It is well known that people with similar demographic and psychographic characteristics
tend to live nearby, for example, in suburbs, counties, shires, states, regions, countries, etc.
People living within the same geographical boundaries often exhibit similar buying
patterns. This is in part due to similarities in demographic and psychographic characteristics
of residents. This phenomena is further enforced by local weather, environment,
and cultural differences. Segmenting markets along geographical boundaries can
lead to more specialized and focused marketing approaches.
Geographic segmentation can use the following information;
- National census data: National census includes various demographic and psychographic
information on residents of geographical segments: median income, age, education, and so on.
National census information is available from;
- Geographic Information Systems (GIS): These are digital mapping systems
containing geographic data allowing manipulation of data. Certain geographic information
may be used in segmentation. For example, average temperature, rainfalls, and so on.
More important use of GIS system is plotting results of geographic segmentation on a map
so that important geographical clusters can be identified.
- Customer behavioral information: Customer density, past purchasing behaviors,
and products they bought can be added to geographical segmentation processes.
Examples of Geographical Segmentation
Geographical segmentation can be used for various purposes. The followings are
geographic segmentation examples;
Locations for new shop outlets can be identified.
Areas for advertisement can be identified. Segmentation can also reveal
information for advertisement media.
Different geographic segments have differing consumption patterns.
Introducing different products for different geographic segment can
bring more sales!
Military recruits have certain demographic attributes. Focusing on geographic
segments with such profiles, military can find new recruits more efficiently.
In catalog sales direct marketing, generally demographic information of
customers is not available. Census information derived from geographic
data can be used to develop better customer segmentation and predictive
Trend Analysis and Monitoring for Geographic Segmentation
Geographical segmentation can be applied to
Trend Analysis and Monitoring.
For example, the following report shows segment trends for profits and
revenues. Replacing the "Segment" variable with geographic regions,
sales revenue trends by geographic segments can be monitored;
Geographic Segmentation Techniques and Methods
Geographic segmentation is mainly used for mass marketing, as opposed to
one-to-one marketing. (Note that one-to-one marketing techniques are
described in Database Marketing and
The sole purpose is to identify geographical segments that have similar properties
as the ones that sell well. To this end, customer profiling and neural
clustering techniques can be applied;
Profiling customers (or equivalents) can be used
to identify geographic segments.
First, develop profiles from customer profiles. If there is no customer profile
database readily available, survey may be used to collect profiles. Then use the
profiles to identify cities and suburbs from census and GIS systems.
Census and customer data can be merged along geographic variables, for example,
zip code. Then combined information can be used to
neural clustering tools to obtain geographic segmentation. Geographic segments that
belong to the same clusters with the ones that sell well, will be the segments
for marketing focus, since they have the similar properties as the one that sell well!
For more, also read Customer Segmentation.
GIS and Geographical Segmentation
GIS (Geographic Information Systems) is essential in projecting
result of segmentation. You will need a GIS system that allows you
to display segment labels (you developed) on maps!
For more, please read StarProbe Business Intelligence - SOA.