Chapter Five Using Geographic Information Systems for Marketing Research

Copyright © Houghton Mifflin Company. All rights reserved.5 | 2 What is a Geographic Information System? A software application, either desktop or web- based, that allows users to present and interact with data on or from a map

Copyright © Houghton Mifflin Company. All rights reserved.5 | 3 Why GIS ? Standard GIS software allows researchers to –Integrate multiple data sources –Create interactive maps –Forecast sales –Identify the most responsive consumer segments –Determine the most cost effective advertising methods and strategies

Copyright © Houghton Mifflin Company. All rights reserved.5 | 4 Why GIS ? (Cont’d) Standard GIS software allows researchers to –Monitor customer responses to marketing activities –Develop micro-marketing strategies to better understand and analyze the lifestyles and product preferences of people living and/or working in various neighborhoods

Copyright © Houghton Mifflin Company. All rights reserved.5 | 5 Exhibit 5.1 Using GIS To Obtain Directions to Domino’s Reproduced with permission of Yahoo! Inc. YAHOO! and the YAHOO! logo are trademarks of Yahoo! Inc. Map provided by MapQuest ®

Copyright © Houghton Mifflin Company. All rights reserved.5 | 6 Domino’s: Using a GIS Domino's GIS, powered by MapInfo, is used to –Map, in advance, the best delivery route to each customer’s address –Select store locations based on driving distances –Distribute inventory efficiently based on buying trends and other factors

Copyright © Houghton Mifflin Company. All rights reserved.5 | 7 Domino’s: Using a GIS (Cont’d) Domino's GIS, powered by MapInfo, is used to –Identify business opportunities –Analyze purchased demographic data such as household age, income, and gender by pointing and clicking, looking at detailed street maps and drilling down for in-depth customer information

Copyright © Houghton Mifflin Company. All rights reserved.5 | 8 Geocoding Geocoding is the practice of assigning specific latitude and longitude coordinates to information Geocoding software is usually bundled with other GIS software

Copyright © Houghton Mifflin Company. All rights reserved.5 | 9 Exhibit 5.2 The Process of Geocoding Text and graphics reprinted from "ArcView ® GIS Means Business," courtesy of ESRI. Copyright © 1997, Environmental Systems Research Institute, Inc. All rights reserved.

Copyright © Houghton Mifflin Company. All rights reserved.5 | 10 Micro Marketing by ACE Hardware Ace Hardware, in the Paradise Valley area of Phoenix, AZ, conducted an in-store survey to obtain relevant GIS data –Trade area map : allowed the management to visualize its customers and learn who and where their customers are –85% of its customers came from one to three zip codes

Copyright © Houghton Mifflin Company. All rights reserved.5 | 11 Micro Marketing by ACE Hardware (Cont’d) Advertising was direct mail sent to customers by zip code Could substantially reduce its cost of advertising by eliminating mailers to zip codes outside its trade area

Copyright © Houghton Mifflin Company. All rights reserved.5 | 12 McDonalds In Japan is Faster with GIS McDonald’s plans to open 2,000 new locations in the next 5 years –Plan depends on their ability to review potential sites quickly and accurately GIS has made this process much more efficient knowing the restaurants minimum sales requirements and the factors that affect demand McDonalds is opening new locations faster than you can say cheeseburger!

Copyright © Houghton Mifflin Company. All rights reserved.5 | 13 Developing Local Advertising Campaigns GIS was used to develop a regional newspaper insert program for the Mercury Grand Marquis luxury automobile to –Enable Lincoln Mercury to develop cost-effective regional advertising programs –Examine past buyers of a certain vehicle and locate similar types of consumers in the desired region –Identify the neighborhoods and zip codes where consumers are most likely to buy the given vehicle

Copyright © Houghton Mifflin Company. All rights reserved.5 | 14 Table 5.6 Propensity to Buy Indices for 3 Different Zip Codes

Copyright © Houghton Mifflin Company. All rights reserved.5 | 15 Mapping the Propensity to Buy Index Areas where Grand Marquis should be advertised –Each zip code area will be color coded to distinguish between the more promising and less promising areas

Copyright © Houghton Mifflin Company. All rights reserved.5 | 16 Lincoln Mercury Research Results Distributed Grand Marquis insert on two separate occasions in 2001 using Southern California newspapers First month of the campaign –362 Grand Marquis vehicles sold in Southern California –Represented the highest sales in February since 1996 –Increase of 3% in Grand Marquis sales during first quarter of 2001 –California accounted 6.4% of the Grand Marquis sales in February–an increase of 2.2% over year 2000