For the store you are planning, assume thyat there are 18,000 households in your

Question

For the store you are planning, assume thyat there are 18,000 households in your community and that these are within a reasonable driving distance. You have determined that if you broadly define your store's market, 65 percent of households in the community would be shoppers at your store and would shop there an averate of 3.4 times per year. On the other hand, if you define your market much more selectively by focusing on a well-defined niche, you estimate only 28 percent of households would shop your store; however, they would shop an average of 9.2 times annuallly. In this situation, would a broadly or more narrowly defined market create more customer visits to the store? (hint: Total store visits, also referred to as traffic, is equal to the total number of households in the market multiplied by the proportion that would shop your store, multiplied by their average shopping frequency.) What other factors should you condsider when deciding how narrowly or broadly to define your market?

Explanation / Answer

Broadly: 18,000*.65*3.4= 39780 visits Narrowly: 18,000*.28*9.2= 46368 visits. Based on this, you should narrowly define the market, to maximize number of customer visits. However, you may want to also consider average visit value (how much each customer spends each visit), whether or not you want large market coverage (and therefore more household penetration and a broader definition), differing costs associated with the definitions, and ultimately the profit (either value or margin).

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