Assignment 2: Study Areas, Geocoding, Customers, and Trade Areas

Abstract

For this assignment, two friends own coffee and doughnut shops in two separate locations in San Francisco, CA. They want to determine how each of their stores are doing in relation to one another, other coffee and doughnut shops, and ensure that they reach the most customers possible without competing against each other. Through a series of four maps and some analysis of them, these business inquiries can be answered.

Methods

For the context of this assignment, five maps were created. The first, showing where each store's customers live. The second, showing where other coffee and doughnut shops exist. The third, showing each store's customer trade area. The fourth, showing drive time areas. The fifth, showing average incomes by census clock group. All of the maps for this assignment were created in ArcMAP.

For the first map, and all of the maps thereafter,  a study area was created. Since the stores are located in San Francisco, the logical study area created was in San Francisco county. Setting up a study area not only allows for more accurate and defined analysis, it greatly speeds up data processing and drawing since the only area of interest has been defined with the study area. Once the study area was defined, locations of each store and their respective customer's locations were geocoded into the study area. This means that the individual addresses of these places were put into the coordinate system defined in the study area as geographic coordinates. The mean center and standard distances of each of the store's customers were also calculated. The mean center shows a spatial rendering of the geographic center of each store's customers, and inherently in relation with the store's location. The standard distance is represented by an ellipse. This shows where around 68% of each store's total customers reside and also helps with the spatial analysis of this project.

Map 1

For the second map, a similar geocoding process took place but this time with other coffee and doughnut shops within the study area. This map along with Map 1, can provide some very useful information as to which customers are choosing this coffee and doughnut shop over others that may be closer in proximity.

Map 2

For the third map, customer trade areas for each store were calculated. This was done by inputting each store's customers into the customer derived area tool. The three layers provide a bit more accurate representation of where customers reside for each store than the standard distance calculation done in the first map. The green layer represents where 30% of the store's customers live, the yellow layer 50%, and the red layer 70%.

Map 3

    For the fourth map, a drive time area for each store was calculated. This was done by inputting San Francisco's road network into the drive-time areas tool. The three layers represent different distances a customer would have to drive to get to the business. This calculation provides a very useful idea as to how far customers are willing to drive to each store based on real road networks in San Francisco.

Map 4

For the fifth and final map, the median household income for each block group in San Francisco was added to the map. This was a preset of business analyst that was set up before the study area was but can be added to any map by adding median household income as a value in a graduated colors symbology.

Map 5

Analysis

Looking at the results, there is only a slight overlap between where about 68% of each store's customers are located and it appears to be right in the middle of the two stores. Considering store 2 has around 425 customers on record and store 1 has around 352, store 2 is doing a bit better than its counterpart. This is most likely due to the high number of coffee and doughnut shops on the north east side of town, creating more competition surrounding store 1 than surrounding store 2. It looks like each store is taking some of the other store's customers, as well. With a few blue dots within a couple miles of store 1, there are some customers that are choosing to go to store 2 instead, and vice versa. Where customers spend their time during the day could determine which store they go to when they're at work, school, etc.

There isn't too much concern as far as competition between the two stores goes, however. Both stores have a good amount of customers within walking distance (map 4), but what about customers that do not live within walking distance? Most driving customers are coming from the west side of town, and there isn't too much competition along the way to either store, which is great. However, if each store is looking to maximize their customer trade area, this business should look at marketing to west side neighborhoods where they already have some clientele coming from. Perhaps store 1 could market to potential customers living on the north side of Golden Gate Park and store 2 could market to potential customers that live south of Golden Gate Park. Another option would be to set up another store just south of Golden Gate Park (map 5). With minimal competition on that side of town (map 2), this area could provide ample opportunity to expand their business. This expansion would be a closer commute for customers currently going to either store as well as potentially bring in new customers from that area. Looking at map 5, median household incomes look promising on the west side of San Francisco as well, meaning that business could go well if there are potential customers who have money to spend in these areas.

Conclusions

After reviewing and analyzing the results, I feel as though marketing to San Francisco's western neighborhoods will be in the best interest of the business for now. Opening up a new store takes a lot of capital and could be risky to what looks like steady business at the moment. It looks to me like the customers that are going to the store that is actually farther away from their residence might either work near that particular store's location or pass by that particular store on their way to work, school, etc. This also falls into the context of customers living in the west-side neighborhoods, which in turn makes me a little weary about setting up a store on the west side. If customers want to wait til they're closer to work or school before they get their coffee or go on a coffee run / lunch break once already at work or school, then erecting a store near west-side customer's residences might not actually bring in any more business. The best thing to do would be to advertise store locations to the west side of San Francisco and offer incentives to customers to fill out a survey as to why they come to the location they do. If the business starts to see more interest in having a store closer to customers on the west side, only then should the business seriously consider setting up a third location closer to their long distance-commuting clients.