POTENTIAL NEW SITE EVALUATIONS
Selecting a business location without first examining the trade area is like driving a car with one’s neck in a brace that prevents the turning of the head. The reason is that it forces a person to become dedicated to actions that may not be best! Explained differently, site selection studies help business leaders to examine local market factors, such as what potential competitors are doing right and wrong, and to determine profit potentials.
More specifically, by using Geographic Information one can remove the “neck brace” and better see what is happening. In short, by examining trade areas one can (1) learn the factors that “drive store patronage,” as well as examine the marketing, merchandising and penetration levels of potential competitors. Additionally, the information, generated from Geographic Information Systems, displays the critical factors regarding sites within a geographic arena.
For situations where a retailer has historical, customer-level data, that information can be put to use. Yet, regardless of whether customer-level data is available, or collected, there are many approaches to choosing a proper location. This said the approaches that the teams at Premier Business Experts typically use to pick the best sites include (1) Radial (or Ring) Studies, (2) Gravity (or Spatial Interaction) Models, (3) Drive-time Evaluations and/or (4) Multiple-Regression Analyses.
With Radial/Ring Studies, those at Premier Business Solutions form circles around the potential sites and examine the characteristics of the populations within the circles, with the size of the circles depending on the type of business. As for Gravity/Spatial-interaction Models, those at Premier Business Experts put the distribution of existing business locations, as well as its competitors, into a geographical context and evaluate each location’s relative attractiveness, using decay curves to model the spatial interaction of individual locations. As for the attractiveness of a location, the professionals at Premier Business Experts often input store sizes and/or sales since those variables have an impact upon “attractiveness.” Moreover, the topnotch employees at Premier Business Experts use Drive-time Evaluations, especially for “convenience store” and “fast-food” types of businesses. With this latter technique, actual customer data (if available or if collected) from current locations can be input into the models. Lastly, those at Premier Business Experts often use Multiple-Regression Analyses, especially when a company has large amounts of data.
In past situations, the professionals at Premier Business Experts have with great success used predominantly Radial/Ring Approaches for highly-specialized professional service firms, predominantly Gravity/Spatial-Interaction Approaches for relatively-competitive service firms and predominantly Drive-time Approaches for independent convenience store operations. Similarly, they have used Multiple-Regression Approaches for companies with significant levels of data, such as an insurance company wanting to evaluate potential new sites for its offices. Below is an example of how the teams at Premier Business Experts combined different approaches to obtain very beneficial results on behalf of a client.
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