Market Area and Site
Selection Exercise
RATIONALE
Perhaps the most significant decision in
traditional retailing management is site selection. While this decision
considers many different factors, the objective is to select retail sites with
surrounding populations which match the profile of the retailer's target
customers. Consideration is also given to the presence of competitors,
their size and strategies.
Better Books Inc.
Better Books Incorporated is a direct
marketer of specialty books in the United States. The firm uses database
marketing techniques to make specialized offerings to target customers by mail,
accepting orders via toll free phone lines, mail or fax. By focusing on
mid to upper income households with above average levels of education, the firm
is able to realize higher prices and margins for its specialty
books.
Faced with increased competition from both
traditional retail and Internet firms, Better Books is seeking to maintain its
profit growth through; 1) selective expansion into markets outside the United
States, 2) increasing its customer base in the United States, and 3)
expanding into traditional book retailing from its current base of two outlets
in the San Francisco area.
You are the business geographics consultant retained by the firm to support this
effort. In this assignment, you will merge internal company data with
geodemographic information at the block group level to produce a profile of the
customers in the market areas of the firm's first two retail outlets. You
will then use this information to evaluate the potential service areas for new
potential locations in the same market, seeking the site which most closely
matches the customer profile of the firm's most successful outlet.
Exercise 1: Market Area Analysis (25 points)
Better Books wishes to create a
profile of the customers of its two existing retail outlets in the San Francisco
area. Specifically,
it wishes to determine the spatial distribution of each store's customers and
the demographic and lifestyle characteristics of those customers. In this exercise, you will
use ArcView to geocode the addresses of the firm's customers and current
stores. You will then define a market area for each of the two stores,
merge the customer data with commercially available demographic and lifestyle
cluster (PRIZM) data and use this information to construct a customer profile
for each of the two stores.
- Download and run the MarketArea.exe
file with data for this project.
- Load ArcView and begin a new project.
- Add theme for the San Francisco Metropolitan Statistical
Area (MSA), (sf-msa.shp).
- Add themes for SF streets (sfstreets.shp), block group
boundaries (sfblkgrps.shp),
and bookstores (sfbkstrs.shp).
- Add tables with customer (sfcustomers.dbf) and store
(sfstores.dbf) information,
geocode the addresses, and add customer (gcsfcust.shp) and store (gcsfstor.shp)
themes.
- Add the tables containing block group demographics (blkdemo.dbf)
and PRIZM lifestyle cluster (blkprzm.dbf) data to the project.
- Using the spatial join procedure, join the table Attributes
of Gcsfcust.shp with the table Attributes of Sfblkgrps.shp. Join the
block group demographic data table blkdemo.dbf with the Attributes
of Gcsfcust.shp table. You have now created a geodemographic
overlay in which demographic values have been assigned to each customer
based on the block group in which they live. You will use this
information to profile the customers of Better Books two stores.
- Using the join procedures, merge the lifestyle
attribute table blkprzm.dbf with the Attributes of Sfblkgrps.shp
table. You now have integrated the lifestyle data with the block group
demographic and base map data. You will use this information to create lifestyle profiles of the
market areas of Better Books two stores in the San Francisco area.
- Use the buffer function to define a 1 mile ring-based
market area for each store. Using the Select by theme function,
select the customers who live within these market areas. Using the Summary
function on the Store_id field, calculate average order size, sales, % home
ownership, % some college, age, family size and income for the customers in
the two areas. From the resulting table, generate graphs which
illustrate any differences you find.
- Using the same buffer theme and the "Have their
center within" option of the Select by theme
function, select the block groups within the market area of the two stores. In the Attributes of Sfblkgrps.shp table, add a new
field for StoreID and enter the number of the store in which the block
groups are located. Save the resulting table. Use the summary
function to create a table which displays the sum of the people in each
PRIZM cluster for each market area. Within the Chart function, design
pie charts which display the composition by PRIZM cluster of each market
area. What patterns do you see?
- Following course stylistic
expectations, write a 2-3 page report in which you,
- describe the procedure you used in this customer
profiling analysis,
- provide a map showing the location of the two
stores, the customer distribution, and the ring-based market areas,
- provide a table containing the demographic
customer profiles of the two market areas,
- provide a describing these procedures and
your conclusions about the customer profiles of each outlet, and
- explain your conclusions about the differences in
demographics and lifestyle clusters between the market areas of the two
stores. Which market area would you select as the 'model' when
evaluating additional sites? Why?
Exercise 2: Site Selection (25 points)
Better Books management desires to use the
customer profiles you have produced to select a site for a third retail outlet
in San Francisco. In this exercise, you will identify available
properties, define service areas for each, determine the characteristics of the
population within these areas, and select the site which offers the best match
with the customer profile you have selected as a model. You will then
write a report summarizing this project and explaining your recommendation for
the third site. i
- Load the SFMarket.apr project you created for
the previous assignment.
- Add a theme listing available properties (availableproperties.shp).
- Select from available properties those which do not
duplicate current sites and are not saturated with competing stores.
- Using the buffer function, create a ring-based
market area for each site.
- Select the block groups which are contained within
each site and calculate summary statistics on the demographics and lifestyle
cluster characteristics of each area. Plot the results on graphs which
compare the values for each site.
- Select the model market are you identified in
the previous exercise. Determine which site you will
recommend.
- Following course stylistic
expectations, write a 2-3 page report to Better Books management
in which you;
- describe the site selection process you have performed,
- explain the profiles of the resulting sites and their match with the
model you have selected,
- display the results of your analysis with maps and graphs,
- explain your recommendation and the rationale for it.
The two parts of this
exercise are due together on the date specified in the Course Schedule.
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