Trade Area Analysis
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Sanjay Dhanwaria Retail & Distribution Management Roll No 35 MBA (IB) 2007 - 10 Trade Area Analysis of ABC Restaurant A trade area analysis is an important part of business planning. The trade area analysis shows where customers live in relation to the existing or potential business site(s). The trade area analysis compares the number of customers by distance from a business site to the number of households in the study area. This yields the market penetration rate (number of customer households to total households) or open market rate enabling you to pinpoint a radius drive time that defines trade area. This information is vital to: 1. Knowledgeably invest in marketing and sales campaigns such as direct mail or cable TV advertising 2. Evaluating new sites to relocate existing business to be closer to the current customers or expanding into a new area where prospective customers live 3. Selling or purchasing a franchise 4. Negotiating a lease 5. Profiling customers using the Tapestry segmentation system and then identifying where prospective customers live who have spending habits like the best customers Define Your Trade Area To define the boundaries of your trade area, you need: A business site or a small sample of potential business sites. Electronic customer address information such as point of sale transactions, credit card records, check customers, exit interviews, or warranty cards.
Transcript of Trade Area Analysis
Sanjay DhanwariaRetail & Distribution Management
Roll No 35 MBA (IB) 2007 - 10
Trade Area Analysis of ABC Restaurant
A trade area analysis is an important part of business planning. The trade area analysis shows where customers live in relation to the existing or potential business site(s). The trade area analysis compares the number of customers by distance from a business site to the number of households in the study area. This yields the market penetration rate (number of customer households to total households) or open market rate enabling you to pinpoint a radius drive time that defines trade area.
This information is vital to: 1. Knowledgeably invest in marketing and sales campaigns such as direct mail or cable TV
advertising 2. Evaluating new sites to relocate existing business to be closer to the current customers or
expanding into a new area where prospective customers live
3. Selling or purchasing a franchise
4. Negotiating a lease
5. Profiling customers using the Tapestry segmentation system and then identifying where prospective customers live who have spending habits like the best customers
Define Your Trade Area
To define the boundaries of your trade area, you need: A business site or a small sample of potential business sites. Electronic customer address information such as point of sale transactions, credit card
records, check customers, exit interviews, or warranty cards.
This information is used to produce a trade area analysis report with maps.
Analyzing Trade Area
The table below depicts a trade area analysis for the ABC Restaurant store location. The customer penetration rate is the number of customers divided by the number of households. The table below shows that 25 percent of customers are within one mile of the site at a penetration rate of 24.7 percent; and 50 percent of customers are within 2.32 miles of the site with a penetration rate of 6.7 percent. The action plan for the ABC Restaurant is to concentrate building penetration in the second tier from 6.7 percent to a higher rate.
