Trade areas can be created with or without customer data. Trade areas help you define your market area and help you better understand your existing or potential customer base. Business Analyst provides several common options to help determine these catchment areas.
Below are descriptions for trade area techniques included in Business Analyst.
Popular Trade Area Techniques
Customer Derived Areas
Customer-derived areas is a technique that allows you to create trade areas based on the location of your customers or a weight (an attribute associated with each customer), such as sales. For example, you can gain an understanding of your primary, secondary, and tertiary markets by showing areas representing 30 percent, 50 percent, and 70 percent of your customers. In this case, the closest 30 percent are your core customer base. Because the customer-derived area uses actual customer locations as an input, it can be a more comprehensive version of a standard simple ring trade area.
Ring studies are the simplest and most widely used type of market area analysis. The concept of a simple ring is easily understood. Since a businessperson might not know what shape the market or service area should be, a simple circle is used to begin the process. Many preliminary market studies begin with an analysis of 1-, 3-, and 5-mile rings, but this may vary from retailer to retailer.
You can generate drive-time areas that use actual street networks and approximate driving times. Equal competition market areas don't adjust for the way people actually travel. Equal competition market areas are based on as-the-crow-flies distances, while people in the real world have to use roads and streets to get where they want to go. A two-mile trip might take 5 minutes on one road network and 15 on another.
Threshold areas create polygons around your stores. The radius of the polygon is determined by expanding from the store location until it meets your criteria. The polygons can be concentric rings or drive-time areas.
Hand-drawn trade areas allow you to create custom trade areas of any shape or size.
Additional Trade Area Techniques
You can generate data-driven rings in store market analysis. The size of the ring is determined by a numeric value in the store data, such as sales or store size (square feet). For health care, for example, it could be the number of hospital beds, while for media it might be signal strength of radio stations. The greater the data value, the larger the size of the ring. This analysis is primarily used to look at your competition, but it can also be used to analyze potential new locations.
Equal Competition (Thiessen)
Equal competition areas, or Thiessen polygon boundaries, define the area closest to each store relative to all other store locations. These polygons are generated from a set of three or more store locations.
Huff Equal Probability
Huff equal probability trade areas are similar to equal competition areas, but the boundaries between the stores are weighted based on one or more variables. These weights can be calculated from results of a Huff model you have run, or you can enter the parameters manually using predictor variables in your store layer.
Non-overlapping rings are trade areas created around your stores using a radius that you specify. Alternatively, you can calculate the ring sizes based on a field value in your store layer. Any rings that intersect will have the overlapped sections removed. This is done by calculating a straight-line boundary between the points of intersection. The overlapped areas of each ring are removed, creating areas of equal competition.
Standard Geographies are trade areas based on standard boundaries such as states, counties, tracts, ZIP Codes, block groups, core-based statistical areas (CBSA), or designated market areas (DMA). Individual trade areas are created for each unique geography (for example, each state, each ZIP Code) that you select. One layer can contain several trade areas, such as one whole layer containing a collection of counties.