Catchment Analysis – Aligning your Strategy for Success - Serendipity2

Catchment Analysis – Aligning your Strategy for Success

What is Catchment Analysis?

Catchment is important for retailers and venues as it’s ‘the defined area around their store, site or venue that has a sphere of influence to draw in customers’. Your catchment size will be dependent on the nature of the business, the offering provided and availability from competitors in the local area. Any business whether a large retailer or SME needs to understand their catchment area and target market to improve targeting, reduce marketing wastage and increase ROI.

Catchment analysis was initially used to study the location for potential new outlets or stores. Analysis conducted includes socio-demographics (age, life stage, education, income) to identify customer’s preferences, what they might be interested in and their buying power. Infrastructure (Road, rail, public) indicating how accessible a location is and can influence how far afield your target audience might live. Competitor businesses (the number, product/services offered and price point) to highlight whether the market is already saturated and possible demand levels.

This information is key to deciding where to open your next store or outlet and can be paramount to successful trading. Spending time and resources on researching the chosen area can help ensure that the new store will be profitable and will attract the required number of customers once open. If retailers open a store in an area where people can’t afford their products or have no requirement it will be disastrous. A little like trying to sell ice to Eskimos!

Today it’s not only businesses looking to open new stores that can benefit from catchment analysis. Brands and retailers will certainly gain an advantage if they re-evaluate the catchment area of existing stores. Catchment analysis provides key information about who lives within the local catchment, how far they are prepared to travel and what ranging, pricing and promotions will help to drive footfall into store and increase sales in store. For new businesses it can confirm viability whereas for existing stores, it can highlight if the strategy needs to be redefined or tweaked in line with the target audience.

Residential and Workforce Population

Your catchment will consist of consumers that live within your target area but also workers that shop within this area. The workforce population is important to consider as the number of businesses, size and industry type will also be influential on sales volumes and potential footfall.

Proximity Drivers

Your catchment may contain proximity drivers such as major places of interest, sports stadia or attractions which draw people into your catchment area. These drivers can increase the transient flow of the population at certain times of the day, week or month. If we know that certain proximity drivers create additional flow of consumers in the area, we can use this knowledge to drive proximity marketing campaigns.

Size of Catchment

The size of catchment for your store will be influenced by the format and size of the store, the population density, how many competitors are in a close vicinity and the product offering. Major retailers or department stores are often termed destination sites as customers are prepared to travel further to purchase high value or low commodity products such as clothing, white good etc. For items that you buy regularly such as milk and bread, the distance shortens dramatically, so your catchment would be smaller.

Catchment can often be influenced by the type of retail space you’re located in. If you are situated within a retail park your catchment will be considerably increased through your joint customer pulling power. As customers, we are prepared to travel further if we can visit multiple stores in the same outing and buy multiple purchases from the one location. Good examples of this being high street locations and retail parks. Dwelling time or time you can spend at a location is obviously a key factor.

Competitors offering similar products will also affect your catchment. Unless you are offering a strong pricing differentiator or have a loyal customer following, customers are unlikely to travel past a competitor to reach your store. This is even more likely when considering low involvement purchases.

Shape of Catchment Area

Catchment areas often have a symbiotic relationship with drive-time rather than being represented by a set even distance. By analysing where your customers live you can create dynamic catchments that take into account areas of dense population so that you can align marketing effort in areas of highest opportunity.

Outputs from Catchment Analysis

Catchment Analysis will provide information and insight on: –

Population Density – including number of households, family size.

Demographics – Gender, Age, Life-stage, Affluence

Lifestyle Variables – Buying behaviour, shopping patterns, key motivators

Competitor analysis – number of competitors, target audience, ranging, price points, promotions offered

Benefits of Customer Analysis

Understanding who is within your catchment area will inform important strategic decisions.

Understand potential footfall – if you can size the population that matches your target profile you can get a picture of potential footfall but also whether you are under or over performing.

Category mix – understanding the local community will enable you to stock and promote the right categories or product mix. A high retirement area will have poor baby product sales and likewise a student area wouldn’t have demand for a premium luxury clothing brand. The range stocked can also be weighted according to family composition. In simple terms shops within a family neighbourhood would benefit from stocking family sized packs in contrast to areas with a high density of young professionals who prefer smaller or single serve portions.

Targeted promotionsUnderstanding customer spending habits and likely shopper motivations will provide insight into how and what to promote to your customers.

Differentiation from competitorsIf you have a strong competition in the local vicinity, understanding your customer base will help you decide how to differentiate yourself from your competitors. This may be by ranging, quality, pricing or the customer service you offer to help you stand out from the crowd and pull in more custom.

The Value in Catchment Analysis

Catchment analysis is a highly effective tool which can help to determine just how and where to open a new store or expand an existing chain. For existing stores, catchment analysis can help align or reset business strategy to remain in line with the needs and demands of the catchment population. Research to provide the total picture of your marketplace and specifically your catchment area, provides you with the chance to utilise this insight to drive more effective business decisions.

About Serendipity2

Serendipity2, (S2), is a leading strategic consultancy which helps major consumer brands and retailers to acquire and retain customers with the overriding objective of driving customer engagement, sales and lifetime brand loyalty.

Driven by insight, we operate at board and senior management level advising CEOs, Sales, Marketing, Operations, Finance and HR Directors on company strategy and in helping organisations to plan and execute business transformation strategies. Underpinned by data science, our services range from sales and marketing strategy, location planning and store segmentation to category planning, store openings and sales territory planning.

With the customer at the centre of the decision making process, S2’s omnichannel approach brings together in store, mobile and online data and technology to create a seamless experience for all parties engaged in the buying process.

Operating in the Food, Drink, Leisure, Hospitality, Travel, Retail, Grocery and Fashion sectors, our award winning customer insight work provides deep level analytical insight and unrivalled expertise in helping to shape, plan and execute strategies for consumer brands and retailers in a rapidly evolving on and offline marketplace.

Our long-standing relationship and extensive data driven work for Coca-Cola, the world’s leading consumer brand organisation, now underpins much of their strategic sales, marketing, operational and financial planning and execution.