Catchment area: what's in it for brands? | Sidely

Catchment areas: challenges for distributed brands

Margot Bonhomme
October 27, 2023 - 7 min reading

When we talk about catchment areas, you're probably wondering what this has to do with you. Well, it doesn't just concern retailers and chains, but also... your brand!

Let us show you how this analysis tool can also help you, whether to define your distribution strategy, or to improve the efficiency of your marketing and sales departments.

Understanding the catchment area

What is a catchment area?

The term "catchment area" refers to the geographical territory within which a sales outlet attracts customers. In other words, it's the area in which a store's potential customers live, work or travel.

The catchment area covers not only the current clientele of a sales outlet or brand, but also its potential clientele. 

It is defined by the distances and travel times required for customers to get there, as well as the socio-economic characteristics of the area concerned.

It is therefore a powerful geomarketing tool that enables distributors and sales outlets to identify strategic location opportunities and assess the penetration rate of a local market.

3 zones to represent levels of attractiveness

The catchment area is generally divided into three sectors, which enable a more detailed analysis of the attractiveness of a sales outlet: 

  1. Primary zone: they're right next door! This is the area closest to and from which most of the store's customers come. They go there naturally, out of convenience; 
  2. Secondary zone: They like to come to this store, but are further away. It's harder for the store to attract them, but there's still traffic;
  3. Tertiary zone: the biggest challenge. In this case, potential customers have competing outlets closer to them. The effort required to bring them back into the outlet is considerable.

Calculation of catchment area

Now we come to the more technical, yet necessary, part. 

There are four main methods used by sales outlets to determine their catchment area: 

  1. Isochronous curve: this involves defining a geographical area that can be reached according to a pre-defined travel time and mode of transport. Mapping this area on the basis of several variables will undoubtedly require the use of dedicated algorithms; 
  2. Isometric curve: also known as isodistance, this technique uses distance rather than travel time as the main variable;
  3. The flight of birds: here, we consider distances without integrating notions linked to geography, time or transport infrastructures; 
  4. Administrative boundaries: communes or départements, for example.

The aim is to understand where potential customers are, and how to bring them to the point of sale.

Assessing a region's commercial potential

Your products are great, but where are the customers who love them?

To measure an area's interest in terms of revenue, distances and travel times are not enough! To assess a territory's commercial potential, you'll need to cross-reference geographical indicators with socio-economic data and, as we'll see a little later, consolidate all this with your distributors' consumption data.

Here are a few criteria that can be used to achieve a finer level of granularity in interpreting the potential of a catchment area:

  • Median income ; 
  • Gender distribution ; 
  • CSP (socio-professional categories) ; 
  • Average age of inhabitants ;
  • Active population rate.

To this end, INSEE provides a number of tools for studying local statistics.

Importance of the catchment area for brands integrated into the distribution network

As a retail-integrated brand, you can use catchment area analysis to better select the outlets in which to distribute your products. It helps you to understand store strata too.

Here is a non-exhaustive list of potential benefits for your brand:

  • Perfect your distribution strategy ;
  • Locate the most promising points of sale; 
  • Optimize your inventory management and logistics; 
  • Improving the customer experience; 
  • Strengthen customer loyalty by improving the distribution of your efforts; 
  • Tailor your offers to local socio-economic realities; 
  • Improve your marketing campaigns with location-based advertising;
  • Optimize your advertising spend by sector. 

State of the competition: how should brands interpret it?

The best potential inevitably attracts competition. So don't limit yourself to sectors with high demographic and purchasing power indicators. The presence of competitors can have a considerable impact on forecast sales.

Bear in mind that if many retailers distribute your product range, their reflex in an ultra-competitive environment will often be to lower their final selling price or play on margins. In this case, your distributors could pass on this pressure to you, by asking you to assume the price cut.

But, paradoxically, increased competition will also tend to increase overall traffic in a catchment area, and therefore sales opportunities for your products.

The aim is to balance potential and competition to find the sweet spot!

These concrete examples illustrate the link between the supply network in a given region and the commercial opportunities available to manufacturers. In fact, the catchment area covered by each of your distributors should be studied in terms of both sales potential and competition density. A vast subject!

Catchment area and distribution strategy

With the catchment area, targeting the consumers most likely to buy your products takes on a whole new dimension. 

While manufacturers of mass-market products tend to want to sell everywhere to maximize distribution intensity, innovative brands or those with specific targets may need to consider much more selective strategies.

A few examples to illustrate this idea:

  • Your product is for the general public and can be sold under identical conditions anywhere in France. National distributors will enable you to cover the entire country, and the notion of catchment areas will only serve to intensify your marketing and sales efforts in regions with the greatest potential;
  • Your product targets a well-off and particularly well-educated segment of the population: you can then use a selective strategy that focuses on points of sale in densely populated urban areas; 
  • Your product is aimed at highly geolocalized population categories, for example based on religious criteria. This time, you target specific neighborhoods, prioritizing local shops.

Data sharing and analysis: consolidating your vision

We explored external data sources above. Let's now turn our attention to analyzing your own data, and - trade marketing be damned - the data your distributors share with you.

Transaction data analysis

The study of your datasharing can tell you a lot about who buys your products. That's why you need to negotiate your checkouts skilfully with chains and stores. 

Alternatively, if you also sell via your own channels, for example on your online sales site, you can try to draw analogies between e-commerce and physical points of sale. But beware of false reasoning...

Finally, it's important for you to monitor the average basket in the outlets where your products are sold. You should also monitor consumer indices to compare them with your own observations in the field.

Competitive analysis

The presence and performance of your competitors in a given region are essential to adjust your strategy accordingly. Data, however, can be hard to come by. Here again, datasharing is an important lever to activate: are your distributors willing to share sales data on competing brands with you? 

In any case, the minimum requirement for a retail-integrated brand is to use a retail performance CRM.

Predictive modeling

Finally, you can use predictive models based on variables such as previous buying behavior, demographic trends and economic factors to anticipate the expansion or reduction of a catchment area. The help of an external company or expert may then be required.

Adapt your marketing strategy to local realities

You've collected and analyzed this field data. You can then use these analyses to redirect the various aspects of your business strategy, and turn them into profits.

One solution: adapt your strategy to local conditions. Every region is a new opportunity!

The first winner of this approach is, of course, your marketing department. A brand that understands its catchment area can adapt its methods to the specific needs of the different zones it addresses.

These marketing efforts can focus on personalizing offers with local products, promotions, merchandising or other promotions to support your products in more competitive areas, or areas where your brand is less popular.

You can also optimize your advertising campaigns, since you now know which territories have the greatest potential, or which are the most hotly contested, either by your industrial competitors or by distributors competing with your own!

Limits and challenges of the catchment area for a brand

To conclude, let's take a look at the various limits or precautions to be taken when determining catchment areas: 

  • Changes in behavior and habits: many technological, economic, climatic and epidemiological factors are likely to have an impact on your end customers; 
  • Evolving competition: you're not the only one evolving your strategies, and you need to keep an eye on what your competitors are doing; 
  • RGPD: data handling must be carried out in accordance with French and European privacy laws; 
  • Brand image : adapting your strategy too much to regional disparities can damage your brand's image by reducing its homogeneity;
  • Advertising expenditure: the personalization of marketing and sales campaigns can also weigh heavily on the overall budget; 
  • Cost of analysis: if you're looking for in-depth analysis, you'll probably need to use external service providers, and the cost of these studies can also have an impact on your expenses.

The catchment area is not just for department stores. It is also decisive for brands that sell via a distribution network.

Having the ability to know and understand a territory and its population enables your brand to optimize the location of the best points of sale, personalize its offers, and improve its marketing tools.

If you can meet the challenges of the catchment area, this weapon can become a real asset in the development of your distribution strategy. 

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