market research: whose your market and how to serve … is our...expenditure share of...
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Market Research:Market Research:Whose Your MarketWhose Your Market
andandHow To Serve Them BetterHow To Serve Them Better
ByLarry E. Lund
Real Estate Planning GroupChicago
312-751-1250
How Demographics and How Demographics and Household Expenditures Affect Household Expenditures Affect
Food Buying HabitsFood Buying Habits
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Family Size Declines as Women Family Size Declines as Women Enter WorkforceEnter Workforce
Real Estate Planning GroupSource: BLS
Expenditure Share of NonExpenditure Share of Non--NecessitiesNecessities(Necessities: Food, Clothes, Housing)(Necessities: Food, Clothes, Housing)
0
10
20
30
40
50
60
1901
1918
1934
1950
1960
1972
1984
1996
2005
Perc
ent
Source: BLSReal Estate Planning Group
Ernst EngelErnst Engel’’s Proposition of 1857s Proposition of 1857
As income increases, the proportion of total expenditures allocated to food decreases., housing and apparel stay constant, and “luxury goods” increases.Ceteris Paribus: Given that all other characteristics are held constant.
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Was Ernest Right?Was Ernest Right?
Exp. Shares <$70,000
Exp. Shares >$100,000
% ∆ in Exp.$70K-$100K
Food Home 8.3 5.3 95%
Food Away 5.7 5.5 196%
Furnishings 3.4 4.5 311%
Apparel 4.1 4.1 209%
Entertainment 4.7 5.7 269%
Pensions 7.0 14.6 534%
Source: BLSReal Estate Planning Group
Changes in Expenditure ShareChanges in Expenditure Share1901
Food42.4%
Housing23.5%
Apparel14.0%
Entertain1.6%
Other18.6%
1972
Food19.3%
Housing30.8%Apparel
7.8%
Trans19.3%
Health6.4%
Entertain8.6% Other
7.8%
1950
Food29.7%
Housing27.2%
Apparel11.5%
Trans13.4%
Health5.2%
Entertain4.4% Other
8.6%
2005
Food12.8%
Housing32.7%
Apparel4.1%Transp
18.0%
Healthcare5.7%
Entertain5.1%
Ins/Pen11.2%
Other10.4%
Source: BLS Real Estate Planning Group
Change in U.S. Household Retail Change in U.S. Household Retail ExpendituresExpenditures
22
9.1
23.3
14.1
1.6
28.2
0 5 10 15 20 25 30
Percent Change
All Expenditures
Food Home
Food Away
Furnishings
Apparel
Entertainment
2000-2005
Source: BLS
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Increasing Concentration of Increasing Concentration of Retail SalesRetail Sales
2033
4759
3346
5768
020406080
Perc
ent
1997 2002
Supermarkets
4th Largest 8th Largest20th Largest 50th Largest
050
100150200250300350
$ B
il.
2005 Sales
Wal-Mart and the Six Dwarfs
Wal-Mart Home Depot CostcoTarget Lowes WalgreensSears
Source: U.S. Census Source: Forbes
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Public Markets at the Crossroads Public Markets at the Crossroads
“So if Everyone loves the Market so much, how come it didn’t catch on?”– Grocery stores copied it– Farmers Markets are Booming
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ItIt’’s All About the Customers All About the Customer
Great Markets respond to the needs of the customer– Shopper– Vendor
The Shopper is King
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Things You Already Knew about Things You Already Knew about Customer Behavior, butCustomer Behavior, but
DidnDidn’’t Know their Fancy Namest Know their Fancy Names
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ZipfZipf’’s Principle of Leasts Principle of Least--EffortEffort
Most people, most of the time, are turned back by modest hurdles that they know could be overcome, with effort. To be habitual, an action must be relatively effortless or carry a particularly LARGEPSYCHIC REWARD.
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Law of ConvenienceLaw of Convenience
Every additional step that stands between people's desires and the fulfillment of those desires greatly decreases the likelihood that they will undertake the activity. ICSC’s Top 10 Moments– Convenience as a driver
of customer traffic
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LomonosovLomonosov--LavoisierLavoisier LawLawMatter cannot be created or destroyed. Matter cannot be created or destroyed.
So what about Sales?– Markets cannot generate new business or create
new buying power, it can only:Attract customers from existing businesses trade area or extend a trade areaFulfill a demand that has not been met within the trade areaCapture increase in buying power from growth in population, employment, or income.
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ReillyReilly’’s Law of Retail Gravitations Law of Retail Gravitation
Reilly's Law basically states that people will travel to the largest store/center (selection) most easily reached (convenience). Programs calculate the probability of where customers will shop
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NashNash’’s Equilibrium Theorems Equilibrium TheoremIn Game Theory, two stores selling the same merchandise will maximize their locational advantage by locating right next to each other at the mid-point: where half their consumers are located
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A Theory of ShoppingA Theory of Shopping
Shopping Demonstrates Social Relationships –What do we care about?Shopping is a Devotional Rite – Pleasing others– Shopping as a “treat” - pleasing oneself
Veblen – “Conspicuous consumption”
– Shopping as “thrift”Hegelian dialectics – household interests vs. community interests. Shopping as a moral act
Shopping as Personal Identity
Source: Daniel Miller writingsReal Estate Planning Group
Physical Aspects of Market Physical Aspects of Market CapacityCapacity
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Trade Area by SurveyTrade Area by Survey
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Competitive Market AnalysisCompetitive Market Analysis
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Pulling PowerPulling Power
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Market ShareMarket ShareSelected Store Estimated Area
(S.F.)Estimated %
Market Share (Fresh Food Items Only)
Lexington Market 74,400 (240,000)
30%
Safeway 50,000 14%Superfresh 35,000 13%Hollins Market 15,500 (50,000) 12%The Avenue Market 17,360 (56,000) 6%Stop Shop & Save -
Pratt15,000 5%
Cross Street Market 27,900 (90,000) 4%Real Estate Planning Group
Sizing the MarketSizing the Market
Selected Fresh Category Hollins Market Potential from Huff Forecasting
Model Bakery $234,000
Meat & Poultry $1,342,000
Fish & Seafood $97,000
Fresh Fruit & Vegetables
$219,000
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Value KeyValue Key
PriceQualityExperience
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Understand Your Customer to Understand Your Customer to Focus on CustomizationFocus on Customization
Market Research is a ProcessNot a Product
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Core CustomerCore Customer
GeographicPsychographic
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ParetoPareto’’s Principles Principle
80/20 Rule states that for many phenomena 80% of results stem from 20% of the effort. In other words, focus on those who buys more at the Market.
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Primary vs. Secondary StoresPrimary vs. Secondary Stores
Primary Store– 64% Conventional
Supermarket– 23% Supercenters– 6% Limited Assortment– 4% Warehouse– 2% Specialty– 1% Conv. Discount
Secondary Store– 63% Conventional
Supermarket– 16% Supercenters– 3% Limited Assortment– 9% Warehouse– 3% Specialty– 6% Conv. Discount
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Your NicheYour Nicheas a Secondary Placeas a Secondary Place
Stock-up?In-fill?Proteins?Organics?Local?Ethnic?Experience?Meal Solutions?
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Geographic Market Geographic Market SegmentationSegmentation
Live Downtown / Work DowntownLive Downtown / Work Outside DowntownLive in City Outside Downtown / Work Downtown
Live in City Outside Downtown / Work Outside Downtown
Live Metro Outside City / Work DowntownLive Metro Outside City/ Work Outside Downtown
Live Downtown/ Not WorkLive in City Outside Downtown/ Not WorkLive in Metro Outside City/ Not WorkLive Outside Metro/ Not Work
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PsychographicPsychographicSegmentationSegmentation
Age– Lifestage
Race/Ethnic TraditionsIncomeEducation
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ExperientializeExperientialize your your Commodities!Commodities!
-ing the thing– Experientializing the commodity
Pike Place Fishmonger throwingBaking
– The roasting, grinding, cooking, eating . . . .Make the customer have a good time buying
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Knowledge is Experiential Knowledge is Experiential InformationInformation
Learn How to Transform Customer Experience– Customer Surveys – Sample Size/Correlations– Behavioral Tracking – Memory vs. Reality– Focus Groups – Memories
Measuring Sacrifice– What consumer exactly wants and settles for
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““Work is Theater & Work is Theater & Every Business a StageEvery Business a Stage””
Create a Stage for Experiences– Workshops for Creating for Individualized
Experiences– Staging the Unexpected!
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PPSPPS’’s 10 Qualities of Successful s 10 Qualities of Successful MarketsMarkets
Right vendor Right location Right mix Right mission Right public spaces Right connections Right economics Right promotion Right value Right management
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Thank YouThank You
Larry LundReal Estate Planning Group
Chicago312-751-1250