Organisations have been using data from geographical information systems (GIS) as a means of targeting potential customers for the past 25 years. The term GIS was first used in 1964 by Oak Ridge National Laboratory (ORNL) in the US, which pioneered one of the first geographic data management systems. But it was not until the early Nineties that the use of GIS as a marketing tool became widespread. The commercial GIS industry is now worth $3.5bn (£2.2bn) according to ORNL, and organisations in all sectors use GIS data.
Central governments and local authorities, for instance, use birth and death data to plan for schools, hospitals, transport facilities and nursing homes. High street retailers use the information to decide where to locate stores to target particular sectors of the population. Knowing where your customers live, their disposable income and the size of their families is a valuable tool for marketers.
“Most organisations benefit from knowing more about their customers”, says Fiona McNeil, a technology strategist at SAS Institute, a business intelligence firm that specialises in GIS software. SAS’s UK clients include Internet bank Smile, supermarket giant Safeway and Barclays Bank. McNeil says location planning is a typical use of GIS, but it is not just about deciding where to site new stores. “Marketers use this information to decide where to buy advertising space from magazines to billboards. They can find out where they are likely to be seen by their target market,” she says.
Safeway uses SAS software to devise and analyse the effectiveness of its product flyers. It produces different versions of flyers reflecting the challenges faced by individual stores. Marketing analysis manager Andrew West says: “The main variable is geography. What works in one area won’t work in another.” He adds that analysing each store’s target market and making sure that the store sells what local customers want is essential.
“Local managers want to know what level of ‘cherry-picking’ is going on in their stores: how many customers are going in solely to get the main deals. We provide the information,” says West. “SAS gives us a tremendous advantage. It enables us to draw quick and helpful conclusions from a huge number of variables.”
Like Safeway, Marks & Spencer (M&S) uses SAS analytical software to find out more about its customers. Data from the 3 million active chargecard accounts, point-of-purchase information and data from external sources tells M&S plenty about its customers. Customer insight unit head Steven Bond says: “We have at least 80 explanatory variables for every UK household, rising to more than 300 for any customer holding a chargecard.”
Size doesn’t matter
Analysing different types of data led M&S to change the way its stores were stocked. Bond says: “In the past, stores were stocked according to size. Nowadays, they are increasingly supplied according to a detailed profile analysis of our customers.” Detailed segmentation analysis also drives the types of sales promotions in stores.
M&S has a long tradition of using GIS data with SAS, but this type of analysis often assumes the existence of a static, residential customer base. M&S’s new outlets at railway stations require a different type of analysis. Bond explains: “The resident population around our food store at Liverpool Street station is negligible. Our modelling is geared to predicting sales based on the flow of people through the station, rather than the expenditure of local households.”
Working for the Government
Four-fifths of SAS’s UK client base is commercial, but the company also works with the public sector. The Universities and Colleges Admissions Service (UCAS), which processes applications for full-time university courses, for instance, uses SAS software t
o find out what types of people are applying for which courses. Institutions compete hard for students and they, together with the Government, policy-makers, the media and the public, want to know who is applying for – and joining – which courses at which universities.
UCAS forecast analyst Alyson Coleman says: “It’s not just about numbers. It’s about attracting the right kinds of applicants with the right profiles, to meet quotas. Premiums are attached to applicants from under-represented groups.”
Data such as age, gender, ethnic origin, social class, address and the institution and course applied for, is collected from UCAS forms. Coleman says: “The more information an institution has at its fingertips, the more targeted its marketing can be, encouraging certain kinds of students to apply in greater numbers.”
With 90 per cent of US Fortune 500 companies as customers, SAS boasted revenues of over $1.1bn (£700m) worldwide in 2000. SAS’s UK turnover increased by 19 per cent, to over £60m, in 2001. The company was founded in 1976 by Jim Goodnight and John Sall, who remain president and executive vice-president respectively, and is one of the world’s largest independent software vendors. Based in North Carolina, it has grown from a single office with four employees to a company employing more than 8,400 staff worldwide, including 450 in Marlow, Buckinghamshire.
SAS UK chief executive Phil Bond is confident 2002 will be a successful year, despite a general fall in IT spending: “Many organisations put their IT budgets on hold after September 11. We found that SAS projects were quickly reinstated, due to their strategic nature. I believe that our financial stability and strong investment strategy will help us to sustain growth.”