- the high renting, buying, or building costs;
- entering into long-term contracts;
- security issues in the area; and
- infrastructural and/or road network developments that affect the flow of foot traffic.
Store success correlates positively with its location; the better the location is, the more potential there is for it to succeed. Therefore, when making locations decisions, retailers increase certainty through using a number of analytical approaches and tools such as the three below.
Assess the potential, and estimate the sales, of a new retail location through performing a gravity analysis (known as spatial interaction modelling).
Identify and evaluate potential store locations with characteristics resembling a well-performing retail store of your choice .
Identify and evaluate potential market areas with specific attributes to expand your business with confidence.
- save considerable amounts of money;
- better serve the needs of existing customers:
- effectively communicate with customers; and
- convert disloyal customers into loyal ones.
The choice of the segmentation approach is usually influenced by the nature of the offered product/service while the choice of the targeting approach/method depends on the definition of the target market. If you are a government agent, you are most likely to be segmenting your target audience using geographic segmentation; if your business is a pharmacy, you are most likely to be segmenting your target market using demographic segmentation; and if your business is a supermarket, you are most likely to be segmenting your customers using behavioural segmentation. However, several retailers use a combination of these segmentation & targeting approaches.
Segment your customers using geographic variables such as neighborhoods, districts, cities, regions, and lands.
Segment your customers using demographic variables such as gender, age, income, education..etc.
Segment your customers using behavioural variables such as frequency of usage, spending, time of purchase …etc.
Recency, frequency and monetary value (RFM) of past purchases are found to be parameters of customer loyalty. Identify and build relationships with customers who purchase most recently, most frequently, and spent the most with your business.
Customer lifetime value (CLV) analysis provides an estimate of the present monetary value a given customer is likely to generate over their stay with their lifetime. Find, and manage relationships with, customers who are profitable in both the short and long run.
Market Basket Analysis
Retain your existing customers and boost sales through identifying and selling products that are commonly purchased together.