The Lowdown on Catchment Areas
26. November 2018
The rapid development witnessed in the field of IT over recent years has transformed the way businesses employ geographic information systems to handle and calculate catchment areas. Hand in hand with this progression, there has been an increase in the amount and variety of relevant data available to businesses. Yet it’s not so long ago that these kinds of tasks were the exclusive preserve of GIS specialists. But now the situation has changed. Location intelligence is the popular, easy-to-use solution for businesses looking to incorporate the latest technology to jumpstart growth.
Questions you need to ask
- How many people live in my store’s surrounding area/neighbourhood? How many households are there? What are the demographics of the location (age, sex, socio-economic background, etc.)?
- Are there any competitors in the surrounding area/neighborhood? If so, how many are there? Do customers have a wide selection of services to choose from or am I the only one providing services in that location?
- Is the spatial distribution of my stores optimised? Is there any significant overlap of different catchment areas?
- Where should I build a new store? Are there any white spaces?
- Where are my clients from?
- Where should I target my marketing campaign?
… and many more
How to define your catchment area
There are many ways of defining your store’s catchment area. The basic rule of thumb is that the area should always be selected with a specific purpose in mind and be based on current data. For instance, if you want to launch a marketing campaign to promote your business in a new location to coincide with the opening of your new store but have no clients or purchase data, you can still calculate a potential catchment area to, lets say, maximise your leaflet distribution rollout for the type of customer you want to attract. Or if you do have internal purchase data, you can easily earmark a catchment area based on the addresses of your loyal customers.
Catchment area modelling
A catchment area is typically defined as an area from which a store can be reached – whether on foot, by car, or public transport – in a certain amount of time, i.e. 5, 10 or 15 minutes. The easiest way is to use direct distances, but the more accurate alternative is to create a real-time model using routable street data.
- Easy and fast calculation
- Higher level of inaccuracy
- The level of precision obtained depends on the local topography. Towns with regular street networks are reliable indicators, while other terrains such as rivers, highways, mountain ridges, etc. can prove more difficult to assess.
- Requires special data and software
- Results are more accurate and up to date
- Strong support for further modelling-based decisions
- Higher costs (Data(1), SW(1), specialists)
- Sub-network allocation
(1) There are also some Open Data and Free and Open Source Software solutions for calculating routes.
Using Real Data
Once you have a CRM system in place together with in-store and offline purchase data, you can calculate accurate catchment areas as well as track where your revenue comes from. And however predictable or surprising these results may be, the important thing is to have access to real data. These findings can help optimise your network or support decisions to close/open a store or relocate.
Again, there are several ways to calculate and visualise catchment areas:
- Easy to understand
- The right choice for spatial analysis
- Lack of additional data (e.g. demographics)
- Overlooks natural borders (rivers, streets, blocks of houses, etc.)
- Accounts for natural borders (rivers, streets, blocks of houses, etc.)
- A wealth of additional data (e.g. demographics)
- Heterogeneous units (different size, shape, etc.)
- Public familiarity with divisions of this kind
- Specific visualisation of point data (e.g. customers, households, POIs, etc.)
- Hot spots indicate where points of interest are concentrated
- Visualises points of interest
- Cartographic representations can be set to display a desired effect
You no longer need to be an expert
Identifying the right catchment area is just one of the ways the CleverAnalytics platform can help your business gain actionable insights and make smarter decisions.