Increasingly, “Location, Location, Location” is being replaced by “Customer, Customer, Customer.”
This doesn’t come as a surprise to any savvy business person: What you know about your customers will help you serve them better and encourage them to spread the word about the value of your products and services.
However, how you go about learning as much as possible about current and potential customers is the true key to sustained success, especially as small businesses find themselves vying with national brands locating here or marketing via the web.
Sure, you can learn a lot through face-to-face discussions. Nevertheless, in 2008, some of the same detailed market analysis tools used by the biggest companies in the world are accessible to you.
Whether your business is in retail, restaurant, banking, insurance, financial services, or other businesses that services homeowners; you have a need to know your customer’s buying habits and lifestyles. Why? It helps drive sale of the products and services in your business.
Understanding which customers are most likely to purchase your products and services helps you target potential buyers more cost-effectively. Furthermore, by knowing where these customers live, you can make location-based decisions on your stores, restaurants, and branch locations.
When you shop, does the sales clerk ask for your zip code or telephone number? Do you use loyalty cards, store credit cards, charge cards? If so, these techniques provide the data necessary to develop customer profiles.
Businesses increasingly are utilizing location-based technology, demographic studies, traffic patterns, sales, homeowner location, and other data to describe customer lifestyles and buying habits (psychographics), identify ideal store locations, determine high and low volume product categories, locate their competition, estimate potential sales volume, and track average daily traffic volume. The same opportunities are available to the smallest business, due to continuous technology advances.
The use of decision support tools directly assists larger companies to understand their current location dynamics and markets that lead to their success, and identify where else these dynamics exist to support additional growth strategies.
It is not by chance that Home Depot, Chili’s Restaurants, Ben & Jerry’s, Wal-Mart, Pier One, Outback Steakhouse and other national brands are locating in your communities. Their decisions to build a store, hire and train staff, purchase inventory, and advertise in specific ways using these decision-support tools substantially reduces the associated investment risks.
They know who their best customers are; where they live; what the sales potential is from each customer; and which locations can maximize their investment. Increasingly, “Location, Location, Location” is being replaced by “Customer, Customer, Customer.”
Different businesses develop different concepts. A good location for one retailer may not be the same for another. Why? Location value is determined by the customers in that trade area. Customer concentrations drive the location decision!
Market researchers have established lifestyle segmentation systems that encompass up to 72 clusters or divisions based on life stage, demographics, income, purchasing habits and other unique characteristics of residents in specific neighborhoods.
Neighborhoods and households are labeled. These clusters and divisions are critical, since they are statistically likely to act in similar, predictable ways. Most stores service several predominant clusters or divisions. Researchers have categorized the over 111 million households in the U.S. into these segmentation systems.
What is your business concept’s “trade area?” You need to know how much time a typical customer is willing to spend to drive to your business. “Drive time” is often a product of the cost of the good or service. Consumers will drive further to purchase a bedroom set than they would to buy groceries. Today, location-based technology can cost-effectively produce a polygon-shaped map of your “drive time trade area.”
Once you know your dominant customer segments and your model trade area, you can graphically plot the major and minor clusters within each. Then, you can augment this with:
* Daily traffic counts by your site location,
* Competitor location(s),
* Trade area product demand,
* Total households in the trade area, and
* Total population and other demographic data.
You also can determine whether an additional location for your store in the trade area would cannibalize (steal sales from) your existing location.
Data to help you market and advertise cost effectively
Want to market and advertise to the households in this trade area?
Consider a marketing message that “fits” the lifestyles and buying habits of your predominant segment profiles - using print, radio, television, or direct mail. Today, you can target direct mail only to specific households that are most likely to purchase your products and services, saving money on wasted eyes bought in a mass media campaign.
Second-home owners, for example, purchase much differently than full-time residents.
Want to determine if a potential, new location will be successful?
Develop a customer profile model, a model of your successful trade area, and an analysis of alternative sites to determine if these sites have the critical factors (profitability analysis, penetration and product performance, competitor location, cannibalization analysis) necessary for a successful location.
Want to know if your existing product and service mix is maximizing your current locations?
Analyze consumer-spending estimates for your trade area’s demand for specific products and services in 20 major categories and hundreds of individual items. These categories and items are indexed to national averages for each segment cluster or division and can help you understand why certain products and services are disappearing from the shelves and why other products are gathering too much dust.
How do you start this analysis?
1. If you are not yet collecting customer-specific information (street address is the ideal), start collecting it.
2. Analyze your sales and inventory data, as well as total cost of goods sold, to determine high and low sales categories.
3. Locate where your competition is.
4. Consider utilizing location, segmentation, and market analysis to increase your competitive edge.
Remember, technology advances have made this process very affordable for the small, local, or regional service business. You can compete effectively with the chains.
About
Want to know more about how you can acquire the information discussed in this article? Contact Warren at http://www.RutherfordBusinessAdvisor.com Warren J. Rutherford President of Rutherford Advisors Inc. is an Accredited Associate, IIB, a CMT Accredited Senior Mentor, a BNI Assistant Director in the SE Mass/RI Region, and a Pitney-Bowes/MapInfo reseller. He provides business advisory and mentoring services to small and medium-sized business, and performs market research for businesses. Copyright 2008, Rutherford Advisors, Inc. All rights reserved.