Location Analytics: What is it and Why Should You Care?

Sean Young

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June 12, 2017

For restaurants and brick-and-mortar retailers, location is the most important factor for their success. Yet so many of these businesses rely on their gut instincts when choosing a new location. That’s a huge leap of faith whether you’re opening your first store or your hundredth.

Enter location analytics.

For the uninitiated, location analytics refers to the ability to derive insights on a business’ current or future location based on data. There’s more data available to business now than ever before, from customer demographics and social media data to traffic counts and store transactions. Location analytics open up a new world of possibilities for business owners, enabling them to better understand their business and reduce the residual risk of opening a new location.

Let’s look at some concrete examples of how location analytics could benefit a restaurant owner - let’s call her Michelle. Michelle owns a chain of fast casual restaurants in Chicago that specializes in deep dish pizza. She’s been able to successfully open ten restaurants in the Greater Chicago area using her intimate knowledge of the city but now that she’s expanding into Wisconsin and Indiana she has no idea where she should be looking.

The first challenge that location analytics helps Michelle with is understanding what makes her existing restaurants successful. Without that she has no baseline for evaluating prospective sites. The most obvious contributor to her restaurants’ success is her customers. Using customer loyalty data, customer surveys, and internal knowledge of her best customers Michelle can put together an ideal customer profile, or ICP.

The ideal customer profile begins with an outline of the demographics they’re part of. How old are they? How much money do they make? How often do they eat out a week? The ICP may also include the other businesses that the customers like to shop at.

Now that’s all well and good but where does location come in? Now that Michelle knows who her customer is, she now needs to know where her customers are coming from. By collecting customers’ addresses using some sort of loyalty program she can determine the trade area of her restaurants, or the distance that her customers are willing to travel to get their hands on her delicious pizza. She can also use her knowledge of her restaurants’ trade areas to prevent cannibalization of her existing store sales and execute more effective marketing campaigns.

All of these insights are great but they don’t make a significant impact on the business unless they’re used to help her open up more profitable restaurants. Let’s recap what Michelle knows from collecting data on her customers:

  • Their demographic profile
  • The other businesses that her customers tend to shop at
  • How far those people are willing to travel to her restaurants

Using a location analytics platform like PiinPoint, Michelle can search for areas in Wisconsin and Indiana that:

  • Have a high density of people who match her customer demographic profile
  • Contain other businesses that her customers like to shop at
  • Attract lots of traffic

Within minutes Michelle can identify high potential sites for expansion all without setting foot outside of Illinois.

Now of course I’m not suggesting she won’t have to visit the sites. There’s only so much data can tell you. Seeing the location in person is critical for evaluating the intangible vibe of the neighbourhood as well as potential buildout costs and considerations. But by using location analytics, you can validate sites before you visit them and save an incredible amount of time visiting location that were never worth your time to begin with.

The brick-and-mortar landscape has always been challenging and it’s no less competitive now. Retailers and restaurateurs should be using all the tools at their disposal to gain a competitive edge. For business owners who are serious about growth, location analytics are too good of an opportunity to pass up.

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