Your Trading Area - Turnaround Tour ShopPros€¦ · for developing your marketing strategy. There are two kinds of trading area analyses, one for outbound businesses and one for

Your Trading Area Locating your target markets

SNAPSHOT The E-Myth Mastery Program

Module 2: E-Myth Marketing Fundamentals Business Development Process: MK-0020

"Your trading area is geography ... but geography is the least of it. It's a living organism with movement, moods, and its own way of doing things."

- Michael Gerber, Founder of E-Myth Worldwide

Your trading area is the specific geographic territory within which vou conduct your and from If your trading area is "concentrated" you need a which your customers detailed trading area analysis. If it is "dispersed," you originate, Your actual don't need a trading area analysis.

trading area is the area If your customers come to you and do business at your

defined by the iOcations Of location, yours is an 'inbound. business. Your trading customers who actually do

area is determined by the "maximum tolerable travel business with you. Your

time" it takes for customers to reach your location. maximum trading area is the largest area Your business If you conduct business at your customers' locations, could feasibly serve. yours is an "outbound business. Your trading area is Usually Your maximum determined by the economics of doing business at their trading area is considerably remote locations. larger than your actual trading area. The "gorillas" in your trading area - major attractions

like shopping malls, sporting venues, and business I f Your trading area is complexes; major travel arteries; or major problem "dispersed-" your c u s t ~ ~ e r s areas like high-crime districts and noxious industrial and prospective CustOmers centers - can alter your trading area, depending on are widely disseminated and how they affect your customers' travel patterns. their proximity to your business isn't critical. I f your business is "in the shadow" of a major

attraction in your area, you take on its trading area If Your trading area is rather than the more limited one you would command "concentrated," location and as a stand-alone business, convenience are of primary importance to your customers and virtually all of them come from nearby.

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E-Myth Worldwide Putting the Pieces Together-"

Santa Rosa, California, USA

trading area, but

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The E-Myth Mastery Program Module 2: E-Myth Marketing Fundamentals Business Development Process: MK-0020

Page 1

Your Trading Area Locating your target markets

"Your trading area is geography ... but geography is the least of it. It's a living organism with movement, moods, and its own way of doing things."

- Michael Gerber, Founder of E-Myth Worldwide

The Three Components of Your Target Market: Demographics, Psychographics, and Trading Area

For all businesses, an understanding of the demographics and psychographics of their target markets is critical. And for some, but not all, local geography and an understanding of their "trading areas" are equally important. You have already taken a close look at the demographics of your market and you have defined your Central Demographic Model. Later you will delve into the minds of your customers and prospective customers to understand their psychographics - how they think, how they behave, how they make decisions. For the moment, however, let's focus on the "where" of your business and your customers.

Your trading area is the physical area in which your customers and prospective customers are found. It can be as simple as a neighborhood or as complex as an internationally dispersed population of people with a common set of needs. For instance, the customers of a neighborhood grocery store are located within a few hundred yards, or within a very short drive time of the store. The store is highly location-dependent, and is also dependent on having a sufficient number of customers within its trading area. By contrast, the customers for a sophisticated, high- end engineering software package can be anywhere in the world. You have already put a great deal of thought into the demographics of your customers. Let's do the same for location and your trading area.

Concentrated and Dispersed Trading Areas

If your trading area is "dispersed," your customers and prospective customers are widely disseminated and their proximity to your business isn't a primary determinant of whether or not they will do business with you. If your trading area is "concentrated," location and convenience are of primary importance to your customers, and virtually all of them come from nearby. The engineering software company mentioned

This document is confidential and proprietary to E-Myth Worldwide and cannot be used, disclosed or duplicated without the prior written consent of E-Myth Worldwide. This is an unpublished work protected by federal copyright laws and no unauthorized copying, adaptation, distribution or display is permitted.

The E-Myth Mastery Program Module 2: E-Myth Marketing Fundamentals

Your Qading Ama Business ~evelb~ment ~rocess: MK-0020

Page 2

above is an example of a business with an extremely dispersed trading area; the neighborhood store is an example of a business with an extremely concentrated trading area.

Businesses with dispersed trading areas are not location-dependent, and their market analysis and planning do not require close examination of the local area and its transportation corridors and barriers.

Businesses with concentrated trading areas are location-dependent. They must be situated in locations that are easy and convenient for their customers to reach (inbound businesses), or in locations that provide for cost-effective sales and client fulfillment at their customers' homes or work sites (outbound businesses). Market analysis and planning for a concentrated trading area require a detailed understanding of the trading "area" and the company's location in relation to its customers, transportation corridors, competitors, and other major influences.

Inbound and Outbound Businesses

If you do business with your customers at your own location, yours is an "inbound business. Customers come to you to buy your products or services. Grocers, department stores, dentists, hospitals, most restaurants, beauty salons, dry cleaners, auto dealers, and your local bank branch are all examples of inbound businesses.

If you do business at your customers' locations, yours is an "outbound business. Many insurance agents and real estate brokers make sales calls at their customers' homes. They, plus pest exterminators, electricians, plumbers, door-to-door sales people, personal trainers, carpet cleaners, and mail carriers are all examples of outbound businesses.

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Your Trading Area Business Development Process: MK-0020

Page 3

EXAMPLES: EXAMPLES:

ELECTRICIANS MARKET RESEARCH

Business is PLUMBERS &)

o+o

PIZZA DELIVERY CONSULTANTS

conducted at the CATERING SURVEYORS & customer's CIVIL ENGINEERS

PERSONAL location TRAINERS -

HOME SECURITY o EXAMPLES: EXAMPLES:

RETAIL STORES TRAINING &

RESTAURANTS SEMINAR FIRMS

Business is AUTO DEALERS &

conducted at your AUTO REPAIR

location HAIR & BEAUTY COMPANIES TELEMARKETING

SALONS

GROCERY STORES PLASTIC SURGEONS

Do You Need a Trading Area Analysis?

The short answer is "yes" if your business has a concentrated trading area, and "no" if your business has a dispersed trading area.

While all businesses need to specify their geographic scope in some way, a detailed trading area analysis is not necessary for businesses with dispersed trading areas. If your business has a dispersed trading area, your specific location is not a primary determinant of your success, nor is the geography of your customer base critical. You can specify your geographic scope with simple statements such as:

the north side of Chicago up to the Wisconsin state border

w the San Francisco Bay Area

H light manufacturing companies in Ohio, Indiana, and Illinois

H upscale suburban communities within 50 miles of major metropolitan areas

cities north of the Ohio River with populations exceeding 50,000

H agricultural communities throughout the nation

H seaports in Pacific Rim nations

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Your Thding Area

Page 4

If your business has a concentrated trading area, a trading area analysis is essential. Not only will it help you understand the

- ~

dynamics of your market better than you ever have before, but you will gain insights about why your business is doing better or worse than you might have expected. A trading area analysis can uncover opportunities for improvement in marketing, delivery, and customer service, and it will reveal the strengths and weaknesses of your present location. It will tell you whether or not you could benefit from a different location. And it will give you important guidance for developing your marketing strategy.

There are two kinds of trading area analyses, one for outbound businesses and one for inbound businesses. Customers of outbound businesses don't care much about the location of the business because they never go there, but the business cares very much about the costs and time efficiencies of going to the customer's location. On the other hand, customers of inbound businesses care very much about the location of the business - its convenience, how easy it is to reach, its neighborhood, and numerous other aspects of its location.

Do You NEED A TRADING AREA ANALYSIS?

TRADING AREA

IS YOUR BUSINESS THE OUTBOUND OR THE

INBOUND TYPE?

I

TRADING AREA 1 ANALYSIS 1

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The E-Myth Mastery Program Module 2: E-Mvth Marketing Fundamentals

Your %ding Area Business ~ e v e b ~ m e n t ~roc&s: MK-0020

Page 5

The Main Requirement for Trading Area Analysis? Common Sense.

Large corporations put a lot of "scientific" effort into location analysis. They have statistical data bases and an impressive array of ways to process their data. But in the end, all of them still have to put "someone on the ground" to look things over in person and use common sense. Small business owners lack the extensive data but they have the advantage of knowing their market area intimately.

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The basic approach takes a little work, but it's straightforward for both outbound and inbound trading area analyses. It has five steps:

1 Conduct a survey of your customers and prospective customers. You'll need to collect information about their

locations as well as their demographics.

2 On a map, plot your actual trading area based on the survey information. You simply plot each survey response

with a dot on the map and connect the outermost dots to define the perimeter of your actual trading area.

3 Map your maximum trading area. This is the largest trading area your business could feasibly serve. It requires an

analysis of travel times, travel barriers and deterrents, and usually some driving.

4 Map your Central Demographic Model (CDM). Determine where your CDM customers are concentrated

within your maximum trading area.

5 Consider the strategies available to you and which one(s) make the most sense for your business. You'll compare your

actual and maximum trading areas, the distribution of your CDM, and figure out the reasons they differ (if they do differ) and what strategy will get the results you want.

Trading Area Analysis for Inbound Businesses

Conduct a Survey

In order to determine the boundaries of your actual trading area (unless you already have good records of your leads and customers), you'll have to conduct a simple survey. For a 30-day period, collect the following information about all (or as many as possible) of the customers and leads who enter your store:



Your h d i n g Area Business ~eve lb~ment process: MK-0020

Page 6

~ N F O R ~ I , A T I O N AHOLJT THEIR VISIT:

Day of week, date, time of day

Point of origin type (home, business, or transient)

Point of origin address (or other indication of their point of origin if they are reluctant)

Mode of travel to your business (by car, foot, mass transit, other)

~ N F O K M A T I O N A R O l l T T H E M :

Gender

Age (approximate)

Household income (or an indication such as upper, middle, lower)

Family status (married or single, with or without children)

Occupation

You won't always be able to gather the exact information. People are sometimes reluctant to answer sensitive questions, and some won't answer any questions at all. But you can use your best judgment based on observation for such characteristics as gender, age, and income.

Address is important - you'll need it to plot your trading area on a map - but it's also sensitive. You may have to reassure customers that you want the information only for analytical purposes, not for solicitation. If they are still reluctant to give their address, ask them what neighborhood, what area, or at least how far they came and from what direction - anything that will help you put them on the map.

Map Your Actual Trading Area

Get detailed street maps of your general trading area and, for each person you surveyed, put a dot on the map at the person's point of origin. If you do nothing more, you already have valuable information. The dots show the general shape of your actual trading area - where your customers are coming from. That alone gives you valuable information for advertising, direct mail, and other marketing activities. It also shows where your customers are concentrated. You'll see thick clusters of dots in some places, and hardly any dots in others. These are important clues to investigate to learn more about your customers, your competition, and your trading area.

Now draw a line connecting the outermost dots. That line is the boundary of your actual trading area.

Next, you're going to map your maximum trading area, but before doing that, let's take a moment to understand the three factors having the greatest influence on the shape and size of your trading area - the "halo effect" of major attractions,

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Your Trading Area

Page 7

whether your business is a primary destination or a convenience destination, and the customer's "maximum tolerable travel time."

Your Location and the "Halo Effect" of Major Attractions

Every retailer knows the benefit of being located in or adjacent to a major shopping center. Even a small store enjoys the same trading area as that commanded by the shopping center, rather than the substantially smaller trading area it would have as a stand-alone store away from the shopping center. People will plan to go to the small retailer simply because they were going to be in the shopping center anyway. It's convenient. Even those with no plans to use the small retailer are exposed to it, and the opportunities for "impulse" buying multiply.

The principle of the halo effect holds true for any kind of small business that is located "in the shadow" of a major attraction, whatever that major attraction is.

There is a dark side to the halo effect. A small business in or adjacent to an undesirable or repellent part of the trading area (such as noxious chemical plants, high-crime neighborhoods, stockyards, and the like) will be unable to draw the customers it normally would expect to attract, and it may require aggressive marketing and strong inducements to attract them at all.

The general principle is if your small business is adjacent to or within a major attraction or a major negative feature of the area then, in effect, your business draws from the same trading area, and your maximum trading area is the same as that of the major feature.

Is Your Business a Primary Destination or a Convenience Destination?

When customers leave their "points of origin" (their homes, places of work or, if they are transient, their temporary locations) they have two kinds of destinations in mind. A "primary" destination is one which, in and of itself, justifies the trip. A "convenience" destination is one that doesn't justify a trip, but where the customer will make a stop "on the way" to or from a primary destination. Primary destinations are always planned and the customer departs with the specific purpose of going to the primary destination. Convenience destinations can be planned, ("I'm going to stop at the gas station on the way to the department store.") or they can be incidental and impulsive ("I was coming back from the department store and 1 noticed a 'Sale' sign at the candy shop, so I stopped in.").

This document is confidential and proprietaly to E-Myth Worldwide and cannot be used, disclosed or duplicated without the prior written consent of E-Myth Worldwide. This is an unpublished work protected by federal copyright laws and no unauthorized copying, adaptation, distribution or display is permitted.


Your %ding Area Business Development Process: MK-0020

Page 8

Some destinations can be both primary and convenience. For instance, some restaurants are convenience stops in a shopper's busy day, but are primary destinations for evening dining. Clothing stores are primary destinations for their customers, and convenience destinations for "window shoppers."

There is a multiplier effect when primary destination businesses cluster together. That's why shopping malls, downtown shopping districts, business parks, and the like draw so many more customers from much greater distances than do isolated stores.

So what? What difference does it make? It can make a huge difference. If your business is a convenience destination, it has little drawing power of its own. You are completely dependent on primary destination businesses and high-traffic transportation corridors to bring customers to your doors. You'll have to do your trading area analysis with the nearest primary destination business as the focal point of the trading area, and you'll have to pay close attention to your visibility and access from transportation corridors.

Estimate the Customer's Maximum Tolerable navel Time

The key to the size of your trading area lies in the customers' willingness to travel to primary destinations. Before you start plotting your maximum trading area on your map, you have to decide on the "maximum tolerable travel time" an average customer would be willing to spend to reach your location. In general, research has found that 20 minutes is the average travel time, and that "willingness to travel" drops off rapidly for longer travel times.

But the 20-minute limit is just a starting point. You'll have to make adjustments if yours is a convenience-destination business, and further adjustments based on the environment customers pass through on their way to their destination, the importance of the purchase, and the nature of the customer. If the destination is a major shopping center, for instance, and there is no closer alternative, the tolerable limit may be 30 minutes, 45 minutes or even an hour. If the destination is along a major transportation corridor for commuters, even if it is a convenience stop, it may draw customers with as much as a one- hour travel time or more. On the other hand, if the business is an isolated convenience store out in a suburban neighborhood, the maximum tolerable travel time may be only five minutes by car or ten minutes on foot, even less if it is in an undesirable neighborhood. If your CDM is a busy housewife or business

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Your %ding Area

Page 9

person, their travel time tolerance is likely to be short, whereas a retired couple with time on their hands may tolerate longer travel times. If the purchase is important and infrequent (an automobile, a custom-made home entertainment center, a power boat, a mink coat) the tolerable limit will be greatly extended, maybe exceeding an hour.

Determining the maximum tolerable travel time for your business is clearly a matter of common sense and applying your knowledge of your market. If you have access to information from your chamber of commerce, municipal planning departments, nearby shopping centers who are willing to share their market studies, or if you are able to engage market researchers to get the information for you, then you have a fairly reliable idea of the maximum tolerable travel time for your business. If not, you'll have to start with the 20- minute average, and modify it based on your situation.

Map Your Maximum mading Area

You should map your maximum trading area in two steps. First, find the outermost boundary by tracing travel routes out to the limits of the "maximum tolerable travel time," then modify it by looking at special characteristics of your area such as major attractions (like shopping centers), competition, and major highways. It's a simple enough process, but you have to be methodical and pay close attention. You'll probably have to get in your car and take a first-hand look at the area by driving the travel routes your customers use.

You will need a detailed map, of course. You can use the same map on which you plotted your actual trading area, or better yet, use a fresh map. Mark the location of your business prominently - a dark, circled " @ " should do nicely.

The idea is to trace backwards along each route, radiating outward from your business, until you have reached a point on that route that a customer would cover within the maximum tolerable travel time. On each route, you'll have to consider the speed limit, any delaying conditions, and any barriers. You will probably have to actually drive many of the routes to get a realistic sense of how far the customer will travel within the tolerable travel time. Internet resources can provide driving directions with estimated travel times.

When you determine the most distant point along each route, mark that point with a dot on your map. Make your marks in pencil, because you may modify them later.

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Your Trading Area

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Use your common sense to make judgments about delaying factors and barriers. A busy thoroughfare with numerous traffic lights is a slow drive when you drive on it, and a deterrent if you have to cross it. Either way, it lengthens the travel time, and it adds a deterrent effect in the minds of customers, making them less willing to drive it and effectively shortening their tolerable travel time.

If you haven't done this before, it may seem like a crude process. Don't worry, it's a lot more accurate than it seems at first glance. Use your knowledge of people and information from customer surveys to make judgments about their willingness to travel to your location. Don't be disturbed by uncertainty and lack of precision - even experts in site location analysis suffer from uncertainty and lack of precision. And it's a surprising fact that the trading area map you produce will probably be very similar to one constructed by an expert. Yours might not be as neat to look at and might not seem as precise, but it will be every bit as useful.

Continue the process until you have covered all the routes customers could take to reach your business, and you have dots showing the end-points of your backtracking (which are actually the points-of-origin for customers at the limits of your trading area). Don't connect the dots just yet. You may have some adjustments to make.

The Effect of "Gorillas" on Customer lkavel Patterns

Many trading areas have one or more major features that influence, sometimes even dominate, your trading area. We call them the "gorillas" in your trading area (if there is a gorilla in your house, it can't be ignored and it influences everything that happens). Major shopping malls, government centers, interstate highways, amusementhheme parks, high rise downtown districts, major public transit routes, high-crime areas, universities, sports venues and major tourist attractions are some examples of trading area gorillas.

How do you deal with gorillas when doing your trading area analysis? Again, use your common sense and knowledge of your own trading area. For instance, if there is a gorilla in the form of a major shopping mall a quarter mile east of your home appliance dealership, you know several things. First, you aren't within or adjacent to the mall, so you won't share in its attraction and its heavy customer traffic. Secondly, the mall will tend to intercept customers coming from the east, and will act as a kind of barrier, cutting off most of your "reach" into that area. It effectively shuts down a large sector of what

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Your Trading Area

Page 11

would normally be considered "your" market. Thirdly, the mall's powerful attraction will draw more customers from the west than would normally be the case, and if you are situated on a convenient travel route, your business will have greater than normal exposure to customers from the west, thus extending your trading area in that direction.

There are too many kinds of trading area gorillas and too many specific situations to create rules of thumb for them all. That's why your common sense and knowledge of your area are your primary tools.

To finish mapping your maximum trading area, you must identify your trading area gorillas and plot them on your map. Then, after carefully thinking about each gorilla, its effect on the trading area, and its influence on your business, review each of the travel routes you backtracked earlier. Adjust each dot as appropriate, extending your trading area in some cases, contracting it in others. When you are done, connect the dots using a clearly visible marker, and there you have it! Your maximum trading area.

Let's recap the process for mapping your maximum trading area. You can use it as a checklist:

Checklist for Mapping Your Maximum h d i n g Area - Inbound Businesses -

Get a good, detailed map and clearly mark the location of your business.

Determine the "maximum tolerable travel time" for your customers. Twenty minutes is the norm. Use common sense to adapt that for your business and your customers.

Trace the travel routes your customers would take to reach your business by backtracking from your location, radiating outward, for a distance that would be covered by a customer during the maximum tolerable travel time. Put a dot at the end of each backtracked route. Continue until you have backtracked all the routes customers might take to your business.

Identify and plot on your map the "gorillas" in your trading area.

Adjust the dots you plotted earlier on your map to reflect the effect of the gorillas.

Draw the perimeter of your maximum trading area by connecting the dots you have plotted.

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Your lkading Area

Page 12

Before discussing the comparison between your actual trading area and your maximum trading area, let's take a look at the trading area analysis for outbound businesses.

Trading Area Analysis for Outbound Businesses

Outbound businesses have a different view than inbound businesses. Outbound businesses are concerned with the costs and time efficiencies of doing business at the customer's location; for instance, transportation to and from the customer, transit times, scheduling of staff and equipment, and other concerns of doing business at remote locations.

In addition to all the other marketing issues, the outbound business is also concerned with balancing the size of its trading area against the economics of serving remotely located customers.

The trading area analysis for outbound businesses has the same five steps as the analysis for inbound businesses, but two of the steps - the customer survey and the mapping of your maximum trading area - take a very different approach.

Conduct a Survey of Your Customers and Prospective Customers

As before, you start with a survey of your customers and prospective customers. If you keep records of your customers and your leads (prospective customers), the survey can be quick and easy. You can

Survey Your Customers and

Prospective


Trading Area

Map Your Central


simply look up your records, copy the necessary information, make a few phone calls to fill in missing data, and you're done in no time.

If you only keep records on customers and not leads, or if you have no demographic information, you'll have to conduct a survey. [Note: You should start keeping such records. They are a valuable source of information for marketing and business planning.] For 30 days, collect the following information from every one of your customers and from the people who inquire about your products and services. You should collect the following information at a minimum: INFORMATION ABOUT INFORMATION ABOUT THEM: THEIR LOCATIONS: Gender Day, date, time of contact Age (approximate) Address Household income (or an Type of location (residence, indication such as high, middle, workplace, other) low)

Family status (marriedIsingIe, with or without children)

Occupation



Your %ding Area

Page 13


When your survey is complete, simply plot a dot on the map for each name surveyed based on the address information. When all have been plotted, connect the outermost dots, and you have the boundary of your actual trading area.


Remember, the definition of your maximum trading area is the largest area your business could feasibly serve - in other words, the outer limits of your trading area. But this time, instead of being concerned with your customers' willingness to travel to your location, as is the case for inbound businesses, your outbound business is concerned with your ability to reach your customers ' locations.

As a practical matter, the outermost limit of your maximum trading area is the farthest distance your workers could travel, pe$orm enough work to generate a minimum acceptable amount of income for your business, return to your location, and do whatever administrative and support work you require of them, all within a single work day. There can be variations, such as some workers who start from their homes rather than from your location, and some who travel "on their own time." But let's stay focused on the basic pattern of an outbound business, and let's do it by looking closely at the key ideas of income-generating work, administrative and support work, and travel time.

Time is the key - income-generating work time, measured in hours. The basic idea is to figure out how much income-generating work time your workers need in order to generate "an acceptable amount" of income on a daily basis, and the amount of time they need for necessary administrative and support activities. What remains is time available for traveling to and from your customers' locations. Available travel time - call it ATT for short - is what determines the boundary of your maximum trading area.

So, how do you figure your ATT? You start by looking at the way your workers spend their days. In a nutshell, their days consist of three activities:

Income-generating 1 Travel to 1 1 A work day = work done for and from customers at the

customers' locations

If you think in terms of time rather than activities, it becomes a simple mathematical formula:

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Your li-ading Area

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~ = ~ ~ + ~ ~ + ~ generating work

And if you think in terms of estimating the ATI' for mapping the limits of your maximum trading area, the formula looks like this:

Total hours Minimum acceptable Admin. and hours of income- Available

in a work

= , (MDw, generating work

day hours

Or better yet, because you are calculating ATI', rearrange it like this:

1 Available Total hours Minimum acceptable 1 Admine and

hours of income- - travel time = in a work generating work support day 1 (MDW)

hours

Estimating Your MDW (Minimum daily work requirement,

in hours, for a work unir)

$ Total business costs per month (from your business' financial records)

$ Add desired profit margin

$ Equals total monthly income required

Divide by number of work days per month

$ Equals average daily income requirement for your business

Divide by number of work units

$ Equals daily income requirement per work unit

$ Divide by average revenue dollars per hour a work unit generates working at the customer's location (Average price customers pay per job divided by average number of hours work units work at the customer's location. From records or owner's estimate.)

Equals MDW

Total hours in a work day are whatever they are for your business, usually 8 hours. Time spent on administrative and support activities is usually minor and is an easy matter to estimate. This is time spent doing "company" work, rather than work done directly for the customer. It includes paperwork, cleanup, training, meetings, and the like.

Estimating your daily minimum acceptable hours of income-generating work can get a little bit tricky. Let's walk through it a step at a time.

Income-generating work is, of course, work done by your "work units" for which your business gets paid. (A work unit can be a single person or it can be a crew of people working on a single job or task. A work unit could be a carpenter, personal trainer, or salesperson; or it could be a working team of painters or termite exterminators.) But what is a "minimum acceptable" amount of income-generating work on a daily basis? That's for you to decide if you haven't already done so.

An easy way to calculate a daily minimum acceptable number of work hours per work unit (let's call it "minimum daily work" or MDW for short) is to total up all your monthly business costs plus an appropriate profit margin and divide by the number of work days in a month to get the daily amount of income your business

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YOLW Trading A m

Page 15

needs to generate. Then you divide that by the number of work units you have. The result is the amount of income each work unit needs to generate on a daily basis. Then it's a simple matter to calculate how many hours each work unit would have to work on a daily basis to generate that amount of income, and that's your MDW. The calculation is shown in the MDW inset panel.

Now you can calculate your available travel time and take the last step in mapping your maximum trading area.

Using a detailed street map of your general trading area, mark your location with a circled @ . Then, starting at your location, trace travel routes in all directions radiating outward for a distance that could be covered in one-half your ATT. One-half the ATT equals a one-way trip to the most distant customer location along each route. The full ATT, of course, would be a round trip. Plot a dot at the end point of each route. Finally, connect the dots, and you have the boundary of your maximum trading area.

You will probably have to do a fair amount of driving to establish how far your workers could reasonably travel in the available time, to identify any barriers that would exclude certain areas from your trading area, and to identify areas that should be excluded because there are few or no potential customers in the area.

Checklist for Mapping Your Maximum Trading Area

- Outbound Businesses - Calculate ATT (daily available travel time) for an average work unit.

Mark your business' location on a detailed street map of your general trading area.

i? Trace all possible travel routes radiating outward from your location. On each route, place a dot at the distance that could be traveled by a work unit within one-half the ATT. You may have to drive the routes to verify speeds, distances, and baniers.

i? Connect the dots to show the boundary of your maximum trading area.

Map Your Central Demographic Model within Your Maximum Trading Area

Now that you know the limits of your trading area and you know where your actual customers are within the area, you can answer the critical question, "Where can I find my best customers?You

This document is confidential and proprietary to €-Myth Worldwide and cannot be used, disclosed or duplicated without the prior wrinen consent of E-Mylh Worldwide. This is an unpublished work protected by federal copyrighl laws and no unauthorized copying, adaptation, distribution or display is permitted.


Your lhding Area Business Development Process: MK-0020

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know who your best customers are because you have already defined your Central Demographic Model (CDM). It's simply a matter of finding out where they are located and plotting their concentrations on your maximum trading area map.

Ideally, you would like to have the name, address, and telephone number of every single CDM person or business in your trading area. In some areas, that is actually possible.. .for a price. In other areas, you'll have to do some research on your own. There are three basic approaches to locating your CDM within your trading area. Here they are in order of highest to lowest quality and cost.

1. Purchase the information from a data service or a market research fm. You can find companies who provide these services in telephone directories and in specialized directories at your local library. Sometimes you can also get advice from the market research department of a bank or other large corporation.

2. Go to the city halls and planning departments in state, county, and city governments and ask for their help locating people and organizations that match your CDM. At best, they can provide the information you need for a modest fee, and help you plot it on your map. At worst, you should be able to interview them and learn the general areas where your CDM is located.

3. Do your own research by interviewing local businesses, chambers of commerce, and other organizations that know the area well, by studying library references, by seeking information from local newspapers - by being resourceful and persistent in ferreting out the information available in your area.

Some sources of information are better than others, some come at a significant cost, and some take considerable effort. But even rudimentary information can be extremely useful. For instance, if you can only get the outlines of areas in your trading area where your CDM tends to be concentrated - no names, no addresses, no telephone numbers, and not even a very good indication of their numbers - you still have an extremely valuable piece of information. You know where to focus your lead generation efforts for maximum effect, and you know which areas to avoid because they won't be very productive. Even crude research can have a big payoff.

So do your research or buy it. Then what?

Plot the information on your trading area map by outlining the areas with concentrated populations of your target markets' CDMs.

This document is confidential and proprietary to E-Mylh Worldwide and cannot be used, disclosed or duplicated without the prior written consent of E-Mylh Worldwide. This is an unpublished work protected by federal copyright laws and no unauthorized copying, adaptation, distribution or display is permitted.


Your Trading Area

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Do your primary target market first, then add any flanker markets. If your information has enough detail, you can even color code your outlines to show high, moderate, and low concentrations. The amount of detail is up to you. For some businesses, it makes sense to plot individual customer locations; for others, outlining the high- concentration areas is all that's necessary. For still others, it makes sense to create a detailed, computerized listing of all people in your trading area who fit your CDM. That will all become clear later when you put your marketing strategy together.

Speaking of Marketing Strategy ... Let's pause for a moment to take stock of what you've done and what information you have to work with. If yours is a dispersed- market business, you haven't had to do much at all other than quickly put together a sentence or two describing the geographic scope of your markets. But if yours is a concentrated-market business, either outbound or inbound, you have been able to create a map showing where your actual customers are located. You have created a map of your maximum trading area, including the areas where your most probable customers (your CDM) are located, the locations and the impact of the gorillas in your market, and a solid, in-depth understanding of your marketplace. If yours is an outbound business, you also have a better understanding of some of the financial and workflow dynamics of doing business in your area.

Pretty impressive, isn't it?

How do you put all this information to good use? Be patient. First you have to round out the marketing picture with an in-depth understanding of your customer's mind - psychographics - and that happens in the next business development process, entitled Customer Perceptions and Behavior.

But you have reached a point where you can begin to think about some key strategic alternatives for your business based on trading area considerations. One strategic decision should be automatic - that of focusing your marketing efforts into the areas where your CDM is found in the greatest numbers. The "how" of that decision will be addressed later when you put your marketing strategy together.

There are four other trading area issues you should begin thinking about if you haven't already done so. Don't let yourself make any final decisions yet, but put these strategic alternatives in a comer of your mind, and let them simmer while you add more information to your growing arsenal of marketing tactics.

This document is wnfidenUal and proprietary to E-Myth Worldwide and cannot be used, disclosed or duplicated wlthout the prior written consent of E-Myth Wortdwide. This is an unpublished work protecled by federal copyright laws and no unauthorized copying, adaptation, distribution or display is permitted.


Your lhding Area Business Development Process: MK-0020

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1. Location change. The trading area analysis was designed to spotlight the strengths and weaknesses of your location related to your trading area. Would your business draw more customers from a different location or by adding another location?

2. Location enhancement. Would improvements in convenience (parking, access, delivery services), appearance (cleanliness, colors, architectural improvements, window displays), or visibility (signage, lighting, attention-getting devices) draw more customers to your business?

3. Geographic penetration strategy. Can you get more business from the same trading area?

4. Geographic expansion. Finding ways to increase the on-the-job efficiency of your workers or reduce your business costs could decrease the minimum daily work time (MDW) requirement, thus increasing your available travel time, which in turn expands the limits of your trading area.

The Payoff Is Competitive Advantage

For a location-dependent business, there are few activities that will pay better dividends than a solid trading area analysis. Not only does it teach you more facts about your trading area than you ever knew before, but it also gives you a logical and intuitive connection that lets you feel the pulse of your trading area. That kind of insight gives you an irreplaceable competitive advantage.

Who knows? In time, your competition may come to view you as one of the gorillas in their trading area.

This document is confidential and proprietary to E-Myth Worldwide and cannot be used, disclosed or duplicated without the prior wlinen consent of E-Myth Worldwide. This is an unpublished work protected by federal copyright laws and no unauthorized copying, adaptation, distribution or display is permitted.

Documents

Your Trading Area - Turnaround Tour ShopPros€¦ · for developing your marketing strategy. There are two kinds of trading area analyses, one for outbound businesses and one for