Use Logic to Define Your Trade Area

Too often we see multichannel marketers with stores defining their trade areas by geography only.

For example, the trade area for store location A is defined as a circle with a 30-mile radius from the store. For your buyers, this may be satisfactory since by definition your existing customers’ geography is self-selected. You could think of an individual customer’s address as a microtrade area. But when talking about prospects, defining a trade area by radius just doesn’t make sense. What’s more, such logic is probably hurting your marketing ROI.

A more logical way to define a trade area would be to create a tiered system (primary, secondary and tertiary trade areas), then analyze store sales by zip code to define each tier. Perhaps the primary trade area is defined as the zip codes that are driving 70% of that store location’s sales, secondary = 20%, and tertiary = remaining 10%.

Unless you’re running Wal-Mart, you’re not selling to everybody. Using your customers’ geographic profile to drive your segment definitions is the logical application of database marketing principles for multi-channel marketers.

Jude Hoffner is director of circulation business-to-consumer markets, at San Rafael, CA-based consultancy Lenser.