Postal address information is important. Standardized and corrected postal addresses are essential for accurate mail delivery, targeted marketing, and other activities a business undertakes to run its operations. Postal addresses do not, however, always identify a precise physical location on Earth. When precise location is important, you must add geographic latitude and longitude coordinates to the database with geocoding. Geocoding is the process of transforming a physical address or land parcel into a set of latitude and longitude coordinates (geocodes) which can then be displayed on a map or used for calculating geographic areas for target marketing. You can use the coordinates to calculate the distance to the nearest retail outlet, determine a building’s proximity to fire stations, decide if the property lies within the boundaries of a taxing district, or for many other business purposes.
ZIP Codes Are for Mail Delivery
The USPS designed ZIP Codes for mail and package delivery, not demographic classifications. Though you may know the average income level of all residents living in a ZIP Code, the wealth profiles of families in one neighborhood could be substantially different from families living in a less-affluent section of the same ZIP Code. The preciseness of geocoding is necessary to use the location of a home to segment an area and target the recipients of a marketing campaign aimed at families within a certain income range.
ZIP Codes are not necessarily stable over time. While a location’s latitude and longitude will never change, the USPS often modifies ZIP Codes. Population shifts or new construction, for example, can cause ZIP Code boundaries to be redrawn or new ZIP Codes to be created.
What is Address Geocoding?
Address Geocoding converts a location’s physical address into a pair of precise latitude and longitude coordinates. Geocoding provides more useful information than address standardization and correction alone, as the coordinates define a fixed point on the earth. A postal address may not tell you why sales at one of your retail stores suddenly dropped. Geocoding, however, could show you the store is located next to a large construction project that is disrupting traffic in the area, or that a competitor opened a location two blocks away.
Geocoding is More Than Mapping
We often think of geocoding only in terms of maps. While geocoding enables precise mapping, it also includes spatial analysis. Spatial analysis makes it possible for organizations to figure the relationship between two or more locations. With exact latitude and longitude coordinates, a company can calculate the distance between two points and determine if an address is in a zone or territory that affects business decisions.
What is Geospatial Marketing?
Geospatial marketing describes the practice of applying geospatial data to recognize prospects or identify patterns conducive to creating the desired response to a marketing campaign. Geospatial data is simply proximity — the relationship between objects based on their location. When marketers can predict response to a campaign more accurately by knowing the relative location of homes, businesses buildings, landmarks, or boundaries, geospatial data will enhance the campaign’s success.
Geospatial marketing can be used to:
- Recommend products to customers based on precise demographic information
- Compute the distance from a customer’s home to a retail store, office, or bank branch
- Offer directions or public transportation advice in marketing materials
- Filter prospects unlikely to respond to an offer because they are too far away
- Personalize marketing copy and images with location-based references
Geocoding, Geospatial Marketing, and Risk Mitigation
Addresses help the USPS deliver mail and packages. They do not identify important geographic-related attributes and characteristics impacting risk, customer satisfaction, and profit. Among other things, geocoding assists with:
- Targeting potential customers within a radius of a brick-and-mortar location
- Identifying credit card purchasing trends for fraud detection
- Determining sales tax rates for specific city, county, and state geographic boundaries
- Promoting products and services targeted to specific geographic regions such as beaches, lakes and mountains
- Identifying a street address or location name located near a latitude/longitude using reverse geocoding
- Assigning sales territories by precise geographic regions not provided by Zip Codes
- Determining the distance service people must travel to a customer location
- Identifying census tract & parcel numbers for regulatory compliance
- Calculating the distance to a body of water, known hurricane path, or nearest fire station
Geocoding for Businesses
Consumers and businesses have access to several free or low-cost applications that offer geocoding solutions. Even Google Maps Satellite offers basic intelligence. Professional level geocoding, however, is designed for problem-solving, not just mapping information. Organizations analyzing the attributes of a “free” geocoding solution find that accuracy and adaptability are not robust enough for the results they need. Professional level geocoding includes three primary components:
- Postal address data standardization and validation
- Geocode determination and assignment
- Data enrichment
Professional level geocoding software tools allow you to append more data sets, including demographics, purchasing preferences, and lifestyle data. In addition, you may want spatial data that enables territory assignment or flood zone determination. Professional geocoding tools combine all three components into a single solution or suite of products. This approach provides the most accurate results possible.
The U.S. Geocoding Reference Data provided by Firstlogic and SAP is used with the Geocoding Transform (GT). It is specifically designed to work with the Firstlogic and SAP Data Quality Management (DQM) software products.
It is important to understand that businesses can accomplish geocoding through various methods. Some methods may be less accurate than others, depending on the location of the property and the level of detail in the supplied data.
All address geocoding involves some extrapolation. A postal address does not always translate to a precise position on the globe. The coordinates are close, but not always exact.
How it Works: Address-Level Geocoding
Firstlogic’s and SAP’s Geocoding Transform converts physical addresses into latitude and longitude coordinates using the “Interpolated Geocoding” algorithm. We use data from the TIGER/Line® geographic coding system.
TIGER/Line system maps a location’s street segment to a geographic coordinate space which includes a range of house numbers. Interpolated geocoding matches an address to a street segment and then computes the likely position of the address.
Suppose a street segment in a city block includes house numbers ranging from 100 to 200, for example. The database knows the coordinates for the beginning and end of the segment and evenly assigns the coordinates for the locations between them. Address-level geocoding routines assume house number 150 to be in the middle of the coordinate range while it assigns a house number of 190 coordinates near the end of the street segment. If the houses are not equally spaced along the street, the assigned coordinates could be off by a small amount. For most commercial purposes, this level of accuracy is acceptable.
You may have experienced this phenomenon with the GPS system in your car. Sometimes it will announce that you’ve arrived at your destination, though you’re still a few hundred feet away.
Address-Level geocoding may be very accurate within cities with short, regular street blocks, but the system accuracy decreases as population density declines.
How it Works: Parcel-Level Geocoding
Land parcels and lots are units of land ownership. Parcel-Level geocoding converts physical land parcels into latitude and longitude coordinates using geographic cadastral data where there are no overlapping parcels or gaps in land lots. When you perform geocoding with parcel-level data, the latitude and longitude of a location is determined by the center of a land parcel.
Parcel-level geocoding works extremely well in rural or undeveloped areas lacking the structure of street grids and city blocks. Depending on the application, an organization may choose to use parcel-level geocoding methods in an urban setting as well, as it can sometimes return more precise locations.
Geocoding Business Benefits
Though marketers use geocoding to enhance customer data and segment advertisements, a precise property location is important in many business aspects. Adding geocode coordinates to your database enables more informed decision-making. Examples might include determining the best sites for retail stores, establishing sales and service territories, enhancing fraud detection, targeting potential customers, or calculating taxes.
Understand how a geocoding solution can benefit your business by assigning latitude and longitude coordinates to your location data. Choose the best geocoding solution that provides the level of accuracy your applications require from interpolated address-level to pinpoint parcel-level geocoding.
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