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Catchment area data offers rapid savings in direct marketing

When companies study locations for new stores to supplement their existing networks, the management must keep in mind the three cornerstones of success in the brick-and-mortar business: location, location, location. Location data is also a link to cross-channel data because it can provide an overall picture of the impact that different channels have in each specific area.

This excellent rule of thumb, the critical role of location to business operations as a whole, should always be remembered when planning various business-areas. For a brick-and-mortar business, catchment areas translate into sales potential. The population of a catchment area is critical for the success of a local store. It is vital to find out the needs and consumption habits of the people in the catchment area and listen to their wishes. Understanding the catchment area is also a key to understanding the competition: who is competing for the customers in the area. Sometimes even a very small difference in distance is enough for customers to make a decision on where to shop.

Businesses usually begin to understand the value of customer information when they want to increase sales or cut costs – especially marketing costs. In addition to the increasingly popular online channels, unaddressed direct marketing is still frequently used. The effectiveness of this media is based on understanding where the customers and customer potential are located. Location is easy to determine for retail chains with a loyal customer system. For stores with no such system, understanding the catchment area and the customers in it should nevertheless be considered critical to business.

The simplest way for a store without a loyal customer system to define its catchment area is to ask customers for their postal codes when they pay for their purchases and immediately enter this information into the point-of-sale system. The benefit of this approach is that it links the postal code information with purchase information, multiplying its value. Even simply writing the codes down in a notebook is better than nothing, although processing the data will require more work. The catchment area can also be determined with conventional surveys or coupon competitions, which take advantage of people’s competitive drive, but the sample must be sufficiently large. It does not matter how you obtain the data as long as you obtain it: in the digital era, brick-and-mortar stores cannot afford not to use customer data.

With catchment area data, external enriching information can be used to enhance customer information. For instance, when socioeconomic and demographic data is combined with POS data it is easier to profile customers and look for new customer potential. Catchment area data can also bring rapid gains and savings through untargeted direct optimisation. When you know the catchment area of your customers, you can cut direct marketing in other areas and invest the saved low ROI euros in something more profitable.

However, nothing is permanent with customers: you can no longer set up your system and then forget it. You must stay alert and make sure you are able to react quickly to keep abreast of customers’ changing needs and purchase behaviour. The effectiveness of the perpetual motion machine that is needed to develop your business is based on goals, continuous monitoring and learning. There is no other route to success.

Tommi Havukainen, CAO Houston Analytics

Houston Analytics is an analytics company started by experts on data-driven leadership. By linking data to business decision-making Houston Analytics is guiding its customers to market leaderships in their industries.