How to Determine Trade Areas

Imagine a big perimeter drawn that encompasses all of the customers of a store. Is that your trade area? It might be. It's one way to determine a trade area, but it may not be the most accurate.

For example, you may have customers that come from far away, because they are visiting the area. If your store is in New York and you have a customer address for that store in Los Angeles, obviously your trade area shouldn't reach from New York to Los Angeles.

Types of Trade Area Definitions

Mapping Analytics uses a number of different ways to define accurate trade areas. The right approach depends on the nature of your business and your need. While distance and driving time to the store are important factors in determining trade areas, these inputs may not be enough in themselves to determine accurate trade areas.

Examples of trade area definitions Mapping Analytics uses include:

Deterministic Trade Areas

Trade areas created by relating customer addresses to the store where customers purchased. The trade area boundary is formed by measuring the travel time or distance that most customers travel to reach the store. In this case, trade areas of stores may overlap. This would not be a good way to determine trade areas for assigning leads, since some customers and prospects fall into more than one trade area.

Proximal Trade Areas

Trade areas that assign all geography closest to a store, to that store. Proximal trade areas ensure that market potential of a trade area is not double counted, as might be the case in overlapping trade areas. However, all of a store's customers may not be included in a proximal trade area.

Probabilistic Trade Areas

Trade areas defined by multiple inputs, including distance and travel time, but also factors such as:

Attractiveness — Product mix, parking, prices and more
Alternatives — Competitors, other stores in your own network
Environment — urban or rural, population density
Traffic — volumes and patterns

Each of these variables would be weighted and included in a model to develop accurate store trade areas.

For the Most Accurate Trade Areas . . .

Mapping Analytics is your source. Our expert analysts have defined accurate trade areas for many retail and financial services customers, leading to better allocation of sales and marketing resources. We can do the same for you.

(888) MAP-SOLUTIONS

Trade Area Information

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