That is, they assume that neighborhoods can be defined in terms of clusters of similar demographic information and behaviors of the households in them. The idea is to make it easier for businesses to figure out their markets. The base information source is the U.S. Census, and updates are based on projections. Statistical techniques, made easier to use by faster and faster computers, are used to classify neighborhoods into different types.
Different companies use different numbers of groupings.
The validity of the clusters is tested against many sources of additional consumer data ranging from car-buying reports to magazine subscription data, which are also used to refine the cluster descriptions. The two companies offer five-digit ZIP code descriptions online for free as a marketing tool but charge for more detailed information. Experts in the business say that you shouldn't be surprised if you don't see your own circumstances reflected in the cluster that describes your area or you walk outside your house and see a street that is very different from its classification. That's beside the point, they say. Cluster classifications are generalizations, said Lee.