeled [1]. In 1974, the Claritas Corporation introduced the first neighborhood lifestyle segmentation model, called PRIZM. Over the past 30 years, Claritas PRIZM model has proven the concept to be both a valid descriptor of neighborhood lifestyles and a powerful predictor of marketing behavior. Except for obvious climatic differences, similar neighborhoods do, in fact, buy, use and act similarly across the country.

Initially, PRIZM® was developed by integrating over 600 Census variables (for demographics), customer purchasing files of over 100 million records (for behavior) and census geography (for neighborhoods). This process produced 40 distinct definitions describing every neighborhood in the United States. These 40 PRIZM Clusters (from the mathematical technique of hierarchical cluster analysis) were assigned nicknames, such as Blue Blood Estates, Golden Ponds and Shotguns & Pickups, to assist in visualizing the neighborhood. Each cluster was fully documented and correlated to hundreds of standard demographics. Finally, every neighborhood was assigned a unique PRIZM cluster:

31,000 Residential ZIP Codes (average: 3000 Households)

65,450 Census Tracts (1000 Households)

200,000+ Postal Carrier Routes (400 Households)

208,000 Census Block Groups (350-650 Households)

Over 19,000,000 Residential ZIP+4's (4-10 Households)

Claritas continuously updates the PRIZM System with new counts, capturing population shifts and changes in behavior patterns. Following each 10-year census, the system is re-analyzed and remodeled. In early 2004, after the Census 2000 data were released, cleaned and modeled, a new PRIZMne System was introduced, incorporating 66 Clusters. The associated assignments and demographics are updated as data are released.  The newest model, Claritas 360, utilizes a 68 Cluster model.

Other geodemographic systems have been developed; however, PRIZM remains the standard across the industry. In 1980, CACI introduced ACORN, and in 1982, Donnelley began marketing Cluster-Plus. VISION was started in the mid-1980's and was marketed by NDS as a subsidiary of EQUIFAX, Inc. In mid-1997, Claritas absorbed NDS and has subsequently absorbed parts of Donnelley. The other systems have neither the universal acceptance nor wide integration enjoyed by PRIZM.

The real power of geodemography lies in its ability to integrate products, services, geography and media. Product and service information can come from the client's customer files and/or syndicated research databases, such as SMRB or MRI. Media applications include broadcast, both local and network; print, individual magazines and newspapers; and outdoor. For direct mail, PRIZM can be used alone on any list. However, when combined with a client's database and/or individual level data, and/or a unique demographic, it is possible to accomplish pinpoint targeting to specific households and individuals, with a higher probability of success and less waste, effort and cost. Most all of the applications can be tied into the lifestyle descriptors to assist in the creative process.

PRIZM is a fixed segmentation system. It is not intended to provide 100% of the answer. Unique modeling of client databases and specific primary research may provide more specific answers but usually at a much higher cost and, by definition, within a much narrower applications window. Unique models are intended to answer a specific application, at a specific point in time, for a specific media, with results not readily transferable across applications.

Using PRIZM, alone or in conjunction with other data, a school can get actionable answers to the fundamental marketing questions of:

WHO are our best prospects?

WHERE are they and where are more of them?

HOW do we reach them - by mail, other media and message?

[1] Jonathan Robbin, founder of Claritas and the developer of PRIZM, began his historic work in the 1960's. In 1980, he and CMT's John DeReu published a technical paper on the results of specific geodemographic applications. CMT is a PRIZM® licensee.