By John J. Coffey, C.P.A. and Gene Palm, www.profitres.com, originally published October 2002, ABA Bank Marketing

§   The purpose of demographic data

§   Types of demographic data

§   Uses of demographic data

 

Really good marketers (which of course includes you since you are reading this column) are naturally a curious bunch.

The most curious of all questions you should be asking is “Who are our customers?”  Sure, you can get answers to the 4 P’s of Marketing (Product, Price, Promotion and Place) and have a rough idea of who you customers are – but the reality is that virtually any customer regardless of their demographic attributes can purchase virtually any product you have to offer.  To make matters worse, your internal transaction processing systems are of little use helping you understand who your customers really are.

What’s needed is a way to household your customers’ accounts (See our Bankmarketingblog.com entry, Why Householding Is Important In An MCIF) and a way to attach customer specific descriptive data to these households.  Enter demographic data!

The Purpose of Demographic Data

The definition of “demographic” is “of or relating to demography.”  Demography is actually the combination of two Greeks words – “demo” which means “people” and “graphy” which means “the art of writing or describing.”  So demography is simply a way of describing people.  Similarly, demographic data is a way of describing the stage of life and lifestyle of your customers.

Companies that specialize in the compilation and sale of demographic data compile their data from a many different sources such as:

§        County real estate records

§        Driver’s license data

§        Warranty forms  (Be careful what you say about yourself, it may come back to haunt you!)

§        Implied lifestyle based on geographic location

§        Magazine subscription data

§        Credit card data

After this data has been compiled, it can then be attached or “appended” to the householded data within your MCIF.

Types of Demographic Data

Demographic data comes in many forms.  The data may be reduced to a single element that describes your customer.  For instance you might be provided with a data element that tells you that your customer is “Upscaled Retired” as opposed to “Midscaled Retired” or “Downscale Retired.”

On the other hand, the data might be broken out into many discreet elements that provide a much richer view of the customer’s stage of life and lifestyle.  Such data elements can include:

§        Age

§        Income

§        Marital Status

§        Presence of Children

§        Home Value

§        Length of Residence

§        Type of Vehicle

§        Type of Credit Card

Uses of Demographic Data

            By using demographic data, you can understand which customers own a home and segment these customers by age.  Or, you can look at your customers’ car ownership and segment these customers by income.  However, as powerful as this demographic data is, this data by itself has limited uses.

To increase the effectiveness of your demographic data exponentially you need to combine this data with the purchase behavior of your customers and segment the results using product profitability.  To do this, you need to look at the “Service Combinations” report in your MCIF.  This lists the most popular combinations of services purchased by your customers.  The most popular service sold to your customers is probably your single-service (and typically unprofitable) checking service.  However, you can also use this report to examine your most profitable combinations of services.  For instance, your [checking – home equity line of credit] combination can generate a healthy amount of profit each year.

            After you have identified a profitable combination, in this case the checking – home equity line of credit, you can then use your demographic data to find out which of your customers own a home but do not have their home equity line of credit with you.  Further, you can use your demographic data to profile other home equity line of credit customers to find out which combinations of demographic data provide the most profitable relationships to the bank.

Using demographic data to satisfy your curiosity regarding who your customers really are can dramatically increase your bank’s profitability!

John J. Coffey, C.P.A. and Gene Palm are the principals of Profit Resources, a consulting company that specializes in MCIF technologies.  © Profit Resources, Inc. 2006