06-16-2015 EDC Meeting - Laserfiche WebLink

Home Browse Search

Defining Trade Areas using Actual Customer Data Trade areas based on actual customer data have a number of distinct advantages. Combining actual customer addresses or zip codes with GIS allows you to uncover relationships and perform calculations unavailable with tabular data. A GIS can visually display where customers are coming from, show how customer concentrations are related over an area and perform advanced distance-based calculations. See Defining Trade Areas using Geographic Data. You can collect address or zip code data using a variety of methods and sources. However, regardless of how the data is obtained, this method offers a number of advantages, including: • Collecting information from customers allows the trade area to be based on real business data, instead of created from estimates. • Comparing the trade area maps of different businesses can identify opportunities to increase market size and penetration. For instance, the trade areas for businesses that primarily sell convenience items can be compared with each other to identify variation. These differences could indicate potential market expansion opportunities for some of the businesses. The same can be done for comparison shopping businesses. • Trade areas for different market segments can be compared. Businesses serving residents can be compared to the origins (or home address) of employees at a major employer. Furthermore, addresses or zip codes are ideal for tracking the origins of tourists. While using customer addresses or zip codes to analyze a trade area has the ability to capture trade area variability, an appropriate sample of customer lists from participating businesses must be incorporated. For instance, stores that serve both convenience and destination shopping segments are necessary to understand the local market. Businesses that serve tourists must be incorporated into your analysis to examine the tourist market segment. Employee lists from major employers are necessary to explore the daytime population market segment. Trade Area Based on Customer Street Addresses Ideally, customer origins are defined by a street address. While zip codes can be used, knowing the street address will allow for a more accurate trade area definition. Using the street address and a process known as geocoding, GIS software can map the origin of each customer. After mapping each address, another GIS technique can be used to define rings based on the percentage of overall customers. These rings, or customer penetration polygons,can be drawn according to different customer percentages. Furthermore,these customer penetration polygons help account for the store trade area in the context of demographics,travel barriers and other market characteristics. 16