For companies like HoneyBaked or Camping World, it's important to realize that customers love you enough to go to great lengths to buy your products—when they need them. But when they don't need you, buying from you may be more about convenience than necessity. I've actually seen focus groups in which a retailer's best customers, from an RFM standpoint, report they wish the retailer had more stores, longer hours or "were just a little easier to get to"—all elements of convenience. What this says is that even your best customers won't always visit your store if it isn't convenient. And distance is a key element of convenience.
Testing among some of our clients has shown that customers in midtier segments that are closer to a retail store actually will outperform high-end customers who are farther away in non-peak seasons. Given the comments on convenience, this isn't surprising.
Getting Distance Data
Among the first steps to applying distance as a selection tool is getting distance-from-store data on the customer file. Some data warehouse/data mining systems automatically apply distance to records based on latitudinal and longitudinal data associated with addresses and ZIP codes. If you have that capability, great, but if you don't, there are other alternatives.
ZIPFind (www.zipfind.net) offers an easy-to-use and highly functional distance tool that, among other operations, allows you to enter a base ZIP code (that of a retail store, for instance) and pull up a listing of all ZIP codes, their distances from your base ZIP, and populations based on whatever radius you define. By exporting a listing of ZIP codes and distance, and appending the data to your housefile, you can enhance your RFM segmentation with distance-from-store data.
How Far Is Too Far?
Unless you're mailing based on the scoring of a customer file model, the best way to determine how far from your store you profitably can mail is to set up a simple testing grid, such as the table shown below, and mail a variety of RFM segments at various distances from the store.