online service that collects payment informations

Keywords: marketing; business GIS; business; environmental scanning; market area analysis; geodemographics; demographic

Finding Market Opportunities Understanding the market environment spatially

Introduction

Problem

Bikes2Go is the startup enterprise of Bill Ivers and Karen Estes,1 avid recreational bicycle riders and recent university graduates in a large Southwestern city. Karen and Bill have noticed that their town and others they have visited have bike rental and repair shops near larger parks and recreational areas but lack them near smaller recreational facilities such as neighborhood parks and school playgrounds.

Further research reveals that these smaller areas do not generate the traffic necessary to support full-scale bike rental and repair shops. Thus, the trails and bike paths in these facilities tend to be underutilized.

Karen and Bill view this situation as an opportunity for developing a business model for bike shop functions that can be profitable at relatively low sales volume. Working with fellow bike enthusiasts, they develop the prototype for an automated, self-service bike rental and repair kiosk that can be located in a modest space near smaller parks and recreation areas.

Bill and Karen hire you as their research consultant and charge you with finding a good place to test market the Bikes2Go rental and repair (R&R) concept.

You will use web-based business geographic information system (GIS) tools for your work.

Location

Seattle, Washington, urban area

1 This scenario and the organizations and people in it are fictional. Any resemblance to actual individuals or organizations is coincidental.

Data used in this lab

 Demographic and consumer spending data at various levels of geography

 Location data for parks and bike shops

 Consumer expenditure data

Activity

This lab focuses on environmental scanning in the search for market opportunities. Bill and Karen have tasked you with finding a good place to test market the Bikes2Go R&R concept.

Each kiosk houses up to 10 rental bicycles, which customers can rent at specified rates by providing credit card information. Customers may also reserve bikes in advance with an online service that collects payment information and ensures that a bike will be ready at the specified kiosk when the customer arrives. In addition, each kiosk provides bicycle service resources, including pressurized air, filtered water, and toolkits for minor repairs. The kiosk displays a fee structure for these services, which customers purchase by credit card. Kiosks are serviced as needed to maintain equipment and the proper number of bikes. Configured in this way, each Bikes2Go R&R kiosk is a self-sufficient miniature bike shop that operates with little overhead or personnel costs.

The ideal test site would be a market area with a concentration of target customers (25–40-year- olds with incomes between $25,000 and $50,000), several parks, and relatively few competing bike shops. The test market at the start of the screening process will be in the Southwest or Pacific Northwest, where climatic conditions allow year-round operation of the kiosks.

You will scan for potential market areas on a national level and then focus on one attractive area, Seattle, Washington, where you will analyze the distribution of target customers and recreational spending. You will also map the locations of regional parks and existing bike shops. Finally, you will integrate this data to search for potential locations for Bikes2Go kiosks. If at least 10 such locations exist, you will report that the Seattle area is an acceptable location for test marketing this concept.

SELECT A MARKET AREA

This calls for a two-phase process involving analyzing and visualizing a prospective market area.

ANALYZE

1 Select a state in the Southwest or Pacific Northwest with a high level of interest in biking.

2 To do so, use the color-coded map 1 below, which displays states classified by their level of biking interest.

3 Measure this interest by referring to the Market Potential Index (MPI) (see table 1) for the variable Participated in bicycling (road) in the past 12 months.

VISUALIZE

1 In map 1, look for the darker colors, which represent states with MPI values for this variable of 100 or greater.

The darkest colors have values of 110 or greater. For MPI measures, a value of 100 is the national average, a value of 120 is 20 percent above that average, and a value of 80 is 20 percent below. Thus, the darkest-colored states are those most likely to engage in recreational biking.

Map 1: Recreational biking MPI by state in the United States

State Participated in bicycling (road) in the past 12 months: Index

Colorado 118

Connecticut, Maryland, Virginia 117

Massachusetts, Washington 115

New Hampshire 114

Minnesota 113

Delaware 110

Oregon 109

Table 1: Top 10 recreational biking MPIs by state in the United States

2 Observe that—as map 1 and table 1 reveal—Washington has the highest MPI value of any state in the Pacific Northwest or the Southwest, with a measure of 115.

This means that residents are 15 percent more likely than the national average to participate in road biking. Within the state, King County, with an index of 129, has the highest level of Washington’s counties, and many census tracts in this county have MPI values above 150.

3 For this reason, choose this area to explore more deeply as a test market candidate.

Map 2: Recreational biking MPI by census tract in western King County

DISPLAY DEMOGRAPHIC CHARACTERISTICS

To be an attractive test market, the western King County area must have concentrations of young people (25–40 years old) with moderate levels of income ($25,000 to $50,000) and relatively high spending on recreational equipment. You will use the color-coded mapping functions to seek out these concentrations.