ZIP Codes for Marketing Analytics

ZIP codes can be a great source for understanding the populations of narrow geographic areas, and there are several free online tools that will quickly convert ZIP codes into demographic, psychographic and consumer profiles.

Some background on ZIPs. The U.S. government assigns approximately 43,000 five-digit ZIP codes, and each ZIP code services 40-150 local post offices.  Each digit in the 5-digit zip code narrows the region to which it is assigned, and there’s a great online site that demonstrates this (Zip Decode).  This site will allow you to geographically drill-down to a specific 5-digit ZIP Code one digit at a time.

One of the easiest ZIP tools is Nielsen’s Tapestry segmentation, which divides consumers into 67 segments based on their socioeconomic and demographic composition.  Use the link below and enter a ZIP Code.

Nielsen Tapestry

What you’ll get is a basic profile of the most common consumer segments in that specific ZIP Code area.  For example, the ZIP Code 63005 encompasses Chesterfield, MO, which is 58% Top Tier – a segment characterized by:  married couples with older children…[that can] indulge…in personal services at upscale salons, spas and fitness centers…Evenings and weekends are filled with opera, classical musical concerts..

You get the idea.  But that’s a fairly rich description for just a five digit ZIP code, and you can use their dynamic map to look at surrounding ZIP codes and also identify their most prominent Tapestry segment.  For example neighboring 63017 is 34% Exurbanites who are likely to be:  Empty nesters…sociable and hard working...[who] go online for everything, while quality instead of price governs shopping choices.

For even greater detail on ZIP code clusters, you can explore Claritas ZIP Code look-up, which provides information from their Lifestyle Segmentation System.  Their portfolio of products includes PRIZM, PRIZM Premier, and P$YCLE, but for simplicity sake let’s look at PRIZM.                 

Online they will provide the top 5 segments for any ZIP code.  Let’s look at 07063, which covers Plainfield, NJ:

Among the top segments are Brite Lites, Lil City, which is described as a group of “well-off, middle-aged couples settled in the nation’s satellite cities…who typically have no kids, and college educations.”  Unfortunately, Claritas does not provide information on the representation of each of the segments in the ZIP code, so we don’t know to the size of the Brite Lites, Lil City in this ZIP code. (That’s for paying clients).

Claritas does provide some basic demographic information on each ZIP code, including Household Size and Composition, Income, Age, Race and Ethnicity, which are valuable measures for understanding the composition of a market.

Finally, there is the Big Daddy of data collection:  The Census Bureau.  The Census is conducted every ten year by the Federal Government (it’s required by the Constitution), and is meant to provide accurate data on the population of the U.S.  We can use their ZIP Code Lookup function to dive in on any ZIP Code area (link below).  This source provides a series of tables on demographic information for the ZIP Code area.

Census Bureau ZIP Code Look-Up

Why would we use ZIP codes in analytics?  Any business that is geographically based can benefit from using these resources to understand their local market.  If you are considering opening up a additional branch of a retail store in a specific market, ZIPs can help you profile that that new customer base and better understand how to serve them.  Businesses with a broader service area can also use ZIPs to learn about their existing customers:  what ZIPs represent the highest concentration of customers?  What do those ZIPs tell us about our customers?  What are some ZIPs with low concentrations of customers?  Why are we failing in those areas?

So go online and play with some ZIP codes.