The Trade Area You Never Knew You Had

Who Are Your Customers—Do You Really Know?

One of the first questions our users ask of us is “Can you tell me something about my customers?” At first, this seemed odd, and quite frankly it left us scratching our heads. Doesn’t a small-to-medium brick-and-mortar business (SMBMB) know their customers? After all, their customers often walk right through their doors and meet them face-to-face. But then we saw the problem: it’s probably not good business practice to ask your customer “Do you want this gift-wrapped? And how much do you spend on artisanal soaps in a month? What other stores do you like to shop at? Do you live in the area? Where do you work?”

Your business can find the basic traits of your core customers—for example, male or female, families with young kids, professionals, can spend $10 on a bar of soap. These traits largely fall within demographic and psychographic quick studies, but they don’t address the larger behavior patterns that help us assess who our customers are and what they are about. Basic demographics don’t take you far enough.

Marketing professionals and product designers collect data to build personas of typical users to represent their ideal customers. They use this information to inspire their product design and marketing messaging and—equally important—to target the right people. After all, there’s no point in promoting after-school enrichment activities to an audience that does not have children.

One of the first questions our users ask of us is “Can you tell me something about my customers?”

Successful business owners invest in understanding who their ideal customers are so they can better serve customer needs and grow their business. They stay in control of their businesses by actively developing their markets, not by passively waiting or hoping for their audiences to find them. The days of “build it and they will come” are long gone with retail competition exploding, both offline and online. This is a dramatic shift and has prompted the advent of fast-paced, specialized digital tools and products. These tools are designed for large brands and companies that have the resources and the ability to collect and use very large datasets, and for a small army of analysts to make sense of the data. They help businesses with many data-collection and customer-engagement tasks, from building customer personas to targeting and beyond. The strongest, most useful buyer personas are based on both market research and insights gathered in-house through surveys, interviews, etc.

When it comes to gathering customer information, SMBMBs have for the most part been left to fend for themselves, but today there are new tools available to help businesses navigate both the data and the decision-making.

New Tools Available to Help SMBMBs Navigate & Grow

If you own an SMBMB, by definition you own a location-related business. That means your physical context largely determines your actions, and your context is the setting within which you want to make a sale. Context comprises the characteristics of your location: the customers available to you, the surrounding businesses that complement or compete with you, and how the activities of your business fit in with surrounding activities.

To actively develop your market, you need the right tools to figure out the who, what and where behind your market—who is your target customer, what customer needs are you fulfilling, and where will you find your customers? You also need the ability to test different ideas and executions, and an appetite and readiness to accept change. You want to cast a wide net but still be able to target the right audience with the right message.

Try this: think about where your store is, the actual location with surrounding buildings, businesses, streets, etc. Take a mental snapshot of where you think your customers are. Now ask yourself these questions:

• How many people are there?
• What do you think they are doing?
• What time of day is it?
• What can you glean from this group of customers?
• Can you compile a profile of these people?

Now go to Spatially.com. Enter your SMBMB address, and see what a data-driven snapshot looks like. Did you find any surprises?

We currently serve only select cities; please check here to see if we cover your area yet. If you don’t see your metro area, drop us a note—we’d love to hear your feedback. And NYC friends, we’re saving the best for last, so stay tuned to find out when we bring you on board.

Old-Fashioned Trade-Area Calculations Have Only Limited Use

Building your market involves knowing not only who you’re targeting and what they want, but also reaching out to them and helping them to find you. Demographics and psychographics are of limited use if you and your customers can’t figure out where to find each other.

To actively develop your market, you need the right tools to figure out the who, what and where behind your market

Calculating the size and range of your market used to be a matter of defining your trade area (or catchment area), that theoretical area from which your customers come to your business. This is done by plotting one-mile, three-mile and five-mile rings around your location and then estimating headcount. Estimates assumed that certain businesses (like amusement parks or top restaurants) drew customers from further afield. Theoretical trade areas considered major competitors, differences in population by time of day, popularity of a business’s neighborhood and walkability. They are still often used today when businesses market their products and services. But all of these estimates are still just that—estimates. They’re guesses, theories based on unproven assumptions. They may roughly determine your trade area, but that’s not the same as measuring your actual market.

The Active Trade Area You Never Knew You Had

Traditionally, the term “trade area” referred to a geographic area that defines how far a business’s influence extends. Spatially’s Active Trade Area (ATA) application determines the trade area for a business (or any point of interest) based on real, observed data. The resulting information is accurate, detailed and provides the insights you need to make informed business decisions. Determining your ATA will let you tailor your marketing and advertising strategies to your actual market instead of a theoretical one, so you’ll evaluate options realistically and identify growth opportunities you’d otherwise miss.

By applying proprietary spatial analytic algorithms to huge volumes of anonymized behavioral data, the Active Trade Area shows where your customers actually come from and where they travel in your area. It can differentiate customer activity patterns by time of day, day of week and season of the year. The ATA also shows nearby populations who don’t engage with your immediate area, revealing potential untapped markets within easy reach of your business.

Using ATA, you can determine the characteristics of the people your business is most likely to attract—even differentiate between those people who pass through a business area and those who actually stop. Most importantly, the Active Trade Area will let you find that new, untapped market of people who are already traveling to your business area.

Benefits to your business from leveraging Active Trade Area data include:

• Identifying and targeting an untapped market to drive new customer acquisition for brick-and-mortar businesses
• Learning who the people who travel to your business area are and where they come from
• Gaining new perspectives on true market potential and market size

Spatially’s Active Trade Area application provides rich, business-specific market insights that expand your ability to find and reach your target audience, attract them to your business and determine the best place and time to move into new areas or offerings. Here’s your chance to harness the power of spatial analytics to reach the markets that matter.

So, how well does this work? Really well. Let me show you what I mean.

What Do Pizza, a Women-Only Gym and a Child-Enrichment Program Have in Common?

Not much. The three businesses we’ll look at here offer casual dining, women’s fitness opportunities and children’s activities to their customers. Each has a different customer base, they surge at different hours of the day and their business models vary dramatically. Yet for each of these small businesses, the Active Trade Area application has been a powerful tool. ATA has provided critical information about customers, helped businesses expand their markets and allowed more accurate ad targeting.

Old World Pizza:

The Importance of Finding Out Where Your Customers Are

Old World Pizza Miami is a single store, brick-oven, New York-style pizzeria located in a small strip mall in a largely residential area. Sales are stagnant. The owners approached us to try to get sales moving again using our Spatially Ads platform.

Being a pizza store, the customer data they’ve been able to collect has been limited to their delivery business and was spotty at best. Traditionally, Old World Pizza would open a map, draw a 2-mile radius around the business (their delivery constraint) and declare their market. But were they missing pockets of their target market, or wasting money by advertising to areas that didn’t tend to visit their business? Without sufficient customer data, they had no way to know.

That changed when Old World Pizza started working with Spatially to determine their Active Trade Area. When a business has insufficient customer data to work with, the ATA serves as a reliable surrogate to actual customer data. And because most SMBMBs don’t have such data readily available, the ATA provides the customer profiles and location insights that allow businesses to reliably target the people that matter most—people that live and work in the area and who frequent the store’s location.

Need more proof? Look at the image below. Using Facebook Ads we ran two types of ads—one using a two-mile circle around the store and the other using our ATA. Within the first few days we saw the ATA outperforming the circle significantly. We had seven times the clicks, almost ten times the reach, all at (drumroll) half the cost. We ran the same test on Google AdWords and found similar results. So, finding out where your customers actually are really does matter and is one of the first steps to proactively develop your market.

RedZone Fitness:

How to Use Ads to Test New Markets

RedZone Fitness is a female-only group training studio with two locations in South Miami. They limit class sizes to provide a personalized workout following their proprietary regimen. RedZone, a fresh alternative to big box gyms, had seen huge success and was looking to open new locations.  

We started working with RedZone by analyzing their existing markets and clientele in order to recommend potential new locations. In our analysis we discovered key attributes of their current customers. Using these attributes, we found potential locations that would support their business model and give them access to a similar customer base.    

That led to the big question: which of these locations was most likely to be interested in RedZone’s services? Rather than going with a gut feeling and making a major investment, including a studio build-out, RedZone used our Spatially Ads platform to test the market for each potential location. While RedZone has customer data on their existing locations, they didn’t have the same data for any new location. RedZone served ads to each respective ATA to gauge interest and engagement for each potential location.  

Empow Studios:

The Benefits of Supplementing Sparse Customer Data

Empow Studios provides after-school enrichment and summer technology camps geared towards elementary and middle school-aged kids. Empow found its customer data too sparse and lacking in detail to determine the best areas to target in their marketing and ad campaigns, so they turned to us for help.

Using ATA, Empow was able to develop surrogate data that helped them to determine a more relevant audience and fine-tune their Google AdWords advertising campaign. The results were so positive that they plan to test new locations using our Spatially Sites system to help them select the most promising candidates.

So Where Do We Go From Here?

Incorporating geospatial analysis into your market research lets you move from guessing about your market to truly knowing your market. That makes a significant impact on your ability to address your potential customers and their needs.  

Location-related business decisions including marketing are too important to base on theoretical actions by imaginary customers. When you base decisions on the actual spatial behaviors of people in your target market, your business plans become clearer, your goals fall into line with reality (making them more attainable), your advertising efforts grow more specific and successful and your marketing outreach is more productive. When you know how to find your customers, you make it easier for them to find and do business with you. And in order to get there, you need the where.

A Final Note

Just in case anyone was put off by the shameless plugs of Spatially’s products— pushing our business really was not the impetus for this article. Rather, the bigger point is that location intelligence is a powerful tool for decision-making and can significantly improve your business performance. Sharing what we’ve learned through developing our products and working with customers is the clearest way to show you what we’ve learned.

Hillit Meidar-Alfi is founder and CEO of Spatially, a location search and analytics company with offices in Boston, Miami and Seattle. Spatially develops tools that help businesses, real estate professionals and other location scouters to better understand business areas and residential neighborhoods and get a comprehensive view of the location dynamics within an area. Spatially launched in January 2017, currently covers the Boston, Miami and Seattle metro areas and plans to roll out nationally over the coming months. For more information about how to put Spatially to work to match your market to your location, visit https://www.spatially.com, call 888-317-5851, or contact [email protected].