Why Location Continues to be a Difference Maker

Last Christmas I wanted to buy a turntable for my daughter. Thanks to an online message forum, I discovered that Target was selling a new brand of turntable at an affordable price point with features typically seen on higher-end models. It was early in the Christmas buying season, and I had a hunch that a product like this might sell out quickly. So I researched the Target.com website, checked their inventory and used the store locator to find the nearest Target with the turntable in stock. At this point many would click the “buy now” button and have the product shipped. Instead, I hopped in the car and drove to the store. Why, you ask? I wanted to see the product for myself before buying it. Once inside the store, my smart phone told me which aisle to go to. With a little help from my friend the store clerk, I located the turntable, looked it over, bought it, and wrapped it up for Christmas. What this very short story teaches us is that while technology has become a key component in the way we consume, we aren’t quite willing to let go of location-based purchasing decisions.

In his best-selling 2005 book The World is Flat, Thomas L. Friedman popularized the concept that 21st century global economies, fueled by technology, were leveling the playing field, creating a world where geography didn’t matter. Trans-national corporations, Internet technology, and streamlined global supply chains, had combined to make it easier for consumers to access the things they wanted – anywhere, all the time.

The virtual, “flattened” landscape is here to stay, and it has drastically altered the way we do business and live our lives. It’s hard to remember what life was like in “the old days,” before Google was a verb, before social media was pervasive in our daily routines. That being said, has the world really become as flat as we thought it would? Maybe not.

Anywhere/all-the-time access to goods and services is wonderful, but does this really mean it doesn’t matter where you live? Even as far back as 2005, many geographers weren’t buying Friedman’s thesis that the world was flat. They insisted on the ongoing reality that place continues to influence how and what we buy.

Richard Jerome, in a recent column for greenbookblog.org elaborates on this concept. The fact is, consumer preferences and behaviors are conditioned, at least in some measure, by geography. To put it another way, how you behave in virtual space is determined by who you are, which frequently correlates to where you live. Even when buying patterns have been so disrupted that consumers have completely changed their means of accessing goods and services—going online to buy, where location seems to have been flattened out of existence—even there, location underpins how we buy online, how you use technology to gain virtual access to retail.

Market researchers must never forget the deep and abiding persistence of geography. Just as the old saying goes, “all politics is local,” there is a truth to the claim that all consumption is local, too. Geographical context, and the behaviors surrounding a given location, are connected to buying patterns, brand identification, and receptivity to new markets.

The real world wields a sort of gravitational force on consumer habits. This phenomenon is described in Wharton School professor David R. Bell’s book Location is (Still) Everything: The Surprising Influence of the Real World on How We Search, Shop, and Sell in the Virtual One (2014). Bell studied online commerce and developed a GRAVITY framework tool to understand how the geographical and virtual worlds intersect. The Internet obliterated two key barriers to consumers’ never ending quest to obtain the products and services they want. The first was information access. It used to be a royal pain to find information about products and their availability. Search engines and instant access to store inventories solved that problem. The second barrier was something Bell calls “geographical friction,” the tendency to only buy what you could get via local markets. The Internet and services such as Amazon two-day shipping has broken that barrier, too. But that is not the end of the story. When Bell studied Internet sellers, he found that sales evolved in some interesting patterns based on location. Initial demand was focused on a few locations, but then demand spread out contiguously—neighbor to neighbor, block to block, and so on. Consumers see what their peers are buying and tend to imitate those buying patterns. In another scenario, because people with similar consumer preferences tend to live in the same neighborhood, they adopt similar buying patterns.

Once you accept the fact that location still plays a major role in consumer preferences and activities, you need to keep factoring geography into your strategic thinking. Some key factors to consider:

  • How is geography influencing buying patterns and tendencies? What other regional markets compare to my own? Are there parallels, and should we be reaching this consumer segment too?
  • Is online retail really meant to displace offline retail? Or should the virtual and physical spaces coexist in a harmonic, fluid way? Maybe the relationship between the two is more symbiotic than parasitic.
  • How does the fact that consumers are doing more of their buying on smartphones impact your marketing strategy? Smart phones’ built-in location services can ease access to goods and services. Brands should be tracking where their customers are when they buy, and whether their purchases are isolated or contiguous to a geo demographic segment.

MSG’s Geo Demographic services can help you to understand your customer base. By mapping demographics onto geography, you can better understand territories, neighborhoods, block-level consumption patterns.  http://www.m-s-g.com/Pages/genesys/geo_dem_services

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