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Market Segmentation

FeaturesMethodologyProfilesReports Order
Household Number and Rank

Regardless of which type of report you want to run first there are two key terms that you need to understand.

The first is Household Number - this does not refer to how many households are in a given geography but rather how many of the households qualify for that specific segmentation definition. The other way to think of this is that it is showing you the market size for that segment in that given geography. So if there are 300 households but only124 meet the definition for a given segment then the Household Number is 124, not 300. And for each of the segments in that given geography they will have a number that will be between 0 and 300. If you are looking at an Urban area then all of the Rural and Suburban defined segments will rank very low. And the sum of the Urban segments should sum close to 300 (there may be some double counting or some households that are not covered so it will not be exactly 300).

Rank - this is a way of knowing how well a segment matches your geography. The rank is a number between 0-100. So for example when looking at the block groups for Middlesex County, NJ (our office location) there are 584 block groups which each had a number of households in them, and for each there was some percentage that met the segmentation selected (in this case P14 - families with children living with them).

AREAKEY - Block Group P14_NAT_RNK P14_COUNT
340230015031 82.9 1487
340230071032 56.3 911
340230006062 44.1 713
340230027011 40.2 650
340230067034 39.0 631
340230014131 34.8 563
340230065003 34.7 561
340230085031 33.5 541
340230015043 33.0 534
340230014163 31.7 513

The Rank tells you that of all the block groups in the county, if you listed them from largest to smallest the top ranking one gets given a 100 the lowest ranking one gets a zero and then everything else is given a number between 0 and 100. If two block groups have the same number of qualifying households they are given the same rank and treated as a single number even if there are 50 block groups that have that same number. So in fact there will not be 584 individual answers for this county but some significantly smaller number. Further the numbers are skewed to the bottom. There will be many more duplicate numbers in the lower end of the range than at the upper end. For example many block groups may have 0 households that qualify for a given segment but very few will have 1487 households - in fact only one does.

Urban-ness

According to the US Census Bureau block groups all break down into two groups: urban and rural. Urban then breaks down into the Urban Cluster (a densely settled area with a population of 2,500-49,999 and the Urbanized Area (a densely settled area with a population of at least 50,000). Similarly Rural breaks down into Farm and Non Farm.

There can be parts of metropolitan and nonmetropolitan areas where there are both urban and rural territory. For example in Middlesex County NJ (where our office is located) most of the area is Urban (white) but there are block groups that are Rural (blue). In fact there are even areas that contain both Urban and Rural counts within a single block group.

Minor Cities are those Urban areas that have a population between 40,000-100,000

Suburban areas are those areas that have Block Groups that are Urban but that are outside of the Urbanized Area.
Income

1. What others do

Other companies create a national set of income criteria - that is to say that a single range is set for the definition of Middle Class or Poor or Upper Middle Class, etc. This is also what the US government does - setting one number for the poverty threshold.


Map Key
Yellow is $45K and below
Light Blue is $45-55K
Green is $55K and above
2. Why we wanted to do it differently

We felt that this sort of flat, national number unfairly penalized the less expensive parts of the country and over-counted the more expensive regions.



For example if middle class was defined as a household income of $35-50K it means that you would qualify those who make $32K in Arkansas as lower middle income and someone who makes $50K in California as middle income. But the difference in cost of living is very different for these two areas. For example the average rent in Arkansas is $614.30 a month, whereas in California it is more than twice that at $1335.70. And housing costs are much more extreme if you look at the cost of buying a house. The average house in Arkansas is worth $85,450 whereas in California it is valued at $510,054 - almost 6 times more. So it is not surprising that folks in California need to get paid more just to have equal buying power compared to a dollar in Arkansas. Thus the median household income is 26% higher in California ($58,153) compared to that of Arizona ($46,076).

3. What we did

Instead of using a single, national set of numbers we calibrated every block group up against the median income of the MSA (City including its surrounding suburbs) that it was located in. For those block groups that were not in a city we used the county level median income. This will then better identify where there are households with disposable income - regardless of the actual dollars.

Our reasoning was simple. If you want to know who makes $35-50K, then you can use the Estimates or the census data and you don´t need us to build that for you. But if what you want to know is, where are the richer parts of this town. If the whole area is affluent, then where are the really rich parts of town. If you are trying to market a luxury product then this will give you the real edge. This will allow you to reach those neighborhoods that have more money than their neighboring communities and want to be the early adaptors in new luxury items. It isn´t enough to just mail to areas that make $65K because in California that isn´t really "rich" whereas in Arkansas you could have mailed to folks who are only making $58K because they will feel "richer" than those making $65 in California.

4. Our definitions

Low Income - 25% below regional median
Lower Middle Class - 10% below regional median
Middle Class - regional median
Upper Middle Class - 10% above regional median
Upper Class - 25% below regional median
Affluent - 50% below regional median


30 Largest Metropolitan Areas and their Median Household Income

Metropolitan Area Name Total Population Median Income
Pittsburgh, PA 2,353,358 36,847
Tampa-St. Petersburg-Clearwater, FL 2,764,953 36,903
San Antonio, TX 2,116,370 38,904
Miami-Fort Lauderdale-Pompano Beach, FL 5,585,525 40,309
Orlando-Kissimmee, FL 2,106,938 41,598
Riverside-San Bernardino-Ontario, CA 4,191,837 42,208
Cleveland-Elyria-Mentor, OH 2,086,863 43,760
Houston-Sugar Land-baytown, TX 6,001,502 43,967
Phoenix-Mesa-Scottsdale, AZ 4,465,818 44,179
St. Louis, MO-IL 2,841,384 44,405
Cincinnati-Middletown, OH-KY-IN 2,183,928 45,264
Kansas City, MO-KS 2,095,836 45,390
Los Angeles-Long Beach-Santa Ana, CA 12,959,963 45,732
Dallas-Fort Worth-Arlington, TX 6,593,201 46,784
Sacramento-Arden-Arcade-Roseville, CA 2,152,609 47,025
Portland-Vancouver-Beaverton, OR-WA 2,281,286 47,404
San Diego-Carlsbad-San Marcos, CA 3,093,669 47,843
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 5,991,927 48,509
Detroit-Warren-Livonia, MI 4,375,369 50,108
Denver-Aurora, CO 2,603,615 50,192
Atlanta-Sandy Springs-Marietta, GA 5,592,147 50,910
Baltimore-Towson, MD 2,702,371 51,147
Chicago-Naperville-Joliet, IL-IN-WI 9,644,791 51,318
Seattle-Tacoma-Bellevue, WA 3,457,586 51,704
New York-Nothern New Jersey-Long Island, NY-NJ-PA 19,147,308 51,862
Minneapolis-St. Paul-Bloomington, MN-WI 3,302,730 54,406
Boston-Cambridge-Quincy, MA-NH 4,628,958 54,649
San Francisco-Oakland-Fremont, CA 4,375,131 62,925
Washington-Arlington-Alexandria, DC-VA-MD-WV 5,550,970 63,482


The national Median Household Income is $44,552 - but as you can see from comparing this to the chart above of the 30 largest MSAs - this is much higher than some (ie Pittsburgh) and much lower than others (for example DC).


        

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