Who Needs ZIP Codes? Other Ways Merchants Can Glean Customer Information

The California Supreme Court's ruling that the state's merchants can no longer ask customers for their ZIP code have some merchants scrambling for new ways to target their customers, but there are steps small businesses to collect valuable customer information.

Experts say small retailers don't have much use for ZIP codes anyway since they tend to carry more specialized products, have a more hyper-local customer base and lack the resources to effectively analyze ZIP code data. With that said, the ruling draws attention to the need for small businesses to implement innovative marketing strategies, said Tom Bogan, owner of business coaching firm ACTIONCOACH in Yorba Linda, Calif.

In the case Jessica Pineda v. Williams Sonoma the high court ruled ZIP codes were "personal identification information" and asking for them violates a state consumer privacy law. Merchants can use the codes to determine where customers live and for other marketing purposes like promotional and direct mailings. California retailers will now be fined $1,000 for each offense.

Small retailers should focus their marketing efforts online, advised Ryan Evans, president of Rand Media Group, which develops online marketing campaigns for small and mid-sized companies.

"This decision is largely irrelevant to sophisticated marketers," he said. "Using ZIP codes was relevant when marketing was done with direct mail, the Yellow Pages or print advertising. Those days are gone. Marketers can now target users online by their interests, browsing habits and even relationships. Small businesses should stop wasting time asking for ZIP codes and start figuring out how to get their customers to interact with them on Facebook and Twitter."

The ruling does not prevent businesses from inviting consumers to join clubs and other programs that require them to submit valuable information such as email addresses, mailing addresses, ZIP codes, and phone numbers, said Farrah Parker of FD Parker & Associates, a strategic marketing and public relations firm.

"For everybody that walks into [your] shop, you should try to collect their … address, phone number,” said Bogan. “You're going to have incentives for giving that information to you. It's a platform for designing certain promotions … you'll be in a much better place to market your products."

Kathy DalPra, SEO specialist and Web site coach with The Online Close, agreed.

"Retailers will need to get creative as to how they find new customers and market to existing ones," she said, by email marketing, increasing social media presence and using online coupons to drive in-store traffic.

"If this was my business, I'd create a few simple, high-converting landing pages with one single offer and use geographical Search Engine Optimization (SEO) to direct local buyers to my landing pages. I'd then use these pages to drive them back to my store with coupons, events and other promotional offers," she said.

No matter what method small businesses using to reach target markets, the key is narrowing them effectively and using voluntary subscription information wisely.

"The biggest mistakes I see small business owners make ... are they don't narrowly define their market and thus the marketing medium they use to get their message to the highest concentration of prospective clients is inappropriate," Bogan said. "Then, they don't [separately] measure the results of each marketing strategy they employ. By not testing separately, they continue to pour good money into failed strategies because they are not aware of the failures."