Since 1971, San Diego-based Claritas has been providing accurate, up-to-date marketing information about people, households and businesses within any geographic area in the United States. Its target marketing services are aimed at reducing the cost of customer acquisition and growing customer value.
Picture Business recently had the opportunity to sit down with Neil Portnoy, Assistant VP of Consumer Durables, at Claritas Inc. to discuss the company’s methodology and how imaging retailers can benefit from the information and research the company specializes in.
PB: How do you know so much about the people in our neighborhoods?
Portnoy: Prizm, Claritas’ proprietary consumer segmentation system, is an aggregate of a lot of data sources. We compile everything from the U.S. national census and local county and state census reports, to large national market research studies and direct mail databases and model all the resulting information down to the household level. We have every one of the 112 million households in the U.S. in our database. We know their lifestyles, demographics, media preferences and even what kind of car they are likely to drive. We can identify those households that have a greater than average propensity to buy a DSLR or print in store or any other behavior.
Smart marketers have come to understand a few things about their business; not all customers are the same, not all customers deliver the same value to the organization, and not all stores within a chain deliver the same value to the organization.
PB: Most independent imaging retailers have good relationships with their customer base. They keep records of customers’ e-mails and preferences. Can your research enhance that data?
Portnoy: Without a doubt….we talk with retailers a lot about how they are leveraging their database. All customers are not the same. Unfortunately, many retailers treat all their customers the same way, and communicate with them all using the same message. We help retailers differentiate a high value customer from a low value customer, and optimize their service of those yielding the greatest value. If a photo specialty retailer is building a database and they can identify customers who purchased a DSLR it would make good business sense to invest in these customers more heavily than a compact camera customer because you can sell them lenses, flashes, ink & paper and other high margin accessories. Smart retailers are actively seeking ways to develop a deeper relationship with this group of customers.
Where Prizm comes in to play is its ability to match up to retailers database and compare its customers’ households to all other households in the nation or in the retailers specific market. From there the system will identify how many households exist in that retailers’ store trade areas that are similar to those DSLR customers, or any other high-value customers. So we are helping the retailer with CRM and customer acquisition & retention.
PB: Do you advise about how to market to specific types of customers?
Portnoy: We advise customers to understand the composition of households in their trade area. By analyzing their current database we can identify the number of households that have a higher than average propensity to buy a DSLR or a compact camera above a certain price. We call these customers and prospects ‘high value’ and they deliver a lot of value to the organization.
We’ll build four or five different target groups in a market. We’ll answer, what their lifestyles, demographics and media preferences are. One group might be appropriate to reach with direct mail, another group radio and another group via newspaper. We want to get the right message about the right product to the right customer and through the right media.
PB: Can you give me an example of a high value photo specialty customer?
Portnoy: There might be a target group for a DSLR with a household income of over $100,000. They live in the “burbs,” they’re 45 years or older, well-educated and own their own home. They belong to country clubs, play tennis and golf. They read the Wall Street Journal and listen to talk radio. These folks shop at specialty stores, and here’s what’s interesting, these people really believe in quality and they’ll pay more for it. What makes this information really powerful is being able to tell which customers these are, how many of them a retailer has, compared to how many more exist around a retailer’s locations, on a household-by-household basis.
Then, within the DSLR category, there is another (Prizm) target group, young digerati, who live in urban areas. They rollerblade and don’t read the newspaper. These folks need to be reached and communicated with differently than the wealthy suburbanites.
The industry talks about soccer moms as if they are all the same. They are not. They are different in terms of household income, education, age, home ownership; some live in cities others in the suburbs and others in second cities. I would estimate if we did a segmentation analysis just on soccer moms we might develop four to six target groups just within that category.
PB: Are any consumer electronics retailers currently using this data?
Portnoy: Best Buy, Circuit City, Radioshack, Office Max, Office Depot to name a few. We just signed a contract with the Pro Group (Dave Workman, the past president of Ultimate Electronics, is executive director). We are helping those 18 members to be able to target upscale CE customers in each one of their store trade areas.
When we do these segmentation projects, we have software that can analyze any trade area around a store. That’s where the vast majority of a retailer’s business is coming from. They need to understand the consumer households immediately surrounding their stores so they can take the right action to drive these high-value customers into their stores.
PB: How can knowledge of market segmentation drive sell through?
Portnoy: There are many examples and it all begins with the ability to identify, quantify, locate and target your best customers. During meetings with CE executives we talk about market potential. Imagine if you could rank a retailer’s locations by potential sales of DSLR or plasma TV, and you can truly understand from a geographic perspective where the business/sales potential exists. From there, you could allocate your marketing, advertising, training/detailing and point-of-purchase resources against those stores in those geographies that have the greatest opportunity to deliver the highest ROI. Well stop imagining, we are providing this type of analysis to our clients every day.
Here’s a real-life example. A particular retailer had 50 locations and its main advertising vehicle was newspaper inserts. I asked how they determined which zip codes to target? They said they didn’t have a process; they just delivered as many as their budget allowed.
However, if their process was to rank zip codes around each of their stores by propensity to purchase a DSLR or compact camera, then they would be able to eliminate at least 25 percent of the households receiving those inserts, and give the dealer a greater ROI.
PB: How might this information influence manufacturers?
Portnoy: Manufacturers need to drive the use of market level data in their cooperative efforts with their dealers and identify, quantify, locate and target the consumers of their products. This information should be shared with the retailers who may not have sufficient market level insights available. More importantly, the manufacturers have an incredible opportunity to use the insights to optimize their support of their dealers. That is how they can outmaneuver their competition and partner more effectively with their dealers to garner more shelf space at key accounts. Manufacturers should be able to position the right product to the right customer, through the right retailer, and target that customer with the right message through the right media. Those manufacturers that embrace this kind of thinking will see sales and margins reach new heights, those who don’t will have difficulty holding on to market share.
PB: Can they help dealers target in those
Portnoy: Absolutely. We are in the process of changing the mind set in the industry. We want retailers and manufacturers to look at the business from a geographic perspective. Who is the customer and where do they and others like them live in the greatest densities? Hence, where is the business? What are these customers’ media preferences? How many live within a given trade area, zip code, county or market?
Think back to that 50-store chain. Do you think if they bought 1,000 DSLRs that those cameras would be sold equally across all 50 stores. Of course not. The 80/20 rule applies here, with 80% of those cameras selling though in 20% or only 10 of his stores. This is due to the composition of households in those 10 trade areas versus that of the other 40 trade areas.
Now if you are a manufacturer and you are allocating training dollars, POP materials and if you are investing DSLR marketing funds in those other 40 stores you will never see an acceptable ROI. Wouldn’t you get a better ROI if you focused on those stores with the greatest DSLR market potential and allocate funds against compact cameras in the other 40 stores?
PB: What’s your personal outlook for the photo specialty channel?
Portnoy: The photo specialty dealers that are still around are the cream of the crop. They’re smart business people and they’re doing everything they can to compete against the big box stores and the Internet. We’re trying to help the channel by putting them on a level playing field in terms of identifying their best customers, driving them into stores…and communicating with high-value customers after the sales to bring them back in for accessories and add-ons.
For specialty dealers to be successful long-term they need the support of the manufacturers to help them identify, quantify, locate and target their best customers and leverage the strength of the channel. Together, retailers and manufacturers can insure the long-term viability of the channel.