Get Smart About Your Market: What You Don’t Know Can Hurt You

Detailed research on key demographics can help unleash your pizzeria’s profit-making potential.



Ideal pizza eaters are single people and younger couples with an on-the-go lifestyle. Do you have a lot of these customers in your market?

 

How well do you know your market? I ask this question because I encounter many experienced pizzeria operators who either don’t know much about their markets or don’t know that their markets have changed, which negatively affects a business.

Most pizzeria operators know how many households are in their markets and where their competitors are located, and most know where area schools are located. Sadly, however, this is all they know. The more you know about your market, the more money you can make. Here’s what you should know, at minimum:

How many households are located within one mile of your business? Convenience is a major buying trigger, and your pizzeria is very convenient for those living within one mile of your shop. Once you become familiar with who’s in that one-mile ring, you can expand to a bigger swath of your service area.

What is the makeup of these households? What percentage has kids? How old are the people living there? How many people live in the households? What’s the breakdown of single-person households versus four or more people in the household? Are these households single family or multifamily?

What are the median incomes of these households? Are these affluent customers, middle-class, working class? 

Where are the pockets of ideal pizza eaters in the area? These can be single people and young couples with children and an active lifestyle. As a good rule of thumb, consider customers who are under 50 years old. 

How many businesses are located within a mile of your pizzeria? Don’t just target residents in your area. Reach out to surrounding businesses, too—their employees have one hour to eat lunch, and you offer the convenience they need.

 

What schools (elementary, junior high, etc.) are located near your pizzeria? In this case, you can look outside the one-mile ring.

Where are your competitors? How many are located within two miles of your pizzeria? Again, it’s OK to look outside the one-mile ring, because their service areas will overlap with yours.

What is the quality of your competition? How good are their pizzas and their service? Are they routinely busy?

How does the quality of your pizza compare with competitors in your immediate area? This may be the most difficult question to answer, but it’s an important one.

 

Identify Customer Prospect Zones

Customer prospect zones are specific sections of your market where pizza eating prospects are clustered together. Families with kids tend to live near other families with kids, while single people in their 20s and 30s live near other folks their age. Similarly, older people tend to live near other older people as neighborhoods transition from family-oriented households to empty nesters, then to retirees and, eventually, back to young families again, at which time the cycle begins anew. By knowing where these clusters are, you can target your marketing message directly to them and generate big sales without wasting marketing dollars.

To illustrate my point, a pizza operator I worked with was sending out shared-mail flyers to 20,000 households that stretched more than three miles from his store. He was getting minimal bang for his buck with these ads, generating about 200 orders (a 1% response). I performed a market analysis and discovered a cluster of households (about 600 homes) located a half-mile from his store in a single postal carrier route. Nearly 80% of these households had kids, obviously a prime indicator for pizza consumption. Talk about customer prospects!

We did a single direct mailer to this carrier route, and the pizzeria generated more than 200 orders with a very high ticket average, creating substantially more revenue than the shared mailer that had gone to 20,000 homes! We also found that the original shared mailer had not been delivered to this more desirable 600-home cluster because the cluster was located in a different ZIP code than those targeted by the pizzeria operator. Had he known his market better, he could’ve targeted that one lucrative carrier route from the beginning and pocketed a lot more cash.

 

Asking the Right Questions

Important demographic information can be gleaned from several sources, but keep this tip in mind: When obtaining demographic data, zero in on the smallest geographic area possible. If the information is available only by ZIP code, that’s OK, but if you can narrow the data down to the carrier route level (several carrier routes make up a ZIP code), that’s even better. Here’s the basic information you want to collect:

Number of households by carrier route in the one-mile ring around your store. Determine this information by using simple, rough boundaries, such as “North Boundary—Main Street” and “South Boundary—First Street.”

Median age of residents in those carrier routes. “Median” means that half the group will be above the median number and half will be below. Median numbers are considered more accurate than “average” numbers.

Percentage of households with kids by carrier route. It’s helpful, but not necessary, to break this down by specific ages.

Median income by carrier route.

Location of apartment complexes. Use common sense here but focus on the apartment complexes with a younger, hipper demographic rather than the senior complexes.

 

Sources of Information

One good source of demographic information is the U.S. Postal Service (USPS). Since the USPS creates carrier routes, it can provide that data to you. Visit your local post office and ask for demographic information for the specific region you’d like to target. Simply give them the boundaries, and they’ll give you the carrier routes. Don’t worry if a carrier route extends slightly beyond the boundaries on which you’ll be focused—it’s no big deal.

Shared-mail vendors will also have a lot of this information, and your beverage distributor can also help. In summary, you can never know too much about your market, so it’s important to gather as much demographic information as possible to stay ahead of the game. Even subtle changes to a market area’s demographics can mean big changes to your bottom line—for better or worse. A little research will go a long way toward boosting your sales, profits and competitive edge and can insulate you against inevitable market changes.

This article originally appeared in PMQ’s March 2012 edition.

 

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