Trade area marketing versus mass marketing
The old adage in fishing is that if you cast a wider net, you're likely to have a bigger haul. The Discovery Channel's "The Deadliest Catch" is the epitome of this practice as king crab fishermen risk life and limb to get as many "pots" (traps) as they can into the freezing and turbulent Bering Sea. Unfortunately, many inexperienced direct marketers go after their prospective consumers in the same manner.
If a typical small business owner, a local pizza shop for example, were to send out his first marketing mailer with a coupon, he may not know where to start. Assuredly, he has plenty of knowledge about brick ovens and mozzarella cheese, but little knowledge about direct mailing. When the printer asks the owner which region he'd like to mail the coupon, the owner would generally assume that folks won't travel more than 5 miles to come to his restaurant for a pie. Using this reasoning, he decides to mail to every neighborhood within a five-mile radius of the store. This reasoning is a simple, traditional approach to mass area marketing; but, it is also old-fashioned and ineffective. Savvy direct marketers know that in order to boost ROI and get foot traffic into your store, you must be more targeted in your approach.
A recent survey commissioned by QAS states that the average business could be wasting upwards of $180,000 annually on irrelevant direct mail offers. One half of the ROI battle in direct marketing is identifying the best possible responders. The other half of the challenge in the new age of direct mail is to completely eliminate non-responders - and, frankly, with today's advancing technology, this is becoming the easier half.
For our pizza example, in order to first eliminate the non-responders and then identify the best prospects, the pizza owner should not ask himself how far people will travel for an order, but rather where are my current customers actually coming from ? While typical use of geography selection mailing seems logical, it does not take into account competitor location, land masses, highway intersection, one way streets, along with countless other significant variables. The process of identifying, prioritizing and utilizing these relevant variables is called trade area marketing.
While trade area mapping is not a new technique, today's predictive analytic software is making it a revolutionary, automated marketing process. By analyzing the addresses of existing customers, the predictive models create a mapping grid that carves out and identifies hot spots where your current customers live. By reviewing these maps, vendors can learn interesting trends about their clientele, such as whether or not they will cross a certain river or intersect a particular highway for certain goods and services. Trade Area Marketing is yet another way to carve away that which is not relevant.
By identifying those areas not to mail, our pizza shop owner has significantly decreased his mailing budget and, in turn, increased ROI before any mailings have even left the post office. Trade area marketing is just another element of on-demand targeting that is automated and efficient as a result of today's modeling sophistication.