The Fine Art of Redlining
Why coddle lousy customers?
Oct. 18, 2005: Vol. 1, Issue No. 40
IN THE NEWS
Sears adds 15 percent restocking fee on some items
--By Wendy Tanaka
The Philadelphia Inquirer, Oct. 14, 2005
intransitive senses: to withhold home-loan funds or insurance from neighborhoods considered poor economic risks
transitive senses: to discriminate against in housing or insurance
In many American upmarket suburbs is an unwritten agreement among realtors that homes for sale or rent will not be shown or offered to minority families. This is a form of discrimination called redlining.
Redlining is a fact of life in direct marketing. For example:
Many years ago, the Book-of-the-Month Club received a phone call from a new member in New York City. The person said she had replied to an introductory New York Times ad offering "5 books for $1" several months before and had heard nothing.
The telephone rep at the club was as baffled as the aggrieved consumer, when suddenly she asked what ZIP code the caller lived in.
"10035," was the reply.
After a pause, the rep came back on the phone. "Oh, we're not filling orders from that ZIP code."
As I recall, there was hell to pay.
The policy was based on a ZIP code analysis of customers that revealed many respondents to ads from inner city and slum neighborhoods were keeping the five books, never paying the $1, and never ordering additional books. As a result, no direct mail offers went into these areas, and any newspaper coupons that came in from them were tossed in the round file.
This was a form of redlining--the refusal to do business with potentially marginal customers.
Is this a smart policy?
It depends upon whether you want to make a profit or not.