What in the World is Geocoding?

5 minute read

Geocoding connects a postal address to a physical point on the planet. Adding this information to a corporate database enables marketers to do many things they cannot do with addresses alone. Today we will learn how geocoding works, the levels of accuracy involved, and how organizations can take advantage of this data in mailed and electronic communications. We will also explore geocoding’s role in business strategies and decisions.

What is Geocoding?

Here’s a commonly agreed upon definition for the term:

“Address geocoding, or simply geocoding, is taking a text-based description of a location, such as an address or the name of a place, and returning geographic coordinates, frequently latitude/longitude pair, to identify a location on the Earth’s surface.”

– Address geocoding article, Wikipedia

Geocoding provides more helpful information than standardized and corrected postal addresses alone. For example, according to the USPS, a baseball field has a valid address. The address is helpful for emergencies and for directing visitors to a game. However, its marketing value is limited. Geocoding identifies addresses in relation to other points on the globe, making it more useful for a variety of applications.

Why Do Organizations Use Geocoding?

A variety of industries use geocoding software, including:

  • Healthcare: Geocoding makes it easy for patients to find healthcare facilities by filtering the entries in provider directories according to travel distance. It also provides data for research groups to study the epidemiological patterns of disease.
  • Finance: Geocoding helps determine lending activity in the community to assist in fair lending efforts.
  • Public Safety: Geocodes are used for emergency responses via locally developed street files and E911 points.
  • Commercial: Geography is factored into business analytics processes. Geocoding is also used to monitor shipping patterns and customer sales.
  • Insurance: Insurance companies rely on geocoding techniques to help set premiums and make underwriting decisions based on the physical location of the insured property.

Geocoding and Direct Mail

A standardized and correct postal address not only qualifies an organization for direct mail postage discounts, but it is also the first step for geocoding. Where a customer lives has a direct impact on marketing success. Geocoding data enriches address information by adding latitude and longitude coordinates to exact address data. This step allows companies to build better marketing clusters based on relevant data points. There may be a lucrative marketing cluster in the northwest corner of a ZIP code, while the rest of the area offers little chance of success for a particular marketing campaign. Instead of marketing to customers based on sizeable areas like ZIP codes or city names, companies can approach their best targets based on latitude/longitude coordinates.

Why Not Just Use ZIP Codes?

A ZIP Code map is arranged in blocks. ZIPs are designed for delivery, not demographic classifications. ZIP Codes are not the way people work, travel, and live. People living on the north edge of a ZIP code probably shop at different supermarkets and visit different car repair services from people on the south edge. One “chunk” of a ZIP Code may be single-family homes, while another may be mostly apartments. These scenarios illustrate why organizations need geocoding. In addition, ZIP Codes are not stable over time. The USPS modifies ZIP Codes as population patterns change. For example, a subdivision development at the site of a former farm might cause a ZIP Code to split. A location’s latitude and longitude will never change.

Geocoding for Practical Problem Solving

Superior geospatial data is an investment. The data available from free services may not feature the level of accuracy or preciseness necessary to do the job. Most companies already have access to address coding and cleansing software. It makes sense to get the geocoding data from the same source.

Free or low-cost applications offer geocoding solutions for non-critical business scenarios. Google Maps Satellite offers basic intelligence, for example. Professional-grade geocoding applications are designed for problem-solving, not just dropping coordinates into a database. Organizations analyzing the risks of a “free” geocoding solution find that accuracy and adaptability are not robust enough for the results they want. Marketing Directors, Risk Assessment Officers, and Logistics Managers need geocoding solutions that include three primary components:

  1. Postal address data standardization and validation
  2. Geocode Determination
  3. Data Enrichment

Professional-grade geocoding services may be included with software tools that append additional data sets, including demographics, purchasing preferences, and lifestyle data. In addition, organizations may want spatial data for territory assignment or determining a flood zone. Professional geocoding tools have all three components in a single solution. This approach provides the most accurate results possible.

For more information about geocoding applications and how geocoding works, see our article “Geospatial Marketing – How to Pinpoint the Right Customers”.

Geocoding from Firstlogic

Firstlogic Solutions® is a provider of CASS-Certified and NCOA address updating and standardization software solutions. We are the leading SAP® Partner specializing in delivering Firstlogic Data Quality and SAP Data Services (DS) solutions to data-driven companies.

The geocoding data provided by Firstlogic and SAP is specifically designed to work with the Firstlogic and SAP Data Quality Management (DQM) software products.

Firstlogic’s and SAP’s Geocoding Transform converts physical postal addresses into latitude and longitude coordinates using the “Interpolated Geocoding” algorithm with data from the TIGER/Line® geographic coding system.

The TIGER/Line system maps a location’s streets to a geographic coordinate space. Each street segment in the database includes a range of house numbers. Interpolated geocoding algorithms in the software match an address to a street segment and then compute the likely position of each address.

Geocoding for Land Parcels

Land parcels are units of land ownership. The latitude and longitude of a location is determined by the center of a 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 use parcel-level geocoding methods in an urban setting as well, as it can sometimes return more precise locations. Firstlogic’s products give customers the opportunity to match the geocoding method to their requirements.