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Introduction to the Market Analysis Process
Bill RyanUniversity of Wisconsin-Extension
Jennifer Russell and Kathie Brown,University of Illinois-Extension
Funding - North Central Regional Center for Rural Development (NCRCRD) Seed Grant
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Purpose of a Market Analysis
1. To support business developmentwith reliable data that accuratelydescribes the market.
2. To research issues specific to yourparticular community.
3. To provide a foundation fordeveloping economic developmentstrategies for a business district.
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Illinois communities currently participatingin Downtown and Retail Market Analysis
Elmwood
Germantown Hills
Farmington
Silvis
Winchester
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A. Extension educator
B. Main Street or BID director
C. City plannerD. Economic development professional
E. Retailer
F. Other
What is your role in downtown and business district analysis?
Poll
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YES
NO
Has your community ever completed a downtown marketanalysis or other economic study?
Poll
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http://fyi.uwex.edu/downtown-market-analysis/
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Part I. Understanding the Market
Trade Area Analysis
Funding - North Central Regional Center for Rural Development (NCRCRD) Seed Grant
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Why Create a Trade Area?
1. Reasonable area for generating reports thatexamine local resident characteristics
2. Opportunity for businesses to learn where theymight be able to expand their own trade area
3. A basis for market potential calculations (supply
and demand estimates)
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A. 10,000
B. 35,000C. 85,000
D. 500,000
The average Wal-Mart Trade Area in the U.S. includes howmany people?
Poll
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Trade Area Considerations
Factors to Consider:
Population Proximity of competing
centers
Local mix of businesses
Local destination attractions Traffic patterns
Tools to Use:
Focus groups Mapping using geographic
features (distances,highways, drive-times, etc.)
Mapping using customeraddresses and zip codes
A trade area is the geographic area from which a communitygenerates the majority of its customers. A community may
have both a convenience and a destination trade area.
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Rings
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Drive Times
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Equal Competition Areas
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Using Customer Zip Code Data
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Reillys Law of Gravitation
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Using Customer Address Data
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Using Multiple Methods
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Market Segments and Trade Areas
Local customers Primary driver of local sales in most communities
Focus of your convenience and/or destination trade areas
Non-local In-commuters and workers
Tourists
Seasonal residents
Discussion: Which market segments are important to your
community?
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Part I. Understanding the Market
Demographics and Lifestyles
Funding - North Central Regional Center for Rural Development (NCRCRD) Seed Grant
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Types of Data
Population/households
Age Income
Education
Occupation
Ethnicity Residence
Demographic Analysis
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Data Sources
Public Sources:
US Census Bureau
State and University Data Centers
Private Sources (examples):
ESRI
Claritas
Others
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Population/Households
What it tells us:
Market size
Future growth
Average number of people that live together (household).
Trends in the U.S.:
309M in 2010, double that of 1950
Average Household Size of 2.58
What does the data say about Winchester?
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Age
What it tells us:
Predominance of certain age categories (each with differentpersonal expenditure preferences
Under 18
Over 65
Trends in the U.S.:
13.3% were 65 and older
In 2011 vs. 8.1 % in 1950 (US Census)
What does the data say about Winchester?
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Income
What it tells us:
Distribution of income in the trade area as an indicator ofspending power
Trends in the U.S.:
Median Household Income of $50,500 (US Census, 2011)
32.5% earn more that 75,000
Impact of the Great Recession
What does the data say about Winchester?
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Demographic segments may have a lot of similarities, but
$75K income,home owner,enjoys livemusic, drives aVolkswagen
$40K income,renter, buystwo books amonth, drivesa Pontiac
Photo UW-Madison University Communications, Jeff Miller
Lifestyle Analysis
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One segmentation system offered is calledCommunity Tapestry (from ESRI BusinessInformation Solutions)
Households in each trade area can be segmentedinto unique clusters that describe their demographic,lifestyle, media and purchasing characteristics
Includes Market Potential Indicesthat examinespending propensity for a wide variety of goods andservices
Lifestyle Segmentation Systems
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Heartland Communities
Sample buying habits and preferences
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Spending Potential
Estimates for a trade area arebased on demographic data andavailable from:
Private data firm reports Extension's Gap Analysis
Calculator
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Spending Potential Using Private Firm Reports
Potential sales in the trade area are also available throughpurchase from private data firms based on their internal
models. See the Food and Home (mostly grocery stores)
example below:
Food at Home: Total $ $49,306,088
Average Spent $4,024.00
Spending Potential Index 90
Data Note:The Spending Potential Index represents the amount spent in the area relative to a national average of 100.
Source: Consumer Spending data are derived from the 2005 and 2006 Consumer Expenditure Surveys, Bureau of Labor Statistics.ESRI
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Spending Potential Using
the Gap Analysis Calculator
Grocery store calculation:
U.S. sales per capita by based
on the U.S. Economic Census
($1,631)
The ratio of local trade area per
capita income to U.S. per capita
income ($25,537/$26,739)
Trade area population (29,897)
Multiplication of above figuresis equal to the Potential Sales
in Trade Area ($46 million)
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Part I. Understanding the Market
Conducting Surveys and Focus Groups
Funding - North Central Regional Center for Rural Development (NCRCRD) Seed Grant
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A. How to co-exist with big-box stores
B. How to sell over the Internet
C. How to capture more tourist business
D. How to encourage residents to buy local
E. How do we deal with the recessions impact on consumer spending?
F. How do we respond to changing demographics
Which of the following is the most important concern to localretailers in your community?
Poll
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Business Owner Research
Elmwood, ILHome of Lorado Taft
Business owner research engages the business community inthe market analysis process. It invites business owners toshare their perspectives regarding the current and futureeconomic health of a business district.
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What business challenges are you facing? Red flags? What business incentives or assistance would be helpful?
Characteristics of your business: category, years ofoperation, space occupied, employment, etc.
Market characteristics: busiest times, impact of communityevents, advertising effectiveness, target markets, etc.
Toughest competition and the products or services that
differentiate your business. Businesses that complement your business the most and
those you would most like to see come downtown.
Sample Questions - Business Owner Research
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Consumer Research
A market analysis should include local research to fullyunderstand the uniqueness of your particular market and itsconsumers.
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When do you typically shop for non-grocery items?
What restaurants or types of cuisine do you prefer?
Which events have you attended in the last 12 months?
How often do you come downtown and why?
How often and why do they shop at competing locations?
Which businesses would you patronize if opened downtown?
Demographics: gender, age, address, income, etc.
Attitudes about the downtown and the community.
Sample Questions Consumer Research
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Secondary vs Primary Research
Secondary data is existing data which hasbeen collected, including U.S. census data,county based economic data, school districtdata, health department data, etc.
Primary data is information that you collect,including surveys, case studies, focusgroups, interviews, pilot tests, observationalstudies, etc. Data can be collected from
Consumers
Business operators and property owners
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Types of Primary Data Collection
Method Pros Cons
Mail, phone, oronline survey
Can generalize to thepopulationClient controlData is in hand
Time consumingExpense of postage,printing, and data entryCollect only what isknown
Focus Group Depth of informationIntroduce new topicsQuickly implementedLess costly (?)
Cannot generalize topopulationNeed the right groupModerator skill
Mapping Client driven
Gathering and verifyinginformationClient engagement
Requires field work
Variable implementationand interpretation
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Method Pros Cons
PersonalInterviews
Flexibility inimplementationDepth of information
Need trained interviewersVariability in implementationTime consumingCostly
Observation Do it yourself
Quick to design andimplementForces a focus
Time consuming
Limit to scope of informationLimit to geographyVariability in implementation
FacilitatedMeetings
EncouragesengagementImmediateinformationUses few staff
Need lead timeNeed skilled facilitatorsAll or nothing for the eventDevelops high expectations
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Sample Surveys in the
Downtown & Business District Market Analysis toolbox
Business Owner Survey
Consumer Survey
University of IllinoisExtension online toolmay help in gettingstarted:http://www.communitydevelopment.uiuc.edu/commsurvey/
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The Survey Process
1. Define goals.2. Develop and define method.
3. Ask: will this work within our constraints?
4. Develop survey instrument(s).
5. Identify population, select sample; develop contacts.6. Test the survey instrument (often questionnaire).
7. Implement survey process.
8. Collect data.
9. Analyze data.10. Prepare report.
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Peer City Comparisons
Examining Similar Cities and their Business Districts is useful inidentifying potential business opportunities and economic
development strategies.
Identifying Comparable
Places: Similar in Demographics
Similar in Location
Similar in Urban and RuralCharacteristics
Similar Function
Identifying Successful
Districts: Knowledge from existing
study group members
Recognized downtownsuccesses
Research websites ofdowntown or Main Streetorganizations
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University of Illinois ResourceCommunity SwapCommunity Swap processpairs like communities withsimilar populations,demographics and amenities.
Extension can assist inplanning.
Exchange followed by a
Town Hall Meetings todiscuss key findings.
Establish goals and
strategies based on newinformation.
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Part II
Analysis of Opportunities by Sector
Funding - North Central Regional Center for Rural Development (NCRCRD) Seed Grant
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Includes tools for estimating demand and supply for selectedbusiness categories. Business opportunities are examined in
terms of quantitative and qualitative factors
RealisticRetail/Service
BusinessOpportunities
Demand Supply
ReasonablenessCheck
II. Analysis of Opportunities by Sector
Examining Retail Opportunities
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Retail Analysis Tool: Gap Analysis Calculator
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Poll
In Wisconsin, the top three categories of business that lineMain Streets include?
A. Grocery, drug stores and apparel shops
B. Restaurants, bars and hair salonsC. Hardware, furniture and home dcor stores
D. Gas stations, auto parts and auto repair
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Retail Analysis Tool: Business Mix Analysis
NAICS Description Number Sales (000's)Full-service restaurants 7.9 5,378Beauty salons 6.7 1,451Drinking places (alcoholic beverages) 3.9 1,224Automotive mechanical & electrical repair 2.2 854Gift, novelty, & souvenir stores 2.0 729Other amusement (bowling, golf, fitness) 1.9 791Used merchandise stores 1.8 810Gasoline stations 1.7 5,527Appliance, television, & other electronics stores 1.7 3,322Grocery stores 1.6 13,973Barber shops 1.3 148Specialized building material dealers
1.3
2,240
Jewelry stores 1.1 830Florists 1.1 413Automotive parts, accessories, & tire stores 1.1 1,550Comparison with Wisconsin cities/villages with 5,000-10,000 Pop. (Average of 45 Downtowns)
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Retail Analysis Tool: Innovative Downtown Businesses Clearinghouse
Case studies of downtown
retail and servicebusinesses that:
build on downtownscharacter and
offer products and
services not found in bigbox stores.
Searchable by
Type of businessSize of community
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II. Analysis of Opportunities by Sector
Analysis of Other Property Uses
Includes techniques for estimating demand and supply forvarious downtown uses. To the extent possible, opportunities
are examined in terms of quantitative and qualitative factors
Restaurants
Arts and Entertainment Housing
Office Space
Lodging
Light Industrial
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Part III
Putting Your Research to work
Funding - North Central Regional Center for Rural Development (NCRCRD) Seed Grant
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III. Putting Your Research to work
Using Your Market Analysis
Market analysis findings can provide a solid and objectivefoundation for launching economic development strategies for
your district.
Niche Development
Space Usage Image, Branding, Marketing
Business Retention/Expansion
Business Recruitment
Entrepreneurship Benchmarking
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For More Information
Kathie Brown
University of Illinois-Extension
Email: [email protected]
Jennifer RussellUniversity of Illinois-Extension
Email: [email protected]
Bill Ryan
University of Wisconsin-ExtensionEmail: [email protected]