Clusters' Last Stand: Demographic Clustering Methods Give Way to Household-Specific Demographic Targeting

Byrne, Thomas C., ABA Banking Journal

When Michael J. Weiss's seminal work, "The Clustering of America," appeared nearly ten years ago, it had a profound effect on the retail banking industry. At a time when direct marketing concepts were just beginning to filter in, his work helped shape and define the way financial institutions conducted direct marketing campaigns. Ten years later, banks are still regularly applying his principles. But are they the right principles for modern times?

Important new techniques are now emerging that promise to bring unprecedented precision to database marketing. No longer do advanced bank marketers rely on generalized demographic profiles to determine their best prospects. Nor do they market to whole zip codes at a time. Instead, using new databases and software tools, they zero in on prospects house by house, creating demographically precise profiles that exactly match characteristics of their own existing best customers.

Using these new approaches, banks are already enjoying reduced printing and mailing costs, increased response rates and higher rates of return. Longer term, they are building clearer pictures of their customers, their competitive positions and their own profitability.

Psychographic and Geographic Clustering

To understand these new techniques, we need to review the old models that still dominate the direct marketing landscape. Typically, when prospecting for new customers, bank direct marketers first determine key characteristics they believe future customers will share. They may develop profiles using marketing software, by gleaning ideas from nationally available marketing sources, or just by gut feel. Often, lifestyle factors such as the kind of car potential customers drive, what kinds of food they eat, how much they travel, etc., are key …

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Publication information: Article title: Clusters' Last Stand: Demographic Clustering Methods Give Way to Household-Specific Demographic Targeting. Contributors: Byrne, Thomas C. - Author. Journal title: ABA Banking Journal. Volume: 89. Issue: 11 Publication date: November 1997. Page number: 82+. © 2009 Simmons-Boardman Publishing Corporation. COPYRIGHT 1997 Gale Group.

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