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ARE YOU
READY FOR MODELING?
by Alan Brown
In contrast to audience surveys and focus groups, a less familiar research approach uses existing data files to learn more about current and prospective audiences. Two research methods known as “lifestyle modeling” and “response modeling” are outlined in this article by Alan Brown of Audience Insight. Both rely on data enhancement techniques to build profiles of attenders and non-attenders. In 1990, AMS and Metro Direct Inc. of New York formed an alliance to offer secondary research services, including modeling, to arts institutions of all types.
Arts presenters and producers with computerized ticketing
systems have the opportunity to gain added value from their data files
through lifestyle and response modeling.
This article summarizes how existing data resources can be
used to learn more about current and future audiences and to boost
the response rates of direct marketing campaigns.
Guideposts will be provided to help you determine if modeling
is a viable tool for your organization.
Mailing lists - such as your own customer address file,
or a list that you purchase - can be processed by one of these firms
to append a variety of additional data to each address record. This process is called “data enhancement.”
Variables which can be appended to your file include:
Data enhancement has two primary applications for arts
marketers - lifestyle modeling, and response or “predictive” modeling.
Both relate to improving responsiveness to direct marketing
efforts. Lifestyle modeling
also provides a foundation of audience information upon which to build
other research efforts such as audience surveys and focus groups.
What
is Lifestyle Modeling?
Lifestyle modeling is a method of analyzing customer
lists based on geo-demographic segmentation.
To enable the analysis, your customer data file must be enhanced
with lifestyle codes; each address is classified into one of forty
to fifty lifestyle segments, depending on the system used. Geo-demographic segmentation is based on the assumption that households
within the same geography (e.g., a ZIP+4 or Block Group) share similar
lifestyles, demographic characteristics and purchasing behaviors. Several of the systems currently available
include:
Uses
of Lifestyle Modeling
Lifestyle modeling has four primary applications:
geographical analysis, patron segmentation, affinity analysis,
and market potential assessment.
Geographical Analysis
The distribution of your patrons by ZIP Code is mapped,
and your market or “trade” area is defined. A typical trade area contains 80% to 90% of total customers, and
may be defined as:
Each organization’s market reach is different. While
some primarily draw a local audience, others serve a wide area. In
some cases, primary, secondary and tertiary markets can be discerned,
frequently in concentric rings around the venue.
Highway access and natural barriers such as mountains and waterways
also have a major effect on trade area definition.
Visualizing your market area from a satellite view can be very
revealing. (Patron maps have
also been used successfully as supporting material in grant applications
and sponsorship appeals.)
Accounting for population levels, market penetration
is also measured - both by ZIP Code and by lifestyle segment.
Patron Segmentation
Your key customer segments are identified. Mailing labels can be purchased to reach households
in these segments at the ZIP+4 level of geography. (This is often referred to as “precision marketing”
or “micro-targeting”.) Comparing the lifestyles of different groups
of patrons (e.g., subscribers, single ticket buyers, donors, members,
etc.) can help you discern characteristics associated with each group
- in terms of demographics, geographical distribution, media preferences,
purchase behaviors, etc.
Segmentation results also are used to develop creative
selling ideas. For example,
segments of young professionals can be targeted with special discount
offers for “first-timers.” Family-oriented programs can be promoted
to segments of households with young children.
Affinity Analysis
The lifestyle profile of each customer group can be
compared to the profiles of consumers of other products and services
to identify high correlations. For
instance, your subscriber profile might correlate closely to the profile
of American Express cardholders.
Many hundreds of profiles are available for comparison, including
such categories as automobiles, financial services, alcoholic beverages,
leisure activities, magazines, media, etc.
Marketers use these results to generate cross-selling
ideas, while fundraisers leverage these data to support sponsorship
appeals. For example, a presenter
in the northeast found a high correlation between subscribers and
imported wine drinkers. The
information was used to sell program advertising space to a local
wine distributor.
Market Potential
Assessment
The profile of your current patrons can be evaluated
against the profile of each ZIP Code in your market area, and market
potential can be calculated. Results
are used to identify and prioritize high potential areas for targeting.
A small number of market research and consulting firms
offer some or all of these services.
Prices can range from $2,500 to $10,000. Before committing to a lifestyle modeling study, find out:
What is Response Modeling?
Whereas lifestyle modeling
helps marketers understand their customers and locate better qualified
prospects, response modeling helps predict who will or will not respond
to a mailing. The technique
is used most frequently to reduce printing and mailing costs. Response modeling involves enhancing a data file before it is mailed. To illustrate a typical application, consider
the following example:
Generally, response modeling is most relevant to arts
groups who routinely mail expensive pieces (i.e., mailed cost-per-piece
= $.40+) to lists obtained commercially.
To make sense, the costs of response modeling must be less
than the savings realized from reducing the quantity of pieces mailed. Thus, the higher your printing and postage
costs, the higher the chances that response modeling can save you
money. A simplified cost/benefit analysis is illustrated
below:
A Dynamic
Combination
Since response modeling requires a large data file
to be enhanced prior to mailing, lifestyle codes are already attached
to address records for the post-campaign lifestyle modeling study,
resulting in significant cost savings.
Towards
a Customer Information System
Both primary and secondary research efforts can reap
rewards for arts marketers. However,
arts organizations historically have taken a scattershot approach
to research - addressing one burning issue at a time - without conceptualizing
an overall research program.
At the forefront of arts marketing are a handful of
managers who take an integrated approach to research - using both
primary and secondary research methods on
an on-going basis to address both short and long-term issues. The goal is a Customer Information System - a dynamic knowledge
base to inform marketing decisions - an idea we hope to explore in
future issues of ArtsReach. Integral to this concept is the central role
of the customer data capture system as an information resource.
How complete are your customer records? How much information do you retain on each
customer? If, for example,
you are unsuccessful at capturing addresses of night-of-show walk-up
customers, you may be missing a substantial portion of key audience
segments (e.g., students) in your database.
The quality of your customer data capture system has a direct
impact on your ability to successfully use modeling techniques.
Your data capture system can be a critical element
of successful direct marketing. Lifestyle
and response modeling are two research tools which add value to your
precious data resources.
IS MODELING RIGHT FOR YOU?
Answer the following questions to help understand if
lifestyle and response modeling could be valuable research tools for
your organization.
©
2008 Audience Insight LLC, P.O. Box 423, Southport, CT 06890 |
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