Christine Jackson
Modeling Market Penetration of Credit Line Customers: An Aid for Targeting Potential Customers © 2005
The purpose of this study is to illustrate the value of applying spatial analytical techniques to key business issues faced by financial institutions. Particularly, the approach to be evaluated and discussed throughout this paper will help contribute to the Royal Bank of Canada's knowledge of regional, spatial, and contextual factors of their Credit Line customers within the Greater Toronto Area, which in turn has a dramatic impact on the design and implementation of customer analysis and marketing approaches. This paper utilizes a file of 5,777 Credit Line customers living within the GT A, from the product's introduction in early 2004 to May 2005. The analysis investigates the use of principal component analysis to reduce 37 socioeconomic and demographic variables down to 6 underlying factors. These factors were then used as independent variables in multiple regression (OLS) to produce a model of market penetration. The model results indicate a low level of explanatory power (R 2 = 17.2% ) due to the newness of the Credit Line product. Despite this, the multi-method approach used in this research study demonstrates the value of GIS, spatial analysis, and multivariate techniques as an aid to target potential new customers.