Using PRIZM for Market Segmentation: Definition & Advantages

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  • 0:04 Market Segmentation
  • 0:33 What Is PRIZM?
  • 2:17 PRIZM Advantages
  • 3:26 Lesson Summary
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Lesson Transcript
Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

The PRIZM program used for market segmentation can be a valuable tool for business owners and marketers. In this lesson, you'll learn more about PRIZM and some of its benefits.

Marketing Segmentation

Jeremy works at a technology company. His boss has tasked him with learning more about the company's consumers in an effort to direct marketing and sales activities in a way that will encourage more business. Jeremy has decided he needs to undertake a process known as market segmentation, which is dividing an entire market into different customer segments. His goal is to better understand his customers and to improve his strategies and tactics for reaching them about products and services.

What Is PRIZM?

One effective market segmentation tool is called PRIZM. It was developed by Claritas. PRIZM stands for Potential Rating Index for Zip Markets and is built around geographic neighborhood data obtained through the United States Census.

PRIZM assumes that similar households in the same neighborhood share similar characteristics such as demographic data (i.e., age, race, education level, marital status, etc.), and variables such as lifestyle, attitudes and behaviors. PRIZM works by assigning all households in each neighborhood to a neighborhood group. Households are grouped into one of 68 demographic and behavioral segments.

Here are a few examples:

  • Group 01: Upper Crust - Wealthy, mature without kids
  • Group 22: Middleburg Managers - Upscale middle age family mix
  • Group 48: Generation Web - Low-income younger family mix
  • Group 68: Bedrock America - Low-income middle age, mostly without kids

Census data helps to form these PRIZM groups using neighborhood types, social rank, household composition, mobility, ethnicity, urbanization, and housing. The system assumes that people with similar cultural backgrounds, needs, and ideas gravitate toward one another and live in neighborhoods that offer affordable advantages and compatible lifestyles. By understanding and grouping households in this manner, marketers are able to take advantage of the data to identify and implement marketing opportunities and strategies. It's the most used neighborhood lifestyle segmentation system in the United States, helping to paint a picture of the people throughout the country.

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