But before you do, you might want to consider taking the time to create a business plan for your new venture, which will not only help you map out the opportunities before you, but also the threats.
A business district may serve a number of different trade areas depending on a variety of factors such as types of products sold or customer market segments served.
Population of your community: Proximity of other competing business districts: Typically there is a cutoff point where customers are drawn to the competing center instead of your community.
Mix of businesses in your community: A critical mass of businesses pulls customers from a further distance than a more limited mix of businesses. A significant destination business such as a large discount department store or community attraction can expand your trade area—drawing customers from a long distance.
Rarely do other businesses match the pull of a prominent destination business. Each region has distinct traffic patterns strongly impacted by its network of streets and highways, as well as major landforms such as rivers, lakes, and mountains.
It is based on the premise that people are attracted to larger communities to do their shopping, but the time and distance they must travel influence their willingness to shop in a given city.
In other words, people are more likely to travel shorter distances when possible. Additionally, customers are more likely to shop in larger communities as they typically offer more goods and services.
Consider the map of the Waupaca, Wisconsin example map above. The map shows the location of Waupaca along with surrounding communities. The populations of each of these towns and cities are provided below the community name. Furthermore, the Stevens Point area is larger in population.
Therefore people living in these communities will more likely travel to Stevens Point than Waupaca. In contrast, residents of Ogdensburg are closer to Waupaca and will most likely shop accordingly.
From such observations you can estimate the entire trade area. This method requires little effort and few resources.
There are ways to overcome these deficiencies, however, including one based on actual customer data discussed in the later in this section. Return to top Types of Trade Areas Trade areas business districts fall under two major categories: Most small communities encompass only one type of trade area primary trade area.
However, communities with over 10, residents may find it useful to define both a convenience and a destination trade area. A convenience trade area is based on the purchase of products and services needed on a regular basis, such as gasoline, groceries, and hair care.
Because these purchases are relatively frequent, people usually find it more convenient to buy these products and services from businesses located close to their home or workplace.
People are willing to travel longer distances to do comparison shopping and purchase these kinds of items. In addition to differing by types of goods and services, a business district differs in the types of customers who shop there.
Three common market segments are: Local residents within the trade area. As they reside locally year-round, they provide the majority of spending potential for most businesses.
They have the potential to make purchases within the trade area during the workday. Tourists and second- home owners can offer a large amount of spending potential.
While they are not permanent residents, tourists obviously shop while visiting the area. Analysis of the geographic origin of non-resident customers is discussed in the appendix of this section. Return to top Defining Trade Areas Using Focus Groups Defining trade areas is sometimes more of an art than a science and no one method is always correct.
Whatever method you choose to define a trade area including convenience and destination trade areasmake sure the area you ultimately delineate represents the entire business district or community. If a trade area is too small or too large, your demographic and spending calculations based on that area will be unrealistic and of questionable value.
Focus groups help you ensure that your trade area will be broadly representative. Two methods for defining trade areas using focus groups are described below. Business Owners Focus Group Approach Experienced business owners typically know their customers well.
Asking a group of business owners or operators to undertake a focus group mapping exercise is an efficient way to define your trade area. Hand out printed maps of the general region with a couple rings drawn on the map typically 5- and mile radii to give a sense of distance. Explain to participants that a local trade area is the area in which a majority of the local customers live often defined as the area where 75 percent live.GEOGRAPHIC INFORMATION SYSTEMS (GIS) BUSINESS PLAN: Washington Enterprise GIS Program and Shared Access to Geospatial Services GEOGRAPHIC INFORMATION SYSTEMS (GIS) BUSINESS PLAN This plan builds off the geographic information systems (GIS).
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