In a nutshell, geodemographics work on the principle that people who live in similar neighbourhoods tend to behave in similar ways, even purchasing the same kind of products and brands. By identifying different types of neighbourhood and linking them together, you can deliver your proposition to specific target areas. This is the basic approach to targeting and forms the basis for future modelling techniques.

Historically, geodemographics is the study and grouping of people in geographical locality according to socio class and economic criteria. It is used for business, social research and public policy as they seek to understand the processes by neighbourhoods are formed and their common characteristics. In essence it is a fusion of demography which is information about the population with geography and sociology thereby producing a profiling science . Geodemographic systems estimate the most probable characteristics of people based on the grouped profile of household and individuals within defined geography.

The origins of geodemographics can be traced back to Charles Booth and his studies of deprivation and poverty in early 20th century London, . Booth developed the notion of 'classifying neighborhoods', using 1891 UK Census data to create social groupings within London. 

It was gradually realised that census outputs could serve to identify and to characterize the geographies of cities as the availability of national census data grew and the abiity to use computers to indentify patterns increased. Emerging mthodologies suchs as the development of clustering techniques to group statistically similar neighborhoods into classes on a 'like with like' basis took geodemographics onto the next level. As time has gone the use of more granular date at postcode level has helped to charcterise the information from Census Output level yest further.

From a business / marketing pespective geodemographic systems emerged from the late 1970s with the launch of PRIZM by Claritas in the US and ACORN by CACI in the UK. Geodemography has been used by marketers to target products to households who closely matched the target audience based on their lifestyle and geography and social group. With the use of electoral lists and credit agency information marketers have been able to build a picture of the population/household characteristics in different locations.  This information can be used for aquistion marketing, retention marketing, political campaigns and government policy planning.