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The Market Penetration tool provides a method to examine how well you are reaching your market areas. The number of customers in each area is divided by the total number of people in each area to give you a percentage of how well you're penetrating your market.
The Market Penetration tool calculates the percentage of customers for each feature in the Geography Level. The denominator in the percent penetration of customers can be any Business Analyst variable. In most cases, this variable will be total households or total population.
This tool can be used to examine the percentage of customers for each ZIP Code in your study area. It provides a measure of how you are performing in each geography feature. For example, you may have two ZIP Codes as illustrated in the table below.
| ZIP Code | Number of Customers |
|---|---|
92037 | 500 |
92122 | 700 |
At first glance, it would appear that you are performing better in ZIP Code 92122, because there are 200 more customers in this area. However, when you look at the number of households in each ZIP Code, you see that by percentage of households, you are actually performing significantly better in ZIP Code 92037, as illustrated in the table below.
| Zip Code | Customers | Total Households | Market Penetration |
|---|---|---|---|
92037 | 500 | 1,700 | 29.4% |
92122 | 700 | 4,500 | 15.6% |
You can use this tool in conjunction with trade areas to calculate the performance and market penetration of your store trade areas. In this case, you would set the Layer for Calculating Market Penetration to your trade area layer.