Definition of ZIP code analysis

analysis technique used by direct marketers to determine where their best and worst prospects are and/or to determine how a promotion has performed according to a five-digit ZIP code or ZIP+4 area (see nine-digit ZIP code); also called ZIP code count. Direct marketers believe that ZIP code-based purchase patterns can be identified, because people with similar consumption habits reside (or work) near each other. For example, assume 100,000 direct-mail pieces are mailed, of which 50,000 go to residents of the 06905 area and 50,000 to residents of the 10104 area. A ZIP code analysis might reveal that 2500 responses were received from the 06905 area and only 30 from the 10104 area. This indicates that future mailings should be made to residents of 06905 and not to residents of 10104. A ZIP code analysis of a current customer list can be used to measure the penetration a marketer has achieved in various ZIP code areas. For example, if there are 2500 customers in a five-digit ZIP code area with a population of 250,000, then the penetration level is 1%. A ZIP code analysis of a mailing list can also show how many names are available to be mailed from each ZIP code area. ZIP code analysis of a bad debt file can be used to identify, by ZIP code, groups of prospects most likely to be bad credit risks.