geographical location in business plan

How to write the location section of your business plan?

By now, you must already be in the process of writing your business plan. Each subsection or section included in this document is important in its own way and serves a specific purpose.

The location subsection is one such and is likely to be of great interest to investors and other stakeholders. It helps them understand whether or not your business could be a success based on the characteristics of the area.

This subsection is part of the overall “company presentation” section and is usually grouped with the presentation of the structure and ownership of the business and the management team involved in operations.

But, how do you ensure that the location section is well-written and provides readers the detail they want to see?

Let’s take a look at this in more detail!

In this guide:

What is the objective of the location section of your business plan?

How long should the location section of your business plan be, what information do i include in the location section of my business plan, example of the location presentation in a business plan, what tools should i use to write my business plan.

The main reason why stakeholders might be interested in this information is to understand the serviceable areas that your business targets. In this section, our main emphasis will be on answering the “why here” question that may arise in the minds of the readers.

The area in which a business is located has a significant impact on both its profitability and long-term performance. Businesses are more likely to thrive in areas with easy access to higher-skilled labor and quality infrastructure (i.e. transportation). 

The location section of your business plan helps financiers understand the commercial potential and the risks of investing in your business.

Whilst digital transformation has allowed people to “come together” regardless of where they are located, some investors still prefer to consider the effects of agglomeration. 

Agglomeration refers to the geographical proximity between businesses and/or people and what effects it has on the operations and profitability of the business. 

Location is the key for any business. Let’s talk about how location matters for different types of businesses.

High street shops/businesses

Location is the primary driver of success for these types of businesses because they rely on the number of customers that walk in or are attracted by the storefront. If you operate a high street shop, explaining the attractiveness of the area is critical for your business plan.

For instance, your business might be located near a famous landmark (more so in country towns). Besides this, you should understand the risks associated with the location to the reader of the plan. These risks may include the ability to access the store, limited car parking, access to public transport, etc.

Industrial businesses

Following are some of the business types that may be categorized as industrial businesses. Needless to say that the location section of the business plan is essential for these types of businesses. 

Manufacturing facilities:

While writing a business plan for an industrial business, the location section should include details regarding the production capacity. How are raw materials obtained, how are finished goods manufactured and then shipped to the selling points.

Access to the workforce, energy, water, and environmental aspects should all be considered too. The environmental aspects include waste management, remediation in case of soil contamination, etc.

The logistics:

In the case of logistical businesses, the location section should cover the ease of access to the point of sales and the details regarding any warehouses or logistic hubs involved.

Hospitality businesses

If your business plan discusses food places, the location section should mention the cultures and preferences of locals. This will help the investor or lender determine whether or not your business model suits customer needs.

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When it comes to the location section of your business plan, you should aim to include as much information as possible, as long as it’s relevant. Put yourself in the shoes of the reader. You don’t want to be asking questions that could be easily answered by the document itself.

Be sure to answer:

• Why is the business located here? 
• How secure is the future of the location? Does the lease expire soon?
• Is the workplace safe and secure for employees?
• Is there an abundance of quality staff in the area?
• Are the premises easily accessible (public transport, parking, etc.)?
• How attractive is the catchment area? How much foot traffic is expected?

All these questions are crucial to the success of the business.

A general rule of thumb is that you must cover as much information as possible in 2-3 paragraphs per location.

The size will also depend on the structure of your business:

• A single location business (hairdressing salon or off-licence for example) need to be quite exhaustive as the business is 100% reliant on that location
• A chain with dozens or hundreds of implantations can afford to present locations at a higher level as there is some level of diversification in the overall premises portfolio
• An integrated business with both manufacturing facilities and sale points will probably need to write a slightly longer presentation in order to cover all aspects

To give you a better idea about the information to be added to the location section of your business plan, we’ve categorized it into four categories:

Business location

In this section, you need to state the full location and the exact address of the business. If possible, ensure that your business is listed on Google Maps so that readers can view the location easily. Mention all of the locations if you have more than one branch.

Also, if the business plan includes any plans for future expansion, the details of future location should also be mentioned here. 

In some cases, readers might be interested in the structure of the building in which the business is located. In that case, make sure to explain the general design of the building. This may include mentioning what’s on the first floor, second floor, etc.  

You might also want to provide a graphical representation i.e., a map that shows where your business is located and other brands or competitors in the area, a floor plan showing the layout of the premises.

Serviceable area

Another good practice is to include an explanation of your business’s serviceable area in your business plan. This is defined as the geographical region or territory where your business can effectively provide its products or services. 

You should also focus on why you chose that area in particular and what was the rationale behind it. Factors which may be discussed include convenience and easy access to suppliers.

One of the most attractive features of any location is vast parking availability and accessibility. You can use this opportunity to give a positive impression to the stakeholders regarding your venue.

You can also explain how customers, suppliers, and employees will access your business, including parking options. Writing about serviceable areas also helps readers form a picture of the type of customers who could benefit from your business (families on holidays, business executives, etc.).

Lease terms

The location section of the business plan should provide basic information about the terms of any lease you have signed for the property, such as length, rental rate, and any special clauses.

This is an essential piece of information that can have a significant influence in determining whether your business plan will be successful or not, financially.

Access to facilities

Another piece of information that you may add to the location section of your business plan is the ease of access to common facilities. 

Customers usually prefer to visit areas with significant facilities such as transportation, local infrastructure, and any other amenities that your business might offer customers.

Below is an example of how the location section of your business plan might look like. As you can see, it coincides with the structure and ownership subsection and the management team.

There is a graphical representation of where the business is located, its exact address, information about what the venue includes internally and how close or far it is from infrastructure.

This example was taken from one of our business plan templates .

In this section, we will review three solutions for creating a business plan for your business: using Word and Excel, hiring a consultant to write the business plan, and utilizing an online business plan software.

Create your business plan using Word or Excel

This is the old-fashioned way of creating a business plan (1990s style) and using Word or Excel has both pros and cons.

On the one hand, using either of these two programs is cheap and they are widely available. 

However, creating an error-free financial forecast with Excel is only possible if you have expertise in accounting and financial modeling.

Because of that investors and lenders might not trust the accuracy of your forecast unless you have a degree in finance or accounting.

Also, writing a business plan using Word means starting from scratch and formatting the document yourself once written - a process that can be quite tedious - especially when the numbers change and you need to manually update all the tables and text.

Ultimately, it's up to the business owner to decide which program is right for them and whether they have the expertise or resources needed to make Excel work. 

Hire a consultant to write your business plan

Outsourcing your business plan to a consultant can be a viable option, but it also presents certain drawbacks. 

On the plus side, consultants are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.

However, hiring consultants is expensive: budget at least £1.5k ($2.0k) for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the first meetings with lenders).

For these reasons, outsourcing the plan to a consultant or accountant should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.

Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their own business plan using an online software.

Use an online business plan software for your business plan

Another alternative is to use online business plan software .

There are several advantages to using specialized software:

• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can be inspired by already written business plan templates
• You can easily make your financial forecast by letting the software take care of the financial calculations for you without errors
• You get a professional document, formatted and ready to be sent to your bank
• The software will enable you to easily track your actual financial performance against your forecast and update your forecast as time goes by

If you're interested in using this type of solution, you can try our software for free by signing up here .

The location section of a business plan is very important for both startups and established businesses alike. Giving an attractive outlook of your business’s location, can help you find a business partner or secure capital. 

This information mainly includes details about the location of the business, the structure of the building, and the facilities that are available for the workers and customers. This information can help readers decide whether they want to be a part of your business or not. 

Also on The Business Plan Shop

• 7 tips for writing an effective business plan
• How to do a market analysis for a business plan
• How to write the structure and ownership section of your business plan
• How to write the products and services section of your business plan
• How to present the management team in your business plan
• How to write the suppliers section of your business plan?
• How to write the risks and mitigants section of your business plan?
• Is it worth using a business plan writer?

Know someone who needs to add the location to their business plan? Share this guide with them!

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.

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Business Location Analysis: The Key to Strategic Decision Making

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Table Of Content

Location, location, location! It's a mantra we've all heard before, but how many of us truly understand its significance in the business world? This isn't just about picking any spot on the map. It's about making strategic choices that propel your business towards remarkable growth and success. Let's delve into the crucial factors to consider during business location analysis.

What is business location analysis?

Business location analysis is the process of studying and evaluating potential physical locations for business operations. It's the cornerstone of strategic planning, with a powerful influence on a company's performance, profitability, and overall success. The significance of choosing the right location cannot be overstated—it provides easy access to customers, employees, and suppliers, and can greatly enhance your brand's visibility.

Choosing the right business location is a crucial step in your company's journey. It's more than just a place—it's the setting for your story and the stage for your success.

Why do businesses use location analysis?

Location analysis pops up as a champion in the realm of business operations, offering a strategic edge to businesses across the globe. It's more than just pinning a spot on the map – it's about designing a roadmap to successful business outcomes. It's the silent hero behind boosting your business' competitive edge, accessibility, and brand visibility.

1. Competitive Edge: Become the Market Leader

Location analysis aids in identifying the best locales to set foot in, where competition is minimal and opportunities are abundant. This is where the magic of strategic positioning comes into play.

By understanding the competition landscape, businesses can strategically place themselves in a position that sets them apart, helping them get ahead in the race.

2. Customer Accessibility: Be Where Your Customers Are

Location analysis also plays a vital role in making businesses more accessible to customers. It’s not about being in the most popular spot, but being in the right spot where customers can easily find and reach you.

• Convenience: A location that's easy for customers to reach can significantly boost your business.
• Visibility: Being in a spot where you’re easily seen can naturally attract more customers.

3. Brand Visibility: Shine Above the Rest

Brand visibility is about more than just being seen – it’s about being remembered. Location analysis helps position your business in an area that not only garners high foot traffic, but also aligns with your brand identity.

Whether it's a bustling city center or a serene suburb, the right location can amplify your brand’s presence, ensuring you're not just seen, but also remembered.

4. Optimizing Operational Efficiency

Location analysis optimizes business efficiency. A strategic location enhances logistics, influencing factors such as supply chain efficiency , distribution convenience, delivery speed, and employee commute. The right location streamlines operations, saving time and resources.

Beyond operations, an ideal location grants access to crucial business services like banking, legal, and marketing consultancy. It facilitates not just survival, but also growth.

Because when we think location, we think efficiency. And in business, efficiency isn't just a buzzword - it's a lifeline. So, are you ready to optimize?

Components of Effective Business Location Analysis:

Data Collection:

Any savvy entrepreneur knows that location is key. But how do you determine the right location for your business? It starts with data collection. You'll need to gather and analyze a variety of data types to make an informed decision. Let's break it down:

• Demographic Data: This is the first type of information you need. Who are your customers? What are their ages, income levels, and occupations? You'll want a location surrounded by your target demographic.
• Traffic Data: How many people walk or drive by the potential location each day? More foot traffic could lead to more customers. But remember, that traffic needs to align with your target demographic.
• Competition Data: What other businesses are in the area? Other businesses could be complementary, boosting your sales. Or they could be competitors, potentially taking away customers.

Remember, data should guide your decision, but it shouldn't make it. Use the data to inform your choices and align them with your business goals.

It's a tricky balance, but armed with the right data, you can make a choice that sets your business up for success.

2. Spatial Analysis & Visualization:

Gas Station Density in Saudi Arabia's Key Regions

When it comes to running a successful business, location is key. That's where Spatial Analysis and Visualization come into play, taking us on a deep dive into the world of Geographic Information Systems (GIS).

GIS serves as a powerful tool in the analysis and interpretation of geographic relationships, patterns, and trends. It integrates hardware, software, and data to capture, store, analyze, and interpret all forms of geographically referenced information. Essentially, it allows us to view and understand data in ways that reveal relationships, patterns, and trends in the form of maps, globes, reports, and charts.

"A Geographic Information System (GIS) helps businesses to visualize, question, analyze, and interpret data to understand relationships, patterns, and trends."

• Mapping: GIS converts complex data into a visual format, simplifying the process of decision making. It can display demographic data, consumer behavior, and competitor locations in an easy-to-understand map.
• Analysis: GIS analyzes the data to identify patterns and trends. It provides insights into the best locations for business expansion or the areas that are most profitable.

Incorporating GIS into your business location analysis allows you to make informed decisions based on concrete data. It's like turning on a light in a dark room, illuminating opportunities and potential challenges that were previously hidden.

Benefits of Using GISExamplesEnhanced Decision MakingChoosing the best location for a new store or officeImproved CommunicationVisualizing potential business growth areas for stakeholdersIncreased EfficiencyRouting deliveries to reduce fuel consumption and save time

As we dive deeper into the realm of location analysis, it's crucial to recognize the role of Geographic Information System (GIS). In today's tech-savvy world, GIS tools are transforming the way businesses analyze their location choices. These powerful tools offer a range of benefits, all contributing to a more informed and smart decision making.

3. Predictive Analytics:

Imagine having a crystal ball that foretells how your business would fare in different locations before you even set foot there. That's precisely what predictive analytics offers! This remarkable blend of technology and statistical methods can help you anticipate potential performance in various locations based on historical data, customer behavior, market trends, and more.

How does it work?

• Predictive models gather data: First, these tools collect a wealth of valuable data from various sources, such as customer databases, demographic information, and market research.
• They analyze the data: Next, they use advanced algorithms to analyze this data, identifying patterns and trends that could impact business performance.
• They forecast future outcomes: Based on these patterns, the models can then make predictions about how a business might perform in different locations.

Businesses can use these forecasts to guide their location-based decisions, helping them choose spots with the highest potential for success. But remember, while predictive analytics can be an incredibly valuable tool, it's not infallible. It's always important to consider other factors, such as your business goals, target audience , and competition, to make the most informed decision possible.

Ultimately, predictive analytics is like a compass guiding your business through the complex landscape of location-based decision-making. It helps you avoid the pitfalls of choosing a location based on gut feelings alone and increases your chances of setting up shop in the most favorable locations.

Real-world Applications and Success Stories:

Let's look at some real-world applications and success stories that exemplify the power of strategic business location analysis.

Case Study 1: Starbucks

Starbucks, a global coffee juggernaut, is renowned for its strategic location choices. The company uses a sophisticated location analysis system, incorporating data like traffic flow, area demographics, and nearby businesses. This strategy has been key in their worldwide growth and success. source

Case Study 2: Walmart

Walmart, a multinational retail corporation, stands as a testament to the effectiveness of location analysis. The company focuses on establishing its stores in small towns, where competition is minimal. This strategy, combined with its vast product range and competitive pricing, has led to Walmart's dominance in the retail market. source

Case Study 3: McDonald's

McDonald's, a global fast-food chain, attributes much of its success to location analysis. The company strategically places its restaurants near highway exits, busy city centers, and suburbs. This approach, paired with their quick service and popular menu, has solidified McDonald's status as a fast-food leader. source

In conclusion, these case studies highlight the immense power of location analysis in business strategy. It demonstrates how, with careful consideration and smart decision-making, businesses can leverage location to maximize brand visibility, profitability, and growth.

Challenges in Business Location Analysis:

Choosing a business location is akin to playing a high-stakes game of chess. One wrong move can spell disaster for your venture. Yet, while choosing the right location can be daunting, understanding common pitfalls can ease the process.

• Common Pitfalls and Misconceptions: Many entrepreneurs fall prey to the misconception that a cheap location means higher profits. It's crucial to understand that a location's value is not solely determined by its cost, but also by its accessibility, demographic alignment, and potential for growth. Weigh these factors before making a decision.
• Overcoming Data Inaccuracies: Quality data is the bedrock of informed decision-making. Ensure the data you base your choice on is accurate, up-to-date, and relevant. Misinterpreted or outdated data can lead to costly mistakes.
• The Evolving Nature of Neighborhoods and Local Markets: Neighborhoods and markets are fluid, continually changing and evolving. A location that seems perfect today might not be the same in a few years. Always consider long-term projections and future growth trends in your analysis.

Remember: You're not just choosing a location, you're choosing a future. Make sure it's one where your business can thrive.

How xMap Can Empower Your Location Analysis?

Unlock the potential of your business with xMap , a cutting-edge platform that transforms location analysis. With a plethora of features at your disposal, xMap empowers you to make strategic, data-backed decisions about your business location. Here's how:

• Data Visualization:

xMap's intuitive interface presents data in a visually appealing and easy-to-understand format. This enables businesses to analyze complex data sets effectively and make informed location decisions.

• Comprehensive Database:

database of all the restaurants in dubai with their key information

With xMap, gain access to a vast database of demographic, geographic, and economic data that can be crucial in selecting the perfect location for your business.

• Advanced Analytics:

Use the power of xMap's advanced analytics to uncover hidden patterns, trends, and insights that can significantly impact your location strategy.

With xMap, the power to choose the right location for your business is literally at your fingertips. The platform's unique combination of data richness and user-friendly design makes it an invaluable tool for businesses of all sizes.

Now, let's talk benefits. The advantages of incorporating xMap into your business strategy are manifold:

• Increased Profitability: By providing you with actionable insights based on data, xMap aids in selecting locations that promise maximum profitability.
• Improved Decision Making: xMap's data visualization and advanced analytics facilitate better, quicker decision-making, saving valuable time and resources.
• Competitive Edge: With access to comprehensive data and analytics, you can stay ahead of the competition and identify untapped market opportunities.

Ready to take your business to new heights? Don't wait any longer to harness the power of location analytics with xMap. Whether you're a small startup or a well-established corporation, xMap has got you covered. Explore xMap today or get in touch for a personalized demo.

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"We focus on delivering quality data tailored to businesses needs in the middle east. Whether you are a restaurant, a hotel, or even a gym, you can empower your operations' decisions with geo-data.”

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How to Present Your Business’ Location & Facility

• March 21, 2024
• Business Plan , How to Write

When drafting a business plan, detailing your business’s location and facility is not merely about stating an address or describing a building. Instead it’s about showcasing how your choice of location and the specifics of your facility are important to your business’s success.

This section of your business plan goes beyond mere logistics. Indeed it communicates to potential investors, partners, and lenders the thought process behind selecting a location that enhances market visibility, customer access, and operations efficiency.

In this guide, we’ll guide you through the importance of these elements and how to incorporate them in your business plan. Let’s dive in!

Why Do We Include it in a Business Plan?

In a business plan, the section on a business’s location and facility is crucial for providing readers with essential context about where and how the company operates.

This information typically resides in the business overview section. It should includes details on location and facilities helps stakeholders understand the strategic choices behind site selection. Especially it should be clear as how these decisions support the business’s operations, market presence (visibility), and growth potential.

It conveys to investors, lenders, and partners the thoughtfulness behind location selection (highlighting access to markets, resources, and talent – see more on that below) while the description of the facility underscores the business’s capacity for production, service delivery, and scalability.

Why Location is Important

The choice of location and facility is more than just a logistical decision; it is a strategic one that can significantly influence the overall success and growth trajectory of a business.

Indeed, a prime location enhances visibility, ensuring your business is easily accessible and noticeable to your target market . This visibility is crucial for attracting foot traffic in retail, but it’s equally important for businesses in the service sector to be within reach of their client base.

Furthermore, being situated in a vibrant, thriving area can boost brand recognition and help in crafting a strong, positive public perception.

Simplify operations

Operational efficiency is yet another factor directly impacted by the choice of location. The right location minimizes logistical hurdles and can significantly reduce costs and time associated with transportation and distribution.

For businesses that rely heavily on shipping or receiving goods, being near major highways, ports, or logistics hubs can streamline operations and improve supply chain efficiency.

Access to talent

Access to talent is another critical consideration that depends heavily on location. Operating in or near urban centers or regions known for specific industries can make it easier to attract and retain skilled employees.

For example, proximity to universities, technical schools, and other educational institutions can also be beneficial, providing a steady pipeline of qualified graduates eager to join the workforce. This access to a diverse talent pool can drive innovation, enhance service delivery, and ultimately contribute to the competitive edge of a business.

Why Facility is Important

It’s very important to give details on the business’ facility especially if it is a customer-facing or a manufacturing / supply-side operations business.

For customer-facing businesses (clinics, hotels, restaurants gyms, retail stores, real estate agencies, etc.), the facility’s design, ambiance, and accessibility play a significant role in attracting and retaining customers.

For manufacturing or supply-side operations (brewery, equipment rental, courier, storage, etc.), a facility with the right technical specifications and equipment ensures quality and efficiency in production and supply chain.

Important factors to include here:

• Size and Scalability: Guide readers on choosing a facility size that not only meets current needs but also allows for future growth.
• Layout Efficiency: Discuss how the layout affects operational efficiency, employee productivity, and customer satisfaction.
• Technology and Infrastructure: Highlight the necessity of technological infrastructure and other facilities for business operations.
• Safety and Compliance: Remind readers of the importance of safety standards and compliance with regulations in facility selection.

How to Present Location and Facility in Your Business Plan

Here are 5 simple steps to present location and facility in your business plan:

• Describe the Location: Provide detailed information about the business location, including the address, the geographical area, and why this location is strategic.
• Outline the Facilities: Describe the physical premises of the business. Include details about the size, layout, capacity, and any unique features of the facility.
• Justify the Choices: Explain why the chosen location and facility are optimal for the business objectives. Include data or research that supports these choices.
• Visual Elements: Encourage the use of photographs, maps, and floor plans to give readers a visual understanding of the location and facility.
• Future Plans: Discuss any future plans for expansion or relocation, if applicable, and how this fits into the business’s growth strategy.

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Geographic Segmentation Explained With 5 Examples

Published: Aug 27, 2020

Updated: 21/10/2022

Learn how to effectively use geographic segmentation in your eCommerce marketing strategy. Get inspired by real-world examples from industry-leading brands.

There is no easier route into personalized marketing than market segmentation . By breaking down your customer base into groups, you can target your resources and ensure your audience receives the messaging that is most relevant to them.

There are 4 main types of market segmentation , and each offers a different way to define an audience:

• Demographic segmentation – grouping customers by identifiable non-character traits like age, gender, or income.
• Psychographic segmentation – grouping customers based on their personalities and interests, including beliefs, hobbies, and life goals.
• Geographic segmentation – grouping customers with regards to their physical location.
• Behavioral segmentation – grouping customers based on their past actions, like spending habits, browsing habits, and brand engagements.

The premise is simple enough, but the key to successful market segmentation is understanding exactly how it can best work for you. Today we’re going to do a deep-dive on geographic segmentation , and discover all the different ways your marketing can benefit from it.

What is geographic segmentation?

Geographic segmentation involves segmenting your audience based on the region they live or work in. This can be done in any number of ways: grouping customers by the country they live in, or smaller geographical divisions, from region to city, and right down to postal code.

Geographic segmentation might be the simplest form of market segmentation to get your head around, but there are still plenty of ways it can be used that companies never think about.

The size of the area you target should change depending on your needs as a business. Generally speaking, the larger the business the bigger the areas you’ll be targeting. After all, with a wider potential audience, targeting each postcode individually simply won’t be cost-effective.

In total, there are six factors that pertain to geographic segmentation and can be used to create customer segments:

• Location (country, state, city, ZIP code)
• Climate and season
• Cultural preferences
• Population type and density (urban, suburban, exurban or rural)

Geographic segmentation benefits

Easy to implement.

Geographic segmentation is different from the other types of market segmentation (especially psychographic and behavioral ) because it requires fewer data points .

As a result, it offers a quick and effective route into personalized marketing and can offer tangible ways to reach potential customers using only their location as a starting point.

Higher product relevancy

This helps not only to improve sales but also creates a better relationship between customer and business. Presenting relevant items to customers improves user experience , reducing the amount of effort they need to put in to find what they want.

Improved advertising effectiveness

By presenting more targeted ads, you’ll guarantee that more of your marketing budget is spent reaching relevant customers, and less wasted on those who have no need or interest in your product.

This isn’t to say that geographic segmentation is always the best strategy to employ. It has specific uses for specific businesses and industries. Small businesses working in localized areas will benefit immensely from targeting their marketing to just these areas. Big businesses with products that will have consumer hotspots in specific regions will also benefit.

An international manufacturer of big four-wheel drive vehicles will achieve more sales targeting customers in rural areas than those who drive congested city streets.

But businesses that sell products that do not depend on region-specific patterns won’t benefit as much from geographic segmentation. Consumers of Corn Flakes are likely to be as common in one region as the next.

Geographical parameters by which to segment

There are several geographical parameters you can use, these include:

Getting the obvious out of the way. Segmenting by location gives you a lot of options. It could be a city, a town, different countries, or even a continent. This can also be used to identify a new geographic location your business may wish to expand into.

Do you think they are buying winter tires in Dubai? Segmenting by climate helps you identify areas where the climate is appropriate for your product or service.

When addressing your target market you need to account for cultural variations and sensitivities. For example, In Western cultures, white symbolizes purity, elegance, peace, and cleanliness. However, in China white represents death, mourning, and bad luck.

This can either focus on density or population type. A brand may choose to focus on a densely populated city area, for example, a fitness chain wouldn’t set up a gym in a rural area. You can also overlay demographic information here to find target audiences.

Urban, suburban and rural

These three different environments all need different and specific marketing strategies as customer needs are different. Those in cities and suburbs tend to have more purchasing power than rural areas, so products can be more expensive.

Not every country in the world wants or can be marketed to in English. If you’re running a marketing campaign it will be essential it’s done in the local language. You’ll need to make sure you’re ready to enter a market if all your marketing messages are going to need to be changed.

Geographic Segmentation Examples

An example of geographic segmentation is an ice cream company segmenting a country by how hot different regions are and targeting those specific areas that are hottest and therefore more likely to buy ice cream.

But that’s a very basic example.

There are however a number of different variables that you might consider when setting up your own geographic segmentation. These are the different ways you might choose to target consumers once you’ve decided on the location you want to focus on. Let’s look at how each might best be used.

Example 1: Segmenting based on location

Though all geographic segmentation involves grouping customers by the area they live or work in, here we’re talking about selling purely based on the availability of a product to a certain area. This is a tool that is useful to businesses that only have the infrastructure or facilities to serve customers within certain boundaries.

The food box subscription service Oddbox has, until recently, only had the infrastructure to deliver within the borders of London. However, they have now expanded to deliver to another nearby city, Brighton.

Using geographic segmentation they were able to target potential customers living in the city and deliver relevant marketing via social media ads . See their ads targeting Londoners and Brighton residents back to back above. As a result, users who weren’t previously aware of Oddbox can be shown the service now available to them.

For bigger, global brands segmentation by country becomes even more important. One brand that always hones it’s advertisements to the country it’s targeting is McDonald’s.

To see exactly how they do this watch the video below.

Whilst the above videos can be used to address an entire country, some brands choose to go even more local and focus on specific cities.

One brand that tried this was Nike with their “Nothing Beats A Londoner” video. The video does a great job of addressing football fans in London by including key landmarks, local football stars, and general life in London. It worked so well that it shot to the top of YouTube’s trending chart within hours. It was even covered by national newspapers ,  tweeted by London mayor Sadiq Khan , racking up millions of views in the process.

Example 2: Segmenting based on time zone

Time zone marketing is most useful to large businesses, as they are more likely to be operating across multiple time zones. It can also be of interest to smaller businesses if they operate in nations that have more than one time zone, as the United States.

Email marketing is an area that can hugely benefit from segmenting by time zone. Whilst big announcements and press releases should generally be shared at a set time, generic email marketing often benefits from being seen at a certain time of day.

If you are looking to have your customers read your email first thing on a Monday morning, segmenting by time zone allows it to arrive at 8:45 am local time, putting your email right at the top of the pile.

Example 3: Segmenting based on climate and season

There’s nothing worse than a badly targeted advert – except being caught without a winter coat in the middle of a deep freeze. Marketing based on the climate or season in a specific location allows you to present the most relevant information to your audience.

Seasonal offers tend to run for long periods, like the IKEA promotion above, which was marketed to British customers just as the summer kicked in. They can also be extremely time-sensitive, like a supermarket’s promotion of ice cream during an unexpected heatwave.

If you’re targeting an area that is consistently hot, or perhaps for the duration of summer months you could get a bit more creative. The below example from Coca-Cola does just that.

The below outdoor advertisement is in Dallas, Texas. Summer temperatures here are consistently above 95 ° F so the ad works really well.

Example 4: Segmenting based on cultural preferences

Different regions will have different values that determine whether or not customers decide to make a purchase. In some cases, these values will be determined by the dominant local religion or long-standing traditions and customs, but in other cases, they can be more esoteric local habits that nonetheless need to be understood and catered for.

One of the most common considerations for food manufacturers is religious dietary restrictions. Companies like Haribo that primarily sell gelatin-based sweets, use slightly adapted recipes to cater to the needs of certain demographics.

The German-based company’s main factory in Bonn and their UK factory in Pontefract create their standard range of sweets. Their base in 99% Muslim-majority Turkey, however, makes and markets only halal gummies, using bovine gelatine instead of the porcine gelatine found elsewhere. 

From an advertising point of view it’s also important to consider local culture. A recent example of this is Toyota’s TV adverts for its new car the Camry.

In total eight commercials were made to target different demographics across America.

Toyota even went one step further and ran the commercials in between TV Programmes whose main viewership matched the ads. People would see different commercials based on whether they were watching “Scandal” on ABC, which has a high number of African-American viewers, VS a Spanish-language network show on NBC such as Universo.

Example 5: Segmenting based on population density

Another variable to consider is the density and type of the population in the area you’re targeting. People living in urban areas have very different experiences than those in suburban, exurban, or rural regions.

Being able to segment by population density is especially useful for home and garden retailers. Imagine you’re someone like Home Depot. You probably shouldn’t pitch city-dwellers an electric riding lawn tractor, when you’d have much more luck marketing them a manual push reel lawn mower, which takes up less space and is suitable for small garden maintenance jobs.

Don’t forget about the other types of market segmentation

Overlaying other types of market segmentation on top of these geographic parameters will allow you to drill down to a specific target market you can run targeted advertisements to. This ultimately will help you achieve customer growth and product sales.

• Psychographic segmentation
• Demographic segmentation
• Behavioral segmentation

In conclusion

Market segmentation is such a powerful tool for reaching your customers in ways that feel relevant and useful to them. Geographic segmentation is perhaps the simplest way to get your foot in the game.

Think about exactly how your company can best benefit from it: Are you a big company that can utilize different messaging across different regions, or a small business that stands to get a lot more bang for their marketing buck if they target their local area? Maybe your product will be of particular interest to city-dwellers, or most in-demand during certain seasons.

Whatever the case, there’s an opportunity to use geographic segmentation to your benefit.

Get in touch with Yieldify to discuss using audience segmentation to personalize your customer experiences!

Geographic segmentation FAQs:

Geographic segmentation is a marketing strategy that presents potential customers with targeted messaging based on their geographic location.

A great example of geographic segmentation is a clothing retailer that presents online customers with different products based on the weather or season in the region they reside in. A customer in New York will require much different clothing in the winter months than one living in Los Angeles.

Geographic segmentation is used by companies across many sectors, but it’s most useful to businesses selling goods that might be affected by changes in climate or local customs. Companies with very defined regional interest, like sports teams, or small businesses offering local delivery, also benefit from marketing targeted this way.

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GEOGRAPHIC STRATEGY

The big picture on geographic strategy.

1. Prerequisite - Amazing Value Proposition If you try to scale in competitive geographies, you better have an amazing value proposition.

2. Most Companies need to Focus or Densify If you don't have an amazing value proposition, first fix it and your go-to-market, then densify.

3. Synergies is the Key to Geographic Strategy Target new geographies where there are high customer, go-to-market and operational synergies.

4. Develop & Execute a Strong Business Plan Commit enough resources to win in a new geography, since most companies don't.

THE TRUTH - MOST COMPANIES AREN'T READY FOR GEOGRAPHIC EXPANSION

If you aren't winning in one geography, don't think you're going to kill the competition in another geography. According to McKinsey, 4 out of 5 attempts to enter a new market fail. With limited resources, first, focus on creating an unbelievable value proposition and go-to-market strategy. Then use the geographic expansion rocket ship to scale.

A QUICK STORY ABOUT GEOGRAPHIC STRATEGY

Both Walmart and Kmart were launched in 1962. Most people don't know that after 15 years, Kmart was 20 times the size of Walmart. In 1977, Kmart posted $9.9 billion in revenue versus Walmart's $479 million. Kmart's CEO summed it up, "We are a company in a hurry...we are already in 196 of the country’s 261 standard metropolitan districts."

While Kmart focused on geographically expanding at a breakneck pace, Walmart was perfecting its value proposition, go-to-market, and operational efficiencies. After 15 years, Walmart had ~100 stores all within 350 miles of their one distribution center.

Comparing Walmart and Kmart's 1988 financials tells the story (graphic below). Kmart was still much larger than Walmart in total sales but look at the 2X sales per store of Walmart vs. Kmart. Total operating profit is the same but look at the marginal economics . For every $1 of sales, Walmart was generating 50% more operating profit, with 30% less operating expenses. They also spent more on merchandise expenses, which translates to ~10% lower prices for Walmart customers vs. Kmart customers. They had a superior value proposition, go-to-market and financial model.

In 1988, while Kmart was in all 50 states, Walmart was in 22 states. Only after Walmart developed a superior business model , did it turn on the geographic expansion lever. Below are the historical revenues of Walmart vs. Kmart.

Below is one of the most impressive videos on geographic expansion outlining the historical growth of Walmart stores from 1962 to 2010 and $400 billion in sales. It showcases Walmart's deliberate geographic expansion strategy.

THERE ARE 3 MAIN OPTIONS WITH GEOGRAPHIC STRATEGY

The strategic decision on which way to grow always comes down to opportunity cost , which comes down to the fundamental question, "with limited resources, what strategies and actions will create the most value?" As you think about strategic growth opportunities, think about the big picture. First, focus on the value proposition and go-to-market until you create more customer and financial value than the competition . Once you back those up with robust functional and organizational strategies and execution , then the business has the blueprints for scaling geographically, or in new markets or new customer segments. When it comes to geographic strategy, there are three strategic options ; focus (eliminate unsuccessful geographies), densify (grow in existing geographies), and expand (grow in new target geographies).

FOCUS (Too many geos)

• Lack of synergies and competition winning
• Hard decision to make, but typically the right one
• Will help focus the organization and decision making to improve the value proposition

DENSIFY (Room to grow)

• What most companies should do and typically provides the most synergy with existing business
• Typically, create a superior value proposition, GTM (go-to-market), profit structure, and high market share, before expanding

EXPAND (Ready to scale)

• The prerequisite to scale is a killer value proposition
• Opportunity to create superior value proposition in new geography, while generating substantial go-to-market and operational synergies
• In more centralized business, geographic scale may be necessary to drive operational scale

THERE ARE TWO MAIN OUTPUTS TO A GEOgraphic EXPANSION STRATEGY

If your company is ready to scale through geographic expansion, then focus on creating two main outputs. The first output is a prioritized list of target geographies and rationale. The second output is the expansion plan that details the goals, budget, and major initiatives needed for the value proposition, go-to-market, and organization to be successful in the new geo(s).

PRIORITIZED TARGET GEOgraphies

EXPANSION PLAN

If you want to talk about your geographic strategy with an experienced strategy coach, set up some time with Joe Newsum , a Mckinsey Alum, and the author of this content and website.

There are 4 main steps to creating a geographic expansion strategy

In practice, companies too often approach geographic expansion strategy with less rigor than the potential opportunity and risk warrant. Geographic expansion can quickly take down a company as it siphons off critical resources from existing geographical battlefields to fight new battles, in new geographies, against often new competitors. So, whether you have a team spend a few weeks or months creating a geo expansion strategy, build in the necessary rigor to create a robust strategy to win in the new geographies. The four main steps outlined below will help you ask and answer the right questions to drive that rigor in your project.

Typically, companies start off with too many potential expansion geographies, and the first step is to do the necessary customer, competitive, and market research to help prioritize down to a reasonable number of target geographies. The second step is to do a deep dive by geo on the competitiveness of the value proposition and go-to-market while outlining the necessary changes across the business model to win in each geo. The third step is to utilize a decision matrix to score and prioritize the actual target expansion geographies. The last step is to develop a comprehensive expansion plan to drive a high level of execution and success in the expansion geographies.

Step 1: Target Research & High-level Prioritization

The first step of target research and high-level prioritization is necessary to whittle down all of the potential geographies to expand into to the ones that make sense based on customer synergies / opportunity and competitive intensity.

CUSTOMER RESEARCH What is the size, growth, density, and needs of target customer base in target locations, regions, states, countries?

Typical analyses include: - Market Research - Demographic Research - Geographic-Demographic Models

MARKET & COMPETITIVE RESEARCH What is the market size, maturity, dynamics in the target geos? What are the competitive dynamics and intensity?

Typical analyses include: - Market & Competitive Research - Adoption Curves, PESTLE Analysis , Porter’s Five Forces

PRIORITIZE INITIAL TARGET GEOS Out of the potential target geos, what are the priority geos to deep-dive into based on customer & market opportunity?

Typical analyses include: - Decision Matrix - Prioritization Matrix - Problem Solving Workshop

Step 2: Business Model Research

The goal of the business model research is to assess the competitiveness of your value proposition and go-to-market, and the necessary changes to the business model needed to compete and win against the competition in a new geography. The level of research and analysis often ranges from a quick high-level scan to costly and complex geographic data and analytic models.

VALUE PROPOSITION ASSESSMENT In the prioritized geos, how does the value proposition (product, service, pricing ) compare to the competition? What changes or improvements are needed to enter and drive better customer value ?

Typical analyses include: - Competitive Benchmarking - Market & Regulatory Research - Surveys

GO-TO-MARKET ASSESSMENT In the prioritized geos, what are the go-to-market (distribution sales, marketing ) dynamics? Are there potential partners go-to-market partners (especially for new countries)?

Typical analyses include: - Market Research - Consumer Research & Surveys

ORG & FUNCTIONAL NEEDS ASSESSMENT For the prioritized geos, what are the high-level organizational and functional needs, investment, and costs to win? What are the risks?

Typical analyses include: - Internal Analysis - Supply Chain & Regulatory Research - Problem Solving / Brainstorming

Step 3: Score & Prioritize Target Geographies

Step 3 of a geographic expansion strategy is to ultimately decide on the expansion geographies. Follow an objective process utilizing a decision matrix, an insightful fact base, and collaborative deliberation. Decision-makers need to be entirely behind the final prioritized targets.

You solve the size and investment of a geographic expansion strategy within the broader context of the overall business model strategy. A geographic expansion creates opportunity cost by taking potential funding, resources, and time away from investing in other strategies such as targeting new markets, and customer segments, improving the value proposition and go-to-market, and driving the efficiency and effectiveness of the organization and functions.

SCORE POTENTIAL TARGET GEOS What dimensions will be scored? Weighting? Scoring criteria? What are the objective scores for each potential target geo?

Typical analyses include: - Decision Matrix - Problem Solving - ROI Analysis

DELIBERATE WHICH GEOS WILL CREATE THE MOST VALUE What is the governance for deliberating the scores, targets and overall expansion? Who needs to be involved?

Typical analyses include: - Facilitated Workshops - Business Case & ROI Analysis - Goal Setting & Scorecard

CHOOSE TARGET EXPANSION GEOS Who are the ultimate decision makers and how will the decision be made, communicated, funded, etc.? What are the ultimate expansion goals? Time line? Initial resources?

Step 3 Output - The Target Geographic Decision Matrix

The output of step 3 is a decision matrix utilized to deliberate and decide on the expansion geographies. Below is a good example of a geographic expansion decision matrix, with criteria covering each dimension of a business model.

Step 4: DEVELOP GEOgraphic EXPANSION PLAN

Once you determine the target expansion geographies, then the last step is to create robust plans to enter, grow, and ultimately win in the expansion geographies. The key to this step is to align and involve the functional and geo owners that will drive the success of the expansion. Furthermore, it is important to assess potential partners or acquisitions that may help in scaling the new geographies.

VALUE PROPOSITION IMPROVEMENT PLAN What changes or improvements need to be made to products , services, and pricing to drive better customer value than competitors in new geo(s)? What is the necessary funding, resources and timing?

Typical analyses include: - Product Strategy Toolkit - Service Strategy Toolkit - Pricing Strategy Toolkit

GO-TO-MARKET STRATEGIC PLAN What are the distribution, sales and marketing strategies and necessary resources to gain target share in the new geos?

Typical analyses include: - Distribution Strategy Toolkit - Marketing Strategy Toolkit - Sales Strategy Toolkit

ORGANIZATIONAL & FUNCTIONAL PLAN What are the organizational, functional, people, process, infrastructure and resource needs of the new geos? Are new partners needed?

Typical analyses include: - Organizational Strategy Toolkit - Functional Strategy Toolkits

STEP 4 OUTPUT - THE ONE-PAGE GEOgraphic EXPANSION PLAN

You should synthesize the geographic expansion plan should into a one-pager that outlines the goals, budgets, and strategic initiatives necessary to win in a new geography. Of course, there will be supporting analysis and details, but the one-pager is critical to help align leadership , stakeholders, and the organization behind the expansion strategy.

final thoughts on geographic expansion strategy

Geographic expansion strategies can scale a company to the next level, but they can also quickly drive a company to financial distress. Before considering geographic expansion, ensure you have the prerequisite of a killer value proposition and go-to-market strategy to beat out the competition in a new geography. As you develop a geographic expansion plan, do it in the broader context of the overall company strategy, since it will siphon off critical resources from other potential value-driving strategies. Moreover, if you decide to expand geographically, allocate enough resources and time to win in the new geographies.

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To get you started on your geographic strategy, download the target geographic decision matrix and the one-page geographic strategy plan.

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Geographic Segmentation: Definition, Characteristics & Examples

Many tools can help you figure out what your target group does, what they need, and what they like. Geographic segmentation is an important tool that helps businesses make goods that consumers and potential customers will like. 

Before launching new products or services or improving existing ones, businesses need to do geographic segmentation as part of their market research. 

In this blog, we’ll talk about what geographic segmentation is and how you can use a number of factors to divide your market into geographic groups.

Content Index

What is geographic segmentation?

Geographic segmentation characteristics, why use geographic segmentation, geographic segmentation examples, geographic segmentation variables, advantages of geographic segmentation.

Geographic segmentation is a component that competently complements a marketing strategy to target products or services on the basis of where their consumers reside. Division in terms of countries, states, regions, cities, colleges, or Areas is done to understand the audience and market a product/service accordingly.

Geographic segmentation is putting your people into different groups or categories based on where they live. In this type of market segmentation, customers are put into groups based on factors like temperature, population, food habits, clothing, etc., as well as where they live.

Customers’ choices and habits are often affected by where they live. For example, people are more likely to buy tea and coffee in the winter because of the weather. During the summer, more people would be drinking cold drinks.

With geographic segmentation, you can figure out how trends and patterns, like the one in the situation above, affect the demand for your product or service in the market. Also, geographic segmentation gives you useful information that can help you make better marketing plans and put your business in the right place.

LEARN ABOUT: Marketing Insight

People in different parts of the world display different characteristics. A marketing strategy created by dividing the target market segmentation into segments on the basis of factors such as economics, food habits, clothing habits, languages, traditions, and many other traits is known as geographic segmentation.

A classic geographic segmentation example: A classic example – people living on colder continents, such as Europe, are interested in warm clothing, heating devices, etc., almost throughout the year, whereas people living in hotter continents, such as Australia, are interested in air conditions, beach vacations, breezy outfits, and cold drinks.

Example 2: let’s take another example where a government body wants to segment its geography based on the use of plastic bags in its region. The goal is to conduct a use of plastic bags survey. Based on actionable insights into the geographical spread of plastic bags, the governmental body can reinforce administrative supervision to reduce the use of plastics and add new plastic recycling plants in areas of heightened usage.

Each continent or country is further divided into places with distinction in terms of culture, traditions, languages, etc., and there can further be a geographical segmentation. Geographic location is an integral factor that determines market positioning and product sales.

Irrespective of an organization’s market share or product success rate, it’s extremely important for them to conduct market research before launching new products/ services or introducing better or newer features.

Geographic segmentation helps you lower your marketing costs. As a business that wants to cut costs, you would look for places to spend that will give you the best returns. It lets you focus your marketing efforts on a specific area of interest and avoid spending too much.

Learn more about your target audience

Make effective marketing plans.

LEARN ABOUT: Behavioral Targeting

Better experiences for customers

Here are some examples of geographic segmentation:

Products based on season

Size and type of region, food inclinations, launch products or services in new regions.

Learn about: Demographic Examples

Geography isn’t the only thing that affects geographic segmentation. Climate and weather, cultural preferences, and people are also important. Pricing, product availability, and marketing tactics are just some of the things that depend on where an organization is located. 

Let’s explore common geographic segmentation variables.

Religion and culture

Businesses can benefit from geographic segmentation as a marketing tactic in a number of ways. Geographic segmentation offers a number of significant advantages that are given below:

Enhanced focus due to targeting

Immediate market growth, improved communication, increase profits.

Learn more: Demographic Survey Questions

Geographic segmentation lets organizations target customers by region, climate, culture, and other criteria. Businesses can adjust their effective marketing campaigns to each group’s demands by segmenting a market. This improves their advertising and helps them understand and personalize their customers.

LEARN ABOUT:  Test Market Demand

QuestionPro, a top survey and research platform, lets organizations examine customer information by region. This tool helps organizations understand regional customer behavior, preferences, and purchase habits and build focused advertising.

QuestionPro’s regional segmentation function helps businesses target prospective customers and grow their customer base in specific locations. Businesses may improve marketing, customer satisfaction, and income by understanding regional customer needs and preferences.

QuestionPro’s geographic segmentation capability is vital for businesses seeking consumer insight, focused marketing, and growth. This product helps companies compete in today’s market with its sophisticated analytics and simple design.

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Geographic Segmentation: The Complete Guide

Published: March 09, 2023

Geographic segmentation organizes your audience into groups based on their physical location, such as country or postal code.

This type of segmentation can provide valuable insights into the buying trends and preferences of different regions, allowing for more targeted and effective marketing efforts.

Plus, geographic segmentation can increase profits and sustain growth.

By understanding the needs and behaviors of different regions, businesses can create more effective marketing campaigns and build stronger relationships with their customers.

Learn more about geographic segmentation below.

Table of Contents

What is geographic segmentation?

Benefits of geographic segmentation, advantages of geographic segmentation, geographic variables.

• Geographic Segmentation Example

Like other types of segmentation, geographic segmentation organizes your audience into different groups. The groups are based on physical location, like a specific country or postal code.

Well, people in certain areas follow certain trends. For example, the residents of a particular city might buy much more fresh fruit than a neighboring city.

Geographic segmentation can help you figure out those trends so you can focus your marketing efforts in the right places.

Segmentation doesn't just bolster your marketing — it's more necessary than ever these days. Other than dividing your audience by location, why should you care about geographic segmentation?

Geographic segmentation can save you money. Think about it: You can spend endless amounts trying to promote your offers.

With the right segmentation, you're marketing the right offers to the right people — people who want and need what you're selling.

Effective geographic segmentation can also make and keep your business relevant.

If you market to the right segments, people will keep buying your products or services. If they keep buying, they're more likely to recommend your business to others.

You can also use geographic segmentation to innovate your product. For example, a certain flavor or style may be prevalent in a certain area. If you make a version of your product with this specification, you can increase sales.

Finally, geographic segmentation can be easier than other types of segmentation . Since the information is concrete, measurement and analysis are much more straightforward.

Your budget dictates your marketing strategy, for better or worse. So, with a specific budget, how can you make sure your marketing results in sales?

Well, geographic segmentation is a great choice — especially compared to something like psychographic segmentation.

Here are a few reasons geographic segmentation might end up on your to-do list.

Image source

1. You can accelerate growth.

More sales are great, but sustained growth is even better. Geographic segmentation can help with both.

Update your segments regularly, and you should be able to keep targeting the right groups. Keep that up, and your business is almost guaranteed to keep growing.

2. You can organize your marketing efforts.

Scalability is one of geographic segmentation's greatest strengths. While you can zoom out and create large segments, you can also zoom in and target more specific groups.

You can even target based on keywords that can help you select a particular group without spending a fortune on marketing.

3. You can improve communication.

As you probably know, every group — and every customer, for that matter — has unique needs and habits. That's where geographic segmentation comes in.

With the right segments, you can focus more on how specific groups of people communicate and do business. That's invaluable if you want to do business with them.

4. You can boost profits.

Want your business to make more money? Start targeting your audience with geographic segmentation, then create specific marketing campaigns for each group.

If you do this right, you should be able to make more profit and cut down on your time and money spent.

The world is a big place. That can make geographic segmentation seem intimidating, but it doesn't have to be.

See, all the geographic variables let you create segments based on the information you can get. Let's look at a few of these variables and how you can use them.

This is probably what comes to mind when most people hear "geographic segmentation." You can segment on a local level all the way to a global level, depending on your needs.

Small Area (Neighborhood)

Think about the last few times you Googled something. Remember the top few results on the first page? Chances are some of those ads were locally relevant to you.

You can target specific communities and areas with your marketing in the same way.

Large Area (Continent)

Have you heard of Cadbury Eggs? They're chocolate eggs that contain toys inside. Eggs with toys inside are banned in the U.S. So it wouldn't make much sense to see a Cadbury Egg commercial in the states.

Without proper geographic segmentation, those ads might run in the wrong market, which would be a waste of money and time.

Segmenting based on climate has to do with weather conditions. Think about it: Packing the same clothes for Hawaii and Montana wouldn't make sense.

People have specific needs and wants depending on their climate, so always be aware of the weather in any market.

Warm Climates

Let's say you sell sunscreen for this example. You probably wouldn't send most of your stock to Iceland, but mistakes happen. Instead, you'd have the most success selling sunscreen somewhere like California or anywhere else with beaches.

Segmenting based on climate can help you match the right products to the proper weather.

Cold Climates

Imagine you went on a ski trip and forgot to bring a nice shirt to wear to dinner. What would you think if you went to a shop in the ski lodge and only saw short-sleeved shirts?

Well, with the right segmentation, the shop would likely have cold-weather clothing. That's why geographic segmentation is important, even regarding weather.

Population Density

Let's say you found the perfect way to segment your audience, and you want to hone in on a certain group. Now, what if this group, the one you thought would buy everything you had, bought at a low rate?

That might have to do with the population's density. Here's how population density can affect your operation.

Think about how the average person lives in an urban environment. They buy things more frequently, tend to have more money, and often care more about what's "cool."

An urban environment dictates many behaviors and habits, so make sure your offer fits the lifestyle of your target audience.

A rural environment probably isn't the best place to debut a new sports car or open a luxury fashion store.

You'll need to adjust your offerings accordingly. Keep this in mind as you segment, and don't push offers that might make a specific audience think you're out of touch.

Pure geographic segmentation can tell you a lot, but it can't account for everything. Different cultures have different products and preferences.

To assess how your offering will be perceived by different cultures, you'll need to get in touch with a diverse group of users.

Consider holding a focus group or sending a survey to your cross-cultural users. This allows you to gain insight from insiders.

Alcohol consumption is banned in Saudi Arabia. That's not to say nobody drinks, but an alcohol band won't have a place in the market there. So, if you own a distillery, you'll see a greater ROI by focusing your operation elsewhere.

Cultural segmentation can make this easier to see, as other places might have similar standards and laws based on demographics.

Let's go to French Canada for this example, specifically Quebec. There, you'll find a large population of French-speaking Canadians.

Proper geographic segmentation could help you decide if you should translate your product labels to French before selling there.

Geographic Segmentation Example: Haribo Gummy Bears

Geographic segmentation sounds simple, and it can be. But if you really want to get your message in front of the right people, you might have to dig a little deeper to create your segments.

Haribo is one of the biggest candy brands in the world. Based in Germany, Haribo produces most of its candy in the U.K. — but not all of it. Being an international brand, Haribo has to cater to many specific groups with different needs.

One of those groups is the population of Turkey, which is majority Muslim. That population requires food to be halal, including candy. This means no pork is allowed, and Haribo typically uses pork gelatin in its products.

So what does Haribo do? It produces candies with beef gelatin specifically for the majority-Muslim country of Turkey.

Why The Campaign Works

Changing ingredients allows Haribo to tap a huge population in a new geography. Dutiful market research unlocked a segment that has needs separate from their other consumers.

Without adjusting its product, Haribo would risk not only losing out on sales but also being seen as a company that lacks knowledge about its customers.

Geographic Segmentation and Your Business

Geographic segmentation is a crucial aspect of effective marketing.

By focusing on regional trends, you can tailor your campaigns to specific groups and increase the likelihood of reaching potential customers.

Using variables such as location, climate, and population density can give you a deeper understanding of your audience, leading to improved communication and increased profits.

Keep in mind that geographic segmentation can be a straightforward and cost-effective approach compared to other types of segmentation.

By regularly updating your segments, you can ensure sustained growth and scalability for your business.

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Location, Location, Location: The Strategy of Place

• Many companies think of geographic strategy as a short-term checkers match rather than as a long-term chess game.
• Establishing new locations is resource intensive, so a wrong decision can sap the energy out of an organization and cause it to lose focus.

When companies thrive in their home base, temptation can be great to expand to new locations, either across town or around the world. The problem: Many companies think of location strategy as a short-term checkers match rather than as a long-term chess game.

“Many companies don't understand that what works in one location may not work somewhere else.”

"The decision to expand is sometimes driven by the wrong reasons," says Associate Professor Juan Alcácer, who teaches in the Strategy Unit at Harvard Business School. "In many cases companies are not thinking of the long-term consequences of what they are doing."

Such snap decisions can result in geo-mistakes that sap energy out of an organization and cause it to lose focus on what it was doing well in the first place.

Geographic expansion should provide access to a fresh market and to additional resources. But companies that take a strategic view also realize that the new territory should increase a firm's competitive advantage by complementing and adding value to its current business.

After all, the strategic value of a new location depends on three things, Alcácer says: the strength of available resources, such as nearby supporting industries; the company's ability to seek and retrieve knowledge in this setting; and its capability to do something better than competitors.

An example of a firm playing tactical checkers instead of strategic chess is one that decides to expand simply by finding the cheapest places to open up shop; Alcácer says it's a mistake to allow low costs to completely override other factors.

"You should not only think about whether there's a market there or cheaper labor," he says. "You also have to think about what your competitors are doing, whether it's the right time to enter or exit that location. Reducing your costs might not provide you with a competitive advantage at all."

Walmart has been a smart expander since it opened its first store in Rogers, Arkansas, in 1962. Sam Walton slowly branched his growing enterprise to other small rural towns, where the retailer was able to outmaneuver mom-and-pop competitors. The management team again waited until they had developed enough resources before going head-to-head in suburban areas against big-box retailers like Kmart.

Timing Is Critical

A crucial consideration for managers to get right early on is whether the business can afford to spend the required resources—especially when it means siphoning time and attention away from an existing successful business.

"When you open a new operation, it requires not only money but also the time and energy of managers to make sure it's going the right way, and that means you can't focus as much on the base business back home," Alcácer says.

In addition to making sure the resources are in place, corporate leaders must decide which strategic locations to target. Companies often blindly follow their rivals from city to city or country to country without analyzing whether that same situation is right for them. Many businesses that jumped on the China expansion bandwagon are now sorry they made that move, says Alcácer. "They are realizing that they were not well prepared for the market or that it wasn't the right market for them."

Alcácer advises companies to consider sending an advance team to live in a target locale to research the market and business models before expanding.

Another problem with following competitors: an increasing risk that those rivals will gain insight into your operations and even poach highly skilled workers. Sometimes it's best to avoid following the herd and seek out an original niche.

That was the road taken by animation studio Pixar, which established itself near the mudflats of Emeryville, across the bay from San Francisco. Pixar deliberately steered clear of LA, where the bulk of the movie industry resides. Alcácer says that when Disney bought Pixar in 2006, Pixar executives asked to remain based in Northern California because they didn't want the company's culture to be negatively affected by the culture in Southern California.

In some industries, however, executives believe they don't have much choice but to cozy near the competition, especially when they need to plug into unique knowledge that exists in certain areas. Biotech companies, for instance, often operate close to top-notch universities to interact with scientists and cutting-edge research that could potentially feed growth, even if their competitors are also on the same block. Detroit and Silicon Valley, likewise, provided valuable clusters of talent and suppliers where, Alcácer realized, "whenever you saw one firm, you saw the other ones."

In an effort to keep key information from spreading around town, firms operating in these types of highly competitive environments need to maintain strong internal linkages between units and create a culture of collaboration among workers across distances, according to the working paper Local R&D Strategies and Multi-Location Firms: The Role of Internal Linkages , by Alcácer and Minyuan Zhao of the University of Michigan's Ross School of Business. By internalizing its innovations better and faster than nearby competitors, a firm can gain lead-time and a stronger competitive product position in the market.

A company can also prevent pilfering of key information by cutting a project into pieces and shuffling the parts piecemeal to workers in different regions. Alcácer says this model can work like a "need-to-know" spy operation, in which certain information is assigned to specific employees, who are not privy to the whole picture.

Going Global

Expanding operations to another country brings a whole new set of complications, says Alcácer. For one, businesses that expand internationally need to adjust their offerings to a completely different market since each country has its own "knowledge profile."

"Companies often don't consider adapting products to the different markets," he says. "Successful companies that expand assume that by doing the exact same thing they are doing in the home market, they will be successful overseas. But many companies don't understand that what works in one location may not work somewhere else. We tend to believe that technology has made us homogeneous, but distance matters. Countries are different; consumers are different. People in India are different than the people in the United States."

Vodafone learned that lesson the hard way. The London-based telecommunications venture initially forayed into Japan on a learning expedition to better understand the country's sophisticated consumers, but was soon captivated by the established market. The exploratory mission quickly morphed into sell mode. Vodafone bought handsets used in Europe in bulk and tried to introduce them in Japan. Unfortunately, Japanese consumers were hooked on a completely different technology, forcing Vodafone to abandon ship after a few rocky years.

"Vodafone needed to study the Japanese handset," Alcácer says. "When you enter a market to provide a service or product and try to learn at the same time, these two [goals] can be conflicting. You can successfully do both at the same time, but you need to be conscious of the two activities."

Another consideration for an international expansion is that the resources required are greatly magnified, and success might only make matters worse in the short run. "When you start to expand overseas, you often see a negative effect on your operations back home. You are literally going through growing pains, and the more quickly you grow, the more likely you are to have problems."

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How to Choose a Business Location

8 min. read

Updated January 5, 2024

Choosing the perfect business location is more than finding a place that looks like you envisioned.

It’s about being in a competitive location that helps grow your business, staying within budget, and meeting local and state regulations and laws.

In this guide, we’ll work through key questions to narrow your location search and provide additional resources to help you find the right spot.

• 1. What location type fits your business?

To start your search, you should understand the different types of business locations. 

• Retail: These are storefronts, malls, or commercial streets suitable for businesses that rely on foot traffic and visibility to attract customers.
• Office space: Suitable for businesses that rely on something other than walk-in customers. It can be a shared office space, a serviced office, or a dedicated office in a commercial building.
• Industrial: These are locations suitable for manufacturing or warehousing businesses. They are usually located outside the city center and have heavy machinery and storage facilities.
• Home-based : Suitable for businesses that do not require a physical storefront or office, such as online businesses or freelancers.
• Pop-up: Temporary spaces that businesses can rent for a short period, often used for testing a new market or for seasonal businesses.
• Mobile business: For businesses operating from vehicles, such as food trucks or mobile services.

Identifying what physical setup best fits your business will make your search more focused and efficient. If you’re unsure which location type fits your needs, the remaining questions should provide additional clarity.

Dig deeper: What to consider when selecting an office space

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2. What’s your budget?

The next step in narrowing your location search is to bring your budget into the conversation.

Your budget will determine the locations you can afford and solidify the areas feasible for your business. 

Understanding your budget involves more than knowing how much you can afford to pay on rent. It also includes your startup and operational costs and additional charges to make the location viable for your business. 

Tip: To truly understand your financial position, we recommend you create a financial forecast .

Here are some additional questions to answer:

• Will you have to do extensive renovations before you can move in?
• How much are state and local property taxes? How much are income and sales taxes? 
• Could you pay less by choosing to start up in another state?
• Can you afford to pay your employees at least the minimum wage?
• Do you qualify for any government economic programs or incentives? Might you qualify somewhere else?

A clear and comprehensive understanding of your budget and all associated costs will enable you to make an informed decision about your business location. It will also help you avoid any unexpected expenses.

Dig deeper:

Budget-friendly alternatives for your business location

Is price the most significant factor when selecting a location for your business? Narrow down your search with typically lower-cost options like coworking spaces and non-traditional rental properties.

Why you should consider a coworking space

Coworking spaces provide far more benefits than cheaper-than-usual rent. From networking to improved facilities—sharing space may be a significant growth opportunity for your business.

Understand your startup costs

Know what it will cost to rent or purchase a space for your business and handle any renovations to met your needs.

Create a financial plan

Understand how the cost of your location will impact your finances by forecasting your potential sales, expenses, personnel costs, and cash flow.

• 3. Does it meet customer expectations?

Your business location plays a significant role in shaping customer perception. It’s not just about the physical place but how the location aligns with your brand image and the expectations of your target market .

Your location should resonate with your target audience and meet their expectations regarding convenience, accessibility, and overall vibe.

For example, an artisanal coffee shop would fit well in a trendy, artistic neighborhood or near cultural spots where customers seek a unique, cozy atmosphere. It wouldn’t work in a busy commercial area or near fast food chains and big box stores where cost and speed are likely more important to consumers.

It’s essential to conduct market research to understand the preferences and expectations of your target market. Consider factors such as:

• Demographics of the area
• Presence of competitors
• Atmosphere of the neighborhood

Remember, your location is an extension of your brand. Choosing a location that aligns with your customer’s expectations will help you attract and retain them.

• 4. How safe is the location?

Don’t underestimate safety when choosing a location. A location viewed as unsafe can deter potential customers, make it challenging to attract and retain staff or lead to a higher risk of theft or vandalism.

Here are a few ways questions that can help you gauge overall safety:

• What is the crime rate in the area?
• Is the area well-lit, especially during the evening?
• Is the location easily visible from the road or other businesses?
• Is there a high level of foot traffic in the area?
• What is the overall reputation of the neighborhood?

Remember, choosing a location that is both actually safe and perceived as safe by your target audience is essential.

Dig deeper: How to set up a safe working environment

• 5. Is there increasing demand?

Choosing an area that is thriving and poised for growth is crucial for the long-term success of your business. Growing demand indicates a healthy economy, leading to increased foot traffic, higher sales, and a good network for partnering or networking with other companies. 

Here are some key questions to consider:

• Is the population in the area growing?
• Are there new businesses opening in the area?
• Are property values increasing?
• Are there any planned infrastructure developments or investments in the area?
• Are there opportunities for networking or partnering with other businesses?

A real-world example of this is the tech boom in Silicon Valley. 

The area became a hub for technology companies, attracting a highly skilled workforce, and led to increased demand for services and housing in the area. 

Dig deeper: The best places for high-growth businesses

• 6. Is the location accessible?

For a location to be truly accessible, it should be easy for you, employees, vendors and suppliers, and your customers to reach your business. 

Since accessibility needs vary, here are some key questions to consider:

• Is convenient parking available?
• Is the location easily accessible by public transportation?
• Is the location near other businesses or attractions that your target market frequents?
• Are there any physical barriers that could make it difficult to access your location?

You likely don’t need to answer “yes” to every question for a location to work. Just be sure that a lack of accessibility won’t negatively impact your sales, recruiting, or brand perception.

7. Are you able to legally do business at this location?

Ensuring that you can legally operate in a given location is crucial. 

To determine your legal ability to conduct business, start with zoning regulations and ordinances. These affect your ability to purchase the property, make changes, and even operate your business there. Remember, many of the same zoning laws apply even if you plan to operate your business from home. 

To determine the zoning of a property, contact your local planning agency or consult an attorney. A simple online search may also provide a zoning map of your area. 

Additional legal considerations include:

• Business licenses and permits: Ensure you have obtained all necessary licenses and permits, including a business license, health permit, fire department permit, signage permit, etc.
• Building codes and regulations: Ensure the building complies with all local building codes and regulations. This may include compliance with fire safety standards, accessibility requirements for people with disabilities, and other structural and safety standards.
• Landlord approval: If you rent the space, ensure that the landlord approves of the nature of your business and any modifications you plan to make to the property. This may involve negotiating a lease agreement that clearly outlines the permitted uses of the property and any restrictions.
• Restrictive covenants: Restrictive covenants are legal obligations imposed on a property by a previous owner or the homeowners’ association and may include restrictions on the type of business that can operate on the property, the hours of operation, noise levels, etc.
• Insurance: Necessary insurance coverage may include property insurance, liability insurance, business interruption insurance, etc.

Remember, it is essential to thoroughly research and understand all legal requirements and restrictions before finalizing your business location. 

Additional resources for choosing the right location

13 tips to identify a great business location.

Do you need help figuring out how to start your location search? Try exploring one of these business location factors, courtesy of the experts from the Young Entrepreneur Council.

How to establish a business in a new location

If you’re changing the location of an existing business, you likely have some idea of what to look for in a location. So, your focus should be on what it will take to reestablish your business successfully.

• Start your location search

Knowing what kind of location you want and what you need to consider is all very well, but where do you go to find a physical business location? While not an exhaustive list, here are a few ways to get started:

• Your local SBDC
• The local Chamber of Commerce
• Walking the neighborhood, keeping an eye open for rental signs
• Commercial real estate agencies

Are you planning to run an online business? Check out our guides on starting a home-based business and setting up your business’s online presence .

Finding the right location is one of the final steps to start a business . Now it’s time to solidify your team , get your marketing strategy in place—and ensure that opening day at your new location is well-staffed and well-attended.

Clarify your ideas and understand how to start your business with LivePlan

Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.

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• 2. What’s your budget?
• 7. Can you legally do business?
• Additional resources

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How to Choose the Right Business Location 10 Factors You Should Know

Free Business Startup Checklist

Ayush Jalan

• December 12, 2023

Choosing a business location is one of the key decisions you’ll have to make as an entrepreneur. Doing so shouldn’t be based on a personal whim, but rather on a detailed understanding of your needs and limits. To do this, you need to understand how you can choose the right location.

In this article, we’ll see how to pick the right location for your business, and the factors that influence your decision.

Why is it important to choose the right business location?

You’ll need to make a strategic decision regarding the state, city, and neighborhood where your business will be located in order to select the right taxes, zoning laws, and regulations. It also affects the factors that influence your operations, profitability, scalability, expenses, etc.

A well-planned location can help you increase your market share , reduce labor and raw material costs, minimize risk, and take advantage of local laws and policies.

“The precept that location is key to the success of a business applies to art, and even to life itself: we thrive or wither depending on how nourishing our environment is.” – Yann Martel

How to pick the right location for your business

Picking the right business location depends greatly on what you want that location to do for you.

Asking the following question can be a great start to conducting your location analysis:

• What is the size of your future shop or office?
• What are your infrastructure requirements? Are you looking for a place to set up shop or to build your own office?
• What’s your budget to set up the new location?
• Do you need to be closer to a particular supplier for raw materials?

Depending on your business, your requirements will vary. Once you’ve identified your company needs, look at the factors that affect your business location to get a better idea of your options.

Factors influencing business location

Several factors determine how your business functions and sustains itself. These are some of them you should consider before picking your business location:

1. Proximity to target customers

In most cases, it pays to be in a location where there’s a high demand for your product. However, depending on your business type, you can decide whether you need to be near your target customers.

For instance, if you’re planning to start a restaurant , it might be more profitable to be in an urban locality where people eat out frequently. Conversely, if you plan on starting a manufacturing business , being close to your target customers might not be a priority.

Regardless of your business type, your proximity to your customers becomes more significant if:

• Your product life cycle is short
• Your transportation cost is high
• Your products are fragile
• Your products require after-sales services

2. Competitors’ location

Picking a location closer to a competitor can impact your business in many ways. Done wisely, it can even turn out to be a good strategy.

If your products have a competitive advantage , setting up a shop near your competitors can work in your favor. Not only can you capture their market share, but also provide your customers with a sense of choice.

Here are the benefits of setting up your business near a competitor:

• Healthy competition will fuel innovation.
• You can leverage your competitors’ marketing strategies for your benefit. Since they have already pulled in customers to the area, you don’t have to spend a lot on advertising yourself.
• Being close to your competitors allows you to strategize better and understand what works and what doesn’t in the market.
• If you happen to build a good relationship with your competitor, you can even collaborate with them.

If you’re afraid that your competitors’ offerings may outperform yours, you may choose other locations that will place you in the center of the market.

3. Talent acquisition

It’s not just customers and suppliers you need to worry about when picking a location; you also need to consider your recruitment needs.

If you plan to build a team, you need to check the following:

• Are there enough talented workers in the area you can hire?
• Does the location have good transportation and other facilities?
• Will the location help boost your staff’s productivity?
• How far is the location from the nearest residential area?
• Will you be reimbursing your staff’s travel expenses?

4. Operating and other costs

The location of your business will greatly influence the expenses you will have to incur.

Some of those expenses to look out for are:

• Transportation of raw materials
• Product delivery
• Inventory costs
• Parking fees
• Labor costs
• Electricity costs
• Water costs

There are a variety of taxes you would have to pay once you’ve set up your business. These vary depending on state and location. Moreover, some areas favor particular industries, creating favorable tax conditions. So, it’s essential to consider the same before deciding on the location of your business.

A few of the commonly levied taxes on businesses are:

• Property tax
• Corporate tax

6. Government incentives

Most young entrepreneurs are constantly on the lookout for funding and support. The good news is that some local and state governments do offer help. This can be in the form of financial incentives, business grants , low-interest loans, tax relaxations, and other benefits.

Make sure to research these before you lock your decision.

Some websites where you can find relevant info are:

• U.S. Chamber of Commerce
• U.S. Small Business Administration
• USA Government

7. Government laws and policies

Converse to the last point, there could be several government laws and policies that may restrict or negatively impact your business activities. Make sure to consider these before finalizing your business location.

Some of the aspects you should look into are:

• Licenses and permits
• Labor and employment laws
• Trade barriers
• Building codes
• Environmental regulations
• Advertising regulations

8. Local zoning ordinances

Local authorities have fixed rules and regulations regarding land usage—these laws are called zoning ordinances. Check if your plans of using and modifying the property comply with local laws to avoid running into problems later down the line.

Some locations have laws that deny permits for specific industries or restrict certain business activities. So, verify with the local municipal corporations or similar authorities to ensure you’re allowed to do business in that location.

9. Local community

While opening your business, it’s crucial to consider the impact of the local community on your business.

Asking the below questions might help you to choose the right business location:

• Is the community welcoming of small businesses?
• Does your business benefit the community in any way?
• Are the local values compatible with your company’s values?
• Will you be able to foster long-term relationships with the community ?

10. Safety and security

Feeling safe and conducting your business without any disturbances is critical.

Inquire about the following while looking for a location:

• Is the crime rate in the area high?
• How well is the policing system enforced?
• Is there a danger of theft or burglary? Will your inventory be secure?
• Is it a safe place for you and your employees?
• Will you need to upgrade the property to safeguard your business?

Choose the right location for your business

Going through a myriad of business location ideas can often cause decision fatigue due to the irreversibility of the action. However, you can increase your chances of success by evaluating your options via extensive research.

Examine the above factors to analyze your compatibility with your desired location and identify potential fits to check if it’s viable. Make sure to take your time to avoid making the wrong investment. You can even consider hiring an advisor to choose the right business location.

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About the Author

Ayush is a writer with an academic background in business and marketing. Being a tech-enthusiast, he likes to keep a sharp eye on the latest tech gadgets and innovations. When he's not working, you can find him writing poetry, gaming, playing the ukulele, catching up with friends, and indulging in creative philosophies.

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Tips on Choosing the Right Location for Your Business

Table of Contents

Choosing a location is one of the most important aspects of starting a brick-and-mortar business and ensuring its long-term success. Location is particularly crucial for retail stores and restaurants that rely on foot traffic, accessibility, atmosphere and the right clientele. 

We’ll share how to analyze your requirements and options to choose a space where your employees, customers and business will thrive.

How to choose the right business location

When you’re starting a business , selecting the right location can be the difference between success and disappointment. If you’ve already completed your business plan and chosen an awesome business name , take the following steps before signing a commercial lease or buying commercial real estate : 

• Set a budget for your business location: Pinpoint how much of your business budget you can spend on a commercial lease or building purchase. You don’t want to fall in love with a location you can’t afford.
• Outline your business’s specific needs: Your business type and industry will inform your location’s specific needs. For example, if you’re starting a restaurant , your needs will be very different from a sales office that requires an office layout with ample conference room space and private offices. Will your parking area need to accommodate many employees and customers? List your requirements to avoid wasting time evaluating properties that won’t fit the bill.
• Determine crucial tax implications: Consider any prospective area’s state and local tax implications. Depending on your industry, it may be wise to seek a location inside or outside a specific zone or municipality to enjoy tax benefits.
• Research government incentives: Federal and state incentives for small businesses exist in some industries. Choosing a specific location may qualify you for certain incentives. If so, it behooves you to focus your location search on a specific area or business-friendly state . 
• Research your target audience: Where do your customers live and work? It’s crucial to choose a location your target market can easily access or frequently visit. Understanding your customer base will inform your location decision. If you’re partial to a specific area but aren’t sure if it’s a match for your target audience, thoroughly research the area’s demographics to gain a clear picture of product or service demand and disposable income levels. 
• Research an area’s specifics: If you’ve found an area in your budget that’s amenable to your target audience, dig deeper. For example, understanding the area’s zoning laws is crucial. Look at zoning maps so you understand what business activities are allowed. If you’re a retail store or restaurant, considering commercial zoning proximity to residential areas can be essential to ensure direct access to foot traffic. Make it your business to know an area inside and out.
• Plot competitors’ locations: If you want to move forward in a specific area, perform a competitive analysis to assess the competition’s presence and gauge demand for your offerings. You don’t want to move in next door or across the street from a fierce business rival. However, you may not be able to avoid the competition entirely. Understanding your situation is key. 
• Analyze individual properties: Once you’ve settled on an ideal area and found individual properties to consider, start comparing their pros and cons. Vet specific properties’ qualities, including office or building size, furniture, parking lot size, amenities, lease terms and more. Is the actual building or space somewhere your team and customers will enjoy spending time?

Factors to consider when selecting a business location

Before signing on the dotted line, numerous additional factors will influence your business location decision. Some may not apply to your specific industry, while some will be crucial determinants.

Consider the following factors before making your business location decision.

What other businesses are nearby?

Beyond understanding where your competitors are, it’s crucial to consider other nearby businesses. Specific business types may complement your offerings, especially if you’re a retail location or restaurant. You may share customers with similar demographics or your neighbors may be excellent allies. 

For example, choosing an office location near a deli and a dry cleaner can provide conveniences for your employees. If you’re a florist, nearby proximity to a baker may lead to customer overlap. Collaborating with other businesses in your location is a bonus that can help create a prosperous economic environment for all.

Does the location provide good foot traffic? 

Excellent foot traffic can be the crown jewel for specific small businesses, including retailers and restaurants. Foot traffic can boost the success of your local marketing strategies and help your business grow. Assess your chosen location’s foot traffic by visiting the area at various times to see how the crowds ebb and flow. Will your business benefit from the foot traffic level? If you’re weighing several great business locations, foot traffic may become a deciding factor. 

Is the location convenient for vendors and suppliers? 

If your business relies on frequent inventory infusions, proximity to your vendors and suppliers can be critical. An inconvenient location may lead to frequent delays and unhappy customers who can’t get the items they want. 

Is your location accessible to employees and customers?

Customers and employees must be able to access your location ― particularly if you’re operating a retail brick-and-mortar store. Evaluate any potential location’s on-site parking and accessibility to highways and major roads. 

How crucial is your business location?

This may seem like an obvious question but consider how the location will impact your business. A retail store’s location may be much more critical than a company’s office headquarters. Consider your customers and employees and how the business’s location will impact them. If the specific location doesn’t matter as much, you can place more importance on things like building amenities and affordability. 

Will your business receive ongoing shipments of goods?

If you’re working in the industrial sector or running a business that receives large supplies of goods, it’s best to choose a location with warehouse storage space and easy delivery options for clients and customers. A business that specializes in shipping and holding goods needs specific structural amenities, such as loading docks.

Will you conduct meetings at your business site?

Consider how your clients will utilize your location. If you meet with customers regularly, you need an accessible location with reception areas, waiting rooms and conference rooms. If no clients ever visit, you may instead prioritize things like a robust business phone system and technical infrastructure. 

Will your customers and employees need dedicated parking?

Consider your company’s size when choosing a business location. Your employees will likely have to drive to your location. If that’s the case, is parking available? Similarly, if you’re meeting regularly with clients and customers, you need convenient parking options for them. Sometimes, the most important aspect of a business location is its free, convenient and accessible parking options.

Why your business’s location is important

Your location is critical to your business’s success for many reasons: 

• Visibility: Depending on your chosen location, you might make your company more (or less) visible to its target demographic, directly impacting your revenue. 
• Customer connections: Additionally, operating a business in a convenient location can help you connect with more customers and develop lasting relationships with them.
• Employee satisfaction: Despite the rise of remote work, many businesses have in-office employees who must spend a great deal of time at the office. A convenient site with an excellent atmosphere and location can help keep employees happy. 
• Professionalism: Your business location will speak to clients. A professional, attractive location can improve your reputation and how customers see you. However, a shoddier office in an inconvenient location won’t do you any favors. 

According to Statista , in-store and brick-and-mortar retail accounts for 85 percent of total retail sales, demonstrating the importance of foot traffic. If your retail store is in an inconvenient or inaccessible location, you could be missing out on a huge chunk of potential sales.

Getting the most out of your business location

Whether your business deals with customers or is more of an employee-centric office environment, your business location matters. It’s crucial to thoroughly assess how location impacts your operations and choose somewhere that meets your specific business needs. 

Depending on your business type, your location should be inviting and professional, creating a positive association for customers and employees alike.

Matt D’Angelo contributed to this article.

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Understanding geographic segmentation and its drawbacks.

14 min read Whether you’re a brand looking to go global, or a small business focusing more on the local, geographic segmentation is one of the most effective types of market segmentation. What is it, and how can you put it to best use?

What is geographic segmentation?

Geographic segmentation is the practice of dividing your audience based on geographic location, from country right down to zip code. It’s used to target products, services or marketing messages at people who live in, work in, or shop at a particular location.

While geographic segmentation has its fans, it also has many flaws. One major drawback is that geographic segments often overlook cultural preferences and the complexity of consumer behavior; just because two people live in the same zip code doesn’t mean they have the same needs or interests. Relying solely on geography for market segmentation could lead to missed opportunities and, in some cases, wasted resources.

Why marketers use geographic segmentation

Marketers may opt to use geographic segmentation for a variety of reasons.

For starters, it’s relatively easy to implement into a marketing strategy, thanks to personal data like home address and location data being straightforward to collect and analyze. Plus, it offers immediate insights into a target area’s demographics, which can be invaluable for local businesses or location-specific campaigns.

Marketers often use geographic segmentation to explore market potential in a given area or to optimize distribution channels. It’s also handy for understanding regional trends and preferences, which can be crucial for businesses looking to expand into new territories.

However, it’s essential to note that while geographic segmentation provides a snapshot of ‘where’ your audience is, it doesn’t delve into the ‘why’ behind consumer behaviors – that’s where psychographic segmentation comes in. It’s a bit like judging a book by its cover; you get the basics but miss out on the nuanced storyline.

While geographic segmentation can be a useful tool in marketing strategies, it often needs to be combined with other segmentation methods for a fuller picture.

Free eBook: How to drive profits with customer segmentation

Geographic segmentation examples

Geographic segmentation is a versatile tool that can be employed in various ways, depending on your goals, audience and the unique characteristics of the locations you’re focused on.

Below are examples of organizations and use cases that geographic segmentation can bring value to.

Political groups

Geographic segmentation is particularly useful in the political realm, where location often correlates with long-held political opinions or the historical dominance of certain parties.

By identifying and targeting areas that are more likely to align with their ideology, political groups can concentrate their fundraising and canvassing efforts more effectively – maximizing return on investment.

Clothing brands and retailers

Fashion needs and preferences vary from place to place, influenced by local culture and, of course, the weather. As a result, clothing brands and retailers will adjust their inventory based on geography.

For example, the same retailer has stores in both a beach town and a ski resort. The beach location might stock up on flip-flops and bathing suits, while the ski resort location will stock clothes designed for colder temperatures.

Home security companies

Home security companies often focus their marketing efforts in high-crime areas where the perceived need for their services is higher.

For instance, a company might offer special package deals or partnerships with local law enforcement in these regions – adding an extra layer of trust and security for potential customers.

Swimming pool suppliers

A company specializing in outdoor swimming pools will naturally target areas with warmer, sunnier climates, like Florida or California, to maximize its profits.

By targeting an audience that’s more likely to buy their products, the suppliers will in turn optimize their marketing and advertising spend.

The problems with geographic segmentation

While geographic segmentation has its merits, it’s far from a foolproof strategy. Here are the more significant issues you may encounter when employing this method.

It doesn’t account for nuance in locations

Even within smaller geographic units like neighborhoods, there can be a vast range of demographic, cultural, attitudinal and behavioral differences – particularly in neighborhoods with a high population density, such as those in big cities. As a result, what appeals to one person might be irrelevant or even off-putting to their next door neighbor.

The reality is that people’s interests can be wildly different even if they live in the same neighborhood.

Take a zip code that’s home to young adults in their mid-20s, families with small children and retirees. Add a mix of white-collar and blue-collar workers, various ethnic backgrounds, and diverse types of housing – from apartments to multi-million-dollar homes. A marketing message tailored for one segment could entirely miss the mark for another, despite the geographic proximity.

It carries the risk of missing the right people

Unless the targeted geographic area is entirely homogeneous – which is rarely the case – when you focus purely on geography you might not be reaching the people who are genuinely interested in what you have to offer.

You could end up wasting valuable resources, like time and advertising dollars, on an audience that’s not well-aligned with your product or message.

It gives limited opportunity for personalization

One of the biggest trends in marketing today is personalization. Geographic segmentation, however, offers limited scope for tailoring messages to individual preferences, because you’ve only identified people based on location.

While you might get the city or neighborhood right and add a level or personalization based on that, you’re missing out on the chance to connect on a deeper, more personal level.

It puts an overemphasis on location

Geographic segmentation can sometimes lead to an overemphasis on location at the expense of other important factors.

For example, businesses may ignore online or social trends that are equally, if not more, influential on consumer behavior. In today’s digital age, physical location isn’t the only parameter that matters, and relying solely on it can result in missed opportunities.

Psychographic vs. geographic segmentation

While geographic segmentation groups people by where they are, psychographic segmentation groups them by who they are.

Here we explore the core reasons why the latter is a more powerful tool for marketers.

Psychographics dominate daily life

Psychographic factors guide most of our life choices – from who we befriend, to the career we pursue. They serve as the invisible hand that informs daily decisions.

Today, psychographic factors like interests, hobbies and personal values offer a more rounded view of who your customers actually are. And the big change of late is that this information has become much easier for brands to access from their target audiences.

Psychographic understanding beats knowing a zip code

Knowing where someone lives might give you a clue about their income or local culture, but it doesn’t tell you much about what drives them to make a purchase. On the other hand, understanding a person’s attitudes, values, interests, attitudes and opinions allows you to speak directly to their ‘why’ – and that’s exactly what psychographic segmentation is all about.

When you understand the ‘why’, you can offer solutions that are far more compelling than anything a zip code could ever suggest.

Psychographic factors create a more holistic understanding

By focusing on psychographics, marketers can connect with consumers on a more personal and emotional level, driving both engagement and loyalty .

Brands that tap into the psychographics of their audience are much better equipped to craft messages that resonate on a deeper level, and build a stronger emotional connection with consumers.

Psychographic segmentation factors – and examples of brands succeeding with them

Psychographic segmentation allows for a deeper, more meaningful way to create effective marketing campaigns.

It’s an approach that’s used to segment your audience based on a combination of the most common psychographic factors: values, hobbies, interests, behaviors, and attitudes and opinions.

Let’s look at why each factor is crucial to the blend of psychographic segmentation – and how they’re put to use by some of the world’s biggest brands.

Values often play an important role in any psychographic segmentation. A core value in today’s world is environmental consciousness.

This could mean anything from actively participating in eco-friendly activities, to prioritizing sustainable choices in everyday life. People with this value are often more willing to pay a premium for eco-friendly products and are more likely to support brands that align with their values.

Patagonia has zeroed in on this segment by offering truly sustainable outdoor clothing and gear, and living its environmental values to the fullest. It’s a brand that doesn’t just sell products; it sells a vision of environmental stewardship that deeply resonates with a target audience that places immense value in this.

Interestingly, genuinely sustainable brands like Patagonia also benefit from the interest of another audience that isn’t necessarily driven by eco-consciousness. Instead, this audience first and foremost values the badge of honor that comes with wearing a widely celebrated brand.

Hobbies offer another dimension for psychographic segmentation. In the case of motorcycle riding, it’s not just an activity but a hobby that’s really a lifestyle, community and even a sense of identity for many. Naturally, those who are passionate about riding often seek brands that understand and cater to this hobby.

Harley Davidson is more than just a motorcycle brand; it’s a lifestyle. It has successfully tapped into this psychographic segment by providing not just bikes but an entire culture around riding. From merchandise to social events, Harley Davidson serves the unique needs and wants of motorcycle enthusiasts

Interests are a crucial element in psychographic segmentation because they often dictate the products, services and brands that consumers want to interact with. Nowhere is this more true than in the realm of health and fitness. Be it the latest superfood, workout trend or cosmetic breakthrough, consumers are very open to being targeted based on their interest in the space.

The Ordinary is a skincare brand that has honed in on the interests of consumers who are keen on science-backed, ingredient-focused skincare. By offering detailed information on active ingredients and their effects, The Ordinary has captivated a market that wants more than just superficial solutions – setting the brand apart in a saturated beauty market.

People are increasingly grouped based on the behaviors they engage in regularly. When looking at younger audiences, one of the chief daily behaviors is of course using social media.

Instantaneous interactions are particularly popular among this demographic – aligning with a desire for more casual, less permanent digital interactions.

Snapchat understood the value of this form of communication. With features like disappearing messages and short-lived stories, they introduced a new social media platform that perfectly fit with the communication preferences of younger generations.

Attitudes and opinions

Attitudes and opinions form a critical part of psychographic segmentation, often driving consumers toward brands that align with their personal viewpoints. This could be anything from political leanings to cultural attitudes, such as body positivity and mental health advocacy.

Ben & Jerry’s is a brand that has found success from making a public stand on social issues like racial justice and climate change. Whether by design or not, this has attracted a consumer base that sees their purchase as an extension of their own values and opinions. Far beyond selling ice cream, Ben & Jerry’s is a brand that stands for something – making it far more attractive to those who share similar viewpoints.

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Related resources

Demographic segmentation 14 min read, market segmentation 21 min read, market fragmentation 9 min read, behavioral segmentation 20 min read, psychographic segmentation 11 min read.

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Business Location Analysis: Definition, Objectives, Factors

Location refers to the choice of region and the selection of a particular site for setting up a business or factory.

But the choice is made only after considering the cost and benefits of different alternative sites. It is a strategic decision that cannot be changed once taken.

If at all changed only at considerable loss, the location should be selected as per its requirements and circumstances. Each plant is a case in itself.

A business person should try to attempt at the optimum or ideal location. An ideal location is one where the cost of the product is kept to a minimum, with a large market share, the least risk, and the maximum social gain.

It is the place of maximum net advantage or which gives the lowest unit cost of production and distribution, for achieving this objective, this purpose.

What is Business Location Analysis?

Location analysis is a dynamic process where entrepreneur analyses and compares the appropriateness or otherwise of alternative sites to select the best site for a given enterprise.

It consists of the following:

Demographic Analysis

It involves the study of population in the area in terms of total population (in no.), age composition, per capita income, educational level, occupational structure, etc.

Trade Area Analysis

It is an analysis of the geographic area that provides continued clientele to the firm. He would also see the feasibility of accessing the trade area from alternative sites.

Competitive Analysis

It helps to judge the nature, location, size, and quality of competition in a given trade area.

Traffic Analysis

To have a rough idea about the number of potential customers passing by the proposed site during the working hours of the shop, the traffic analysis aims at judging the alternative sites in terms of pedestrian and vehicular traffic passing a site.

Site Economics

Alternative sites are evaluated in terms of establishment costs and operational costs under this.

Costs of the establishment are the cost incurred for permanent physical facilities. Still, operational costs are incurred for running a business on day to day basis, they are also called as running costs.

Objectives of Business Location Analysis

The location of a business must be decided to keep in mind the following objectives:

To hold minimum investment and operational cost

The foremost objective in selecting an ideal location is to ensure minimum investment and lower operational costs.

This could be achieved if the business is located in a place where raw materials, labor, transport, and power are easily, regularly, and sufficiently available.

To ensure the smooth operation of the business.

Another objective of the ideal location is to ensure the smooth operation of the business.

This could be achieved if the business is located in a place where the services of banking , communication , transport, repairs, and maintenance are available easily and regularly.

To promote employee welfare.

If the business is located where the educational recreational, medical, and religious needs of employees are met, they will certainly feel attached to the enterprise. They would develop loyalty and commitment to it.

To co-ordinate with Government Policies.

The entrepreneur , while selecting a location, must ensure that his decision does not conflict with the government policy of balanced regional development.

Factors to be Considered in Selecting a Business Location

Selecting the ideal business location is guided by four main factors, namely:

Nature and Type of Business

The nature and type of your business is the single greatest determinant of where the business should be located. Businesses that rely on walk-in customers from the public are the most affected, the main ones being in the service industry.

If your business relies heavily on walk-in clients as opposed to businesses that prospect, then location is everything. Getting your location wrong can spell doom for your business.

In the restaurant business, for example, there are three “main” rules when setting up. These are “LOCATION, LOCATION, and LOCATION.”

This example underscores the importance of a great location for restaurants.

A study of McDonald’s reveals this to be true. Senior management at MacDonald’s will tell you that they are burger salespeople, but their business is real estate.

Therefore, businesses such as restaurants, supermarkets, liquor stores, Ice cream parlors, and the like must be located in easily accessible areas with high levels of human traffic.

In contrast, businesses such as law firms, accountants, software firms, and so forth, which do not rely on high levels of human traffic, can be located in posh offices within office blocks.

The amount of money you can afford to obtain premises must, of course, come into play. Most first time entrepreneurs will be renting due to budget constraints.

Always try and secure premises that provide the best value for your money, considering the nature of business.

Space required

Certain types of businesses require very large amounts of space.

For example, car dealerships and car rentals require a large space to park their vehicles. This may mean looking for an out of cheap town location.

Special facilities needed

Certain types of businesses require special facilities to carry out their business effectively. For example, IT companies have some very special mechanical, electrical, plumbing, and fire suppression requirements.

Server rooms and computer areas need dedicated cooling units. These must be taken into consideration before settling on a business location.

At one point, we may want to determine the size of the business . This helps in knowing whether it’s growing or not.

Also, you ascertain it to plan its various requirements. If you know the size of your firm , then you’re able to determine its efficiency. Any enterprise is the ether; small , medium or large size .

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How to Choose a Business Location: 8 Factors to Consider

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Choosing a business location is not something that can be done on a whim—it's a crucial step in starting a business. First things first, the business location you choose will depend on the type of business you operate. Business parks, shopping malls, strip malls, professional buildings, and others are all designed to meet the specific needs of various businesses. If you’re expanding from online-only to online and brick-and-mortar, for example, your needs will be much different than if you’re an accountant looking to grow your firm and bring in new clients.

A business location strategy takes planning and research and a willingness to thoroughly vet all of your options. With these helpful tips, you can identify the best place to locate your expanding business.

1. Decide on a business location type

Here are five common types of business locations, but more creative options, like co-working spaces, are popping up all the time. Be on alert for these and other location types that would meet your specific needs.

Home-based business - If you work from home but need more space, you might consider moving to a new home or adding on to your existing home to create the office space you need.

Retail business - Don’t limit yourself to downtown storefronts and strip malls. You can also find retail space in airports, free-standing buildings, and special event kiosks.

Mobile business - It used to be that the only businesses that moved around were circuses and festival vendors. But today with mobile card readers, your restaurant can add a roaming food truck location and your used book store can open a new pop-up shop near the beach.

Commercial business space - Commercial business spaces offer flexibility for even more growth down the road, but are typically best for businesses that don’t rely on heavy consumer traffic.

Industrial site - If you operate a manufacturing or distribution business, you’ll have special needs and will likely have limited choices when it comes to opening a new location. Industrial sites are needed for companies that require large amounts of warehousing space, for companies that need access to major transportation routes, or for companies that may produce pollutants as part of the manufacturing process.

In almost every case, where you can locate your business will be dictated by local zoning ordinances in your community. Don’t sign on the dotted line until you’re sure it’s legal for you to operate your business in your desired location.

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Once we uncover your personalized matches, our team will consult you on the process moving forward.

2. Make sure the business location is within your budget

Of course, one of your major priorities will be finding a location that fits within your company’s budget. However, that’s not all you need to examine when it comes to money. There often other location-specific costs to consider beyond the purchase price or monthly rent. Almost every location has different hidden costs that you need to account for: taxes, renovations, utility upgrades, minimum wage requirements, and economic incentives. Even mobile businesses need to consider the cost of permits and vehicle licensing when choosing a new business location.

Considering all the above will help you make a well-educated choice for your next business location. Before committing to anything, be sure to speak with other business owners in the area to make sure they’re happy with the location. Although you can never predict if a new location will be successful, you can do as much research as possible beforehand to ensure it is the best available fit for your growing business.

3. Consider your brand

Keep your brand in mind when developing your business location strategy and looking at options. For instance, you probably wouldn’t want to plant your new office supply location right in the middle of a high-end, boutique shopping district. Likewise, an upscale restaurant might not fare so well in the middle of a college town or rural area, where customers are used to spending less money on cuisine.

4. Think about vendors and suppliers

You'll need to secure a location that makes it easy for you to connect with your vendors and suppliers; otherwise, you might experience significant delays or run into frequent issues with inventory levels. When considering your options, ask yourself which location site makes it easier and cheaper for you to get the raw goods you need to operate.

5. Find a safe location

Operating a business where you feel safe and protected should not be underestimated. And besides your own safety and the safety of your employees, also consider your business's safety as well. This is especially important for businesses with inventory that may be at a higher risk for burglary and theft or if you'll frequently be running your business alone at night.

6. Go where there is demand

Ideally, you want to secure a business location that’s not saturated by your competition. Look for areas where your product or service is in high demand or where your competition is fairly low. If at all possible, you’ll want to expand to a location where the other businesses on the block are complementary, to ensure your business fits into the local market.

7. Think about recruiting efforts

If you'll be hiring employees and managers for your business, you'll want to make sure you open in an area where there's good access to public transportation or where potential employees will be attracted. Finding high-quality employees is crucial to your business success, so plan your location around where employees want to work.

8. Look for sites with parking options

No matter how attractive your business is, sufficient parking should be a key consideration. Does your business location have a convenient parking lot, or will your customers need to pay for parking—and will they be willing to? If paid parking is your only option, you'll also want to consider if your business will offer validation. And don't forget about your employees here—they'll also need somewhere to park.

The bottom line

There are several business location factors to consider, from pricing and availability to parking and market appeal. Choosing the best location for your business is crucial to your overall success, so it's important to do the necessary research before committing to a location. Be sure to think about your location not only as a business owner, but also from the point of view of an employee and potential customer. A well-informed business location strategy will ensure you find the best place to set up shop and open your doors for business.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

Business Plan Demographics – Defining a Target Market

Sorting through demographic information is one of the first steps in doing market research and competitive analysis. This is stuff you’ll need to know in order to prepare an effective business plan. Without this information, you, as a founder, don’t know if there is a sufficient market to support your business. You will also be starting off at a disadvantage when planning other aspects of your business.

**Note: this business plan demographics guide was written just before the Census Bureau changed its primary portal for data from the American FactFinder to Data.Census.Gov .

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Keep in mind that this workbook is only designed to work with table S0201 , Selected Population Profile in the United States . Any other table might not be in the correct format.

About these posts

This series of posts was written to convey my take on how to write a business plan. My intent is to follow up with several more posts after this one.

I’m using the U.S. Small Business Administration (SBA) Plan your business guide as my outline ( link ). In true SpreadsheetsForBusiness.com fashion – I plan to include free downloadable spreadsheets where appropriate.

Rather than just recycling the same information you could find elsewhere, I’m going to take this journey with you. I’ll be building my own business plan as I write these posts. This is my first business plan, so you’ll be learning right along with me.

My business plan

My plan is based around a hypothetical business that will manufacture and market a hair regrowth product for men (and women, I suppose). The plan is to manufacture the product with all-natural ingredients.

What are business plan demographics?

Sorting through demographic data for your business’ potential customers is the first step in understanding what type of person (or business) might be interested in your product or service.

It can provide an unofficial ceiling to the number of customers you might expect. It’s from this information you can get into more detail about demand, market saturation, pricing, and so on.

Common demographic information includes:

• Marital status
• Employment status
• Geographic area

Why worry about business plan demographics?

Focusing on marketing to specific individuals helps you plan with clarity. The saying goes: “you can’t please all the people all the time.” By not trying to market to everyone a little bit, you can focus your efforts on creating a really good experience for some people.

Understanding your target demographics can help you determine if your target market is saturated. Read this post: CALCULATING MARKET SATURATION FOR YOUR BUSINESS PLAN

Whatever your business is, it probably is a reflection of yourself. Your interests and talents, that is. Who you market to will also depend on your characteristics and preferences. So, as you choose the demographics of your avatar, consider who you identify with and would be comfortable marketing to.

How to find and analyze business plan demographics

The market for a product or service is quantified by the number of people who make it up and the total amount of money they spend. We can quantify the size of the market by segmenting people based on their demographic characteristics

Of course, since most of this information is numerical, I’ll be using a spreadsheet to keep track of what I found and what changes in variables mean for the market of my aspiring business.

Also, I’ll be using online resources for the sake of time and simplicity. Theoretically, market research could involve things like focus groups and surveys. That’s more involved than I want to get for this idea, so, I’ll stick with the free information.

The SBA has a nice list of resources for market and competitive analysis here .

Demographic information

Here, we’re just looking for basic information about the people who I might be selling to. For instance, how many people are in the age range that I would market to? How much money do they make? Are they single and looking to mingle? Or, are they in committed relationships and proud of their bald head (like a certain “old man” I used to know and miss very much)?

From FactFinder to spreadsheet

First stop is the U.S. Census FactFinder ( link ).

Here, you can find Census data about your state, city, or even zip code. Not every business is going to be nationwide. Some, like a restaurant, will be very local.

Also, if your business will market to other businesses (B2B), then the information contained here may or may not be pertinent to you. Try another part of the Census website called the Small Business Edition ( link ) if you’re not finding what you need.

Interested in mining the Census website for more valuable market research? Read this post: CENSUS DATA MARKET RESEARCH AT THE NEW DATA.CENSUS.GOV

Since, as of now, I envision my business being nationwide (at the very least regional), I chose to use the “Guided Search.” From there, in the “Topics” section, I chose to look at information pertaining to age, sex, age group, income/earnings (households), and marital status.

I can always delve into more detail or retrieve different information at a later time. My hope is that this gets me started.

Additionally, on the next screen, I chose to break the information down by region. I included all regions so that I could total them for a view of the entire country.

Finally, on the last screen, I opted to see the one table that outlined this information in 2017, the latest year available.

Don’t bother with the “Download” Action. It will give you your data in a different format than it is displayed.

Instead, just highlight everything in the FactFinder table and copy + paste it in a spreadsheet.

Fixing errors

From there, do a Find and replace in your spreadsheet to get rid of the errors that are a result of a “=” being placed in front of the “+/-.01” in the Margin of error column. Replace the “=” with an apostrophe. Be sure to Also search within formulas .

Filtering for the demographic information I need

My goal here is to get a range of the number of potential customers based on a set of demographic statistics. I have a lot more information than I need, so let’s see if we can widdle this down into something more useable.

To do this, I added some columns to the Demographic Info worksheet.

First of all, I added a column ( Estimate # ) that aimed to translate some of the percentage population information into quantities. The format of every download from FactFinder isn’t going to be the same. But, an attempt was made to give you access to both percentage and quantity information for each line item.

Additionally, you’ll find a column named Enter 1-10 to rank demographics . Here, you’ll be able to rank demographic information and narrow down your market on the Pick Demographics worksheet.

Want to nail down the size of your market before you move forward? Read this post: MARKET SIZE FOR A BUSINESS PLAN – 2 METHODS TO GAUGE IT

Creating customer avatars

Maybe you have a couple of different mixes of demographics in mind. That’s fine. Once you are satisfied with one mix of demographics you can highlight the information on the Pick Demographics worksheet, then copy and paste the values (Ctrl + Shift +V) into one of the boxes on the Customer Avatars worksheet.

This allows you to keep tabs on several different customer profiles as you move forward with your business plan.

Keep in mind, this is just the first step of the business plan. The whole point of a plan such as this is to be proactive. In order to be proactive, you’re going to have to be flexible.

If, as you move along through the steps, you reconsider your target demographic – that’s fine. Just circle back and refine your avatars and make adjustments to other parts of the plan as necessary. Don’t get discouraged if you have to do this. That is the whole point of this exercise.

For my avatars, I created four, relatively similar mixes of demographic characteristics.

Gender and income

All include males. Though females can also suffer from hair loss, I am assuming that males would be the primary customer and who the majority of marketing would be geared toward.

Next, every mix of demographics included individuals with earnings as opposed to those with retirement income , with Social Security income , or any other type of public assistance.

Right now, I anticipate that this product would be sold at a premium price due to its uniqueness and all-natural ingredients. This would mean that customers would likely need to earn above-median incomes in order to be in a position to buy a product such as this. Assumptions such as this might change as I progress through this business plan.

In three out of my four avatars, I made assumptions about the relationship status of these men. The demographics included were Now married, except separated , Never married , and Separated . These were my three main avatars.

The fourth included Males , With earnings , and who were High school graduates . This is my “catch-all” avatar. The real total addressable market for my product is probably between this population and the total of the three mentioned above.

The main difference between the three main avatars had to do with education. I assumed that men who were single might be more likely than married men to purchase a product such as this, I lowered the EDUCATION ATTAINMENT to Some college or associate’s degree .

Defining a target market with business plan demographics

Be sure to download your own copy of the workbook used in this post. Just fill out the form at the top.

What other sources would you use to find demographic information for your business plan?

How about the avatars? How would you have screened them further?

Join the conversation on Twitter!

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“In business, wrong location leads to suffocation.” - Mokokoma Mokhonoana 

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“In business, wrong location leads to suffocation.” - Mokokoma Mokhonoana

For businesses, whether big or small, location is crucially important. Business location not only affects a company's costs and revenue as well as its ability to serve the customer. Getting the wrong location can have serious consequences for the business. In this article, you will learn what makes a good business location and how to set up a location strategy to ensure success.

Definition of business location

First, let's find out what a business location is and why it is important for a business.

Business location is defined as a place or structure occupied by a firm to run its operations. This includes any structure or establishment used in conducting a business.

Starbucks places its coffee houses in high-street, high-visibility locations in various settings, including downtown and suburban areas. You can also find Starbucks in office buildings, university campuses, and off-street highway locations. 1

A good business location aims to provide an advantage to your business by creating a balance among:

Operational costs (the daily costs incurred to run your business),

Potential revenue

Target customers.

Some examples of good business locations include the M4 corridor for tech companies, tourist attractions for hotel businesses, and the city centre for coffee shops.

Business location factors

Factors influencing the choice of a business location can be split into:

Supply factors

Demand factors

1. Supply factors

Supply factors examine the cost of running your business operations in a location. Some of these supply factors include:

Labour - The cost of employing labour to carry out the same task differs according to location. An excessive presence of labour in a particular location can increase the cost of employment, as opposed to a location with little available labour.

Land c ost - Due to rentals or outright purchases, land cost varies among different locations. The facilities provided after rentals/purchase or development can also affect land costs.

Non-financial factors - Non-financial factors like political stability, language, social amenities, and governmental support can influence the choice and cost of hiring a business location.

Energy c ost - The cost of energy varies among countries, types of business production and the number of employees hired. For example, the energy costs in the UK are different from those in Germany.

Transportation c ost - This includes the cost of transporting raw materials, stocks, finished products, and other necessary business input from/to a business location. It is necessary that a business location be close to its raw materials or services supply to reduce transportation costs. An example of this is the food processing industry, where business locations are usually close to the farm.

2. Demand factors

Demand factors affect services provided to your customers and your business revenue. These include:

Skilled labour - Businesses prefer locations where the right expertise can be found. An example is an M4 corridor in the UK which houses the majority of the UK technology sector.

Location suitability - Some businesses perform better in a certain environment. For example, in the hospitality sector, hotels are usually found in popular tourist attractions.

Customer ease - A business has to be located where its customers will have ease of access to its products or services. For example, a coffee shop creates ease through its location in the city centre.

Future expansion - A location that doesn’t provide the flexibility for future expansion might not provide a good business location. An example is a manufacturing business that has a lot of potential for growth and expansion. Choosing a larger venue in the beginning will give the business more flexibility to expand its facility later.

Importance of business location

Choosing the right business location is vital to business operations and success. Here are some key benefits of a good business location:

Attract and retain workers with the required skills and talent.

Provide a balance between business costs and business revenues.

Offer the necessary infrastructure for your business growth . These infrastructures include a good transport system, gas pipes, and road networks.

Position your business to fully benefit from government policies, grants, or loans.

Ensure the smooth running of your business operations.

Provide an ideal location to get enough traffic for your business or to keep your business confidential.

Business location strategy

A business location strategy is a plan used to find the best location for your business to reach its goals and objectives. A good business location strategy usually involves location analysis.

Business location analysis is a process wherein a business compares different locations' characteristics in order to select the most suitable location. Here is what is included in such an analysis:

1. Demographic analysis

This considers the population of a location. It takes into account the population's average age, age composition, income, skill level, education level, and occupation, as well as regional governance.

2. Location area analysis

This type of analysis considers the potential areas that will provide the most customers to your business. It also analyses the ease with which these customers can reach your business location.

3. Competition analysis

This examines the presence of competitors in the chosen business locations, especially in terms of strengths and weaknesses.

4. Traffic analysis

This analysis compares the number of people passing your different business locations during working hours. These include both automobile and foot traffic. The goal is to find a location that will provide your business with the greatest exposure.

5. Economics of location analysis

The analysis aims to reduce the cost of operations and investment for your business. Operational costs are those involved in the daily running of your business.

In conclusion, a good location is essential for the growth and success of your business. The ideal business location should provide the least risk, low operational costs, a big market presence, and less competition. It should also provide your business with advantages to help achieve your business goals.

Business location - Key takeaways

• A business location is defined as a place or structure occupied by a firm to run its operations. This includes any structure or establishment used in conducting a business.
• Business operational cost - the daily costs incurred to run your business

Target customers

Business location factors that influence the choice of a business location can be broadly grouped into:

A business location strategy is a plan used to find the best location for your business to reach its goals and objectives.

Business location analysis is a process wherein businesses compare different location characteristics in order to select the location best suited to your business.

1. Nithin Geereddy, Strategic Analysis Of Starbucks Corporation, Scholar Harvard Education, 2013.

2. Staff, 10 Reasons Why Location is Important in Business, rovva.com , 2022.

3. Staff, Factors to Consider When Choosing a Business Location , businesstown.com , 2022.

4. Matt D'Angelo, Tips on Choosing The Right Location for Your Business, businessnewsdaily.com , 2021.

5. Alex Saez, The Key Features of an E-Business, smallbusiness.chron.com , 2022.

Frequently Asked Questions about Business Location

--> what is a business location.

A business location is defined as a place or structure occupied by a firm to run its operations. This includes any structure or establishment used in conducting a business.  

--> Why is location important for a business?

Choosing the right business location is vital to business operations and success.  A good location helps to :

Attract and retain workers with the required skills and talent. 

Provide a balance between business costs and business revenues. 

Offer the necessary infrastructure for your business growth. These infrastructures include a good transport system, gas pipes, and road networks.  

Position your business to fully benefit from government policies, grants, or loans. 

Ensure the smooth running of your business operations. 

Provide an ideal location to get enough traffic for your business or to keep your business confidential. 

--> What is a good location for a business? 

A good business location aims to provide an advantage to your business by creating a balance of the following: 

--> What are factors to consider when locating a business? 

Business location factors that influence the choice of a business location can be broadly grouped into: 

Supply factors 

Demand factors 

The supply factors include labour, land cost, non-financial factors, energy cost, and transportation cost.

The demand factors include skilled labour, location sustainability, customer ease, and future expansion.

--> What are examples of good business location?

Starbucks places its coffee houses in high-street, high-visibility locations in various settings, including downtown and suburban areas. You can also find Starbucks in office buildings, university campuses, and off-street highway locations. 

Test your knowledge with multiple choice flashcards

Which of these is/are correct 

Skilled labour, _______, customer ease, and future expansion are examples of demand factors influencing business location choices. 

In the hospitality sector, hotels are usually found in popular tourist attractions. This is an example of which factor influences business location choices?

Your score:

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Define business location

Business location is defined as a place or structure occupied by a firm to run its operations. This includes any structure or establishment used in conducting a business. 

Market advantage provided by a good business location to businesses includes

Market advantages provided by good business location good business locations include - 

Reducing a business operational cost 

Boosting potential revenue that can be generated,

Bringing customers the business operations are targeting. 

Give three examples of good business locations 

Examples of good business locations include the M4 corridor for Technology business, a tourist attracting location for hospitality business, and a city centre for a coffee shop. 

What are the factors that influence choice of business location?

The factors include labour, future expansion, location sustainability, transportation cost, land cost, customer ease and energy cost. 

What do the demand factors examine?

Demand factors examine factors that affect services provided to your customers, and your business revenues.

Factors examined by the supply factor are?

Labour cost, energy cost, land cost, transportation cost, non-financial factors 

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• About MapBusinessOnline

The Impact of Geographic Location On Your Business

The ability to display imported data layers on a business map is a basic feature in any decent business mapping software . It’s also the primary benefit when you really think about it. Whether the location data you are importing is your own business data, a data set you’ve scraped from the web or data you;ve purchased, that data visualized against a map transforms its ability to inform you, your team, and your map sharing audience. In short, importing data onto a map expands your business awareness.

Address based or lat/lon based data import and visualization is better with Map Business Online for several key reasons:

• Data Imports are Easy & Fast – Press the import button find your data and go. There are a couple of stops along the way to deal with column associations and labels, but your data will be on the map in seconds. Even if it’s a large dataset. I challenge any other tool to import as much data as we do, faster.
• Map Business Online Allows up to 100,000 Records – No daily limits, no hidden controls, just wide-open data imports. Out of the thousands of customers we serve maybe a dozen want to import more than 100,000 records. And half of those are because users often don’t bother to clean and dedupe their data. If you have such a massive data requirement, we can try to advise. Contact us.
• Conduct Spatial Queries – Map Business Online makes it easy to query data inside of a map object (a circle or polygon), outside of that same map object, or to filter your data through data filtering. Data segmentation is a breeze.
• The Map Views are Compelling – Let’s face it, we’re Map Geeks. We love GIS and business mapping. Our maps are beautiful, accurate and include a variety of layer options. There are several base map options to choose from.
• You Can Heat Map – It’s easy to heat map your data. Heat maps are derived from a numeric column in your data. Simply click the Heat Map day glow target icon right in the middle of the toolbar.
• Symbolization and Color Shading – This is easy too. And you can import your own symbols. So, ladies, make Bradley Cooper your map icon if you want. We don’t care. Guys, go ahead import James Fenimore Cooper if it suits your map. Create large and small circles based on your data. Or use pie chart & bar chart symbolization.
• Map Sharing – Maps are for sharing and Map Business Online makes sharing wicked easy. Create static images, if that does the trick. But you can also share through interactive web maps or set-up collaborative map editing with individuals or teams. Remember, shared business maps drive accountability.
• Edit & Update – By adding a unique identifying column to your data you can make data updates a breeze. Edit data incrementally or set-up automatic updates from your desktop or network.
• SDK & API – For the programmers out there we’ve got database access tools that can enable application to application data feeds. Have someone who understands SD’s & API’s contact us. (API use requires a team subscription.)

Add to this list all of the other features in Map Business Online – like advanced territory mapping , our market analysis tool, optimized multi-stop vehicle routing , draw tools and the premium map layers – and your business may just become addicted to Map Business Online.

Business data provided by www.RealZips.com

Businesses use Map Business Online data visualization tools to visually understand things. Examples of visual comprehension are:

• Competitor maps – Understand where your competitors are playing because they are probably not just playing.
• Expansion plans – Visualize information about customers, area demographics, and businesses.
• Customer maps – Understand where your customers are located and where they are not located. This can help businesses determine what you are doing right and perhaps what you may be doing wrong.
• Operational coverages – What your businesses capabilities are and where they are effective.
• Staffing maps – Who’s on first? What’s on second? Don’t let chaos rule your field force. Let maps identify who is required where today.
• Resource planning – Where are all my bill boards? Where are all my antique stores? Where are all my ATM’s?  Where are all my car sales?  Where are all my storage facilities? Where are all my rented machines? Get the picture?
• Prospect maps –   Imported dataset of potential customers can be a real eye-opener, especially when overlaid on existing customers and competitor locations.
• Sales responsibility – Share sales territory maps with your team to drive accountability. Maps are real-good at emphasizing who’s responsible for what accounts.
• Strategic planning – Business maps collect and define trends and bottlenecks in your business. They provide situational awareness. Use them for planning.

Visualize data related to your business. How many successful large retailers ignore the impact of geographic location on their business? Try none. Understand the impact. Now.

Find out why over 25,000 business users log into www.MapBusinessOnline.com for their business mapping software and advanced sales territory mapping solution.

Contact: Geoffrey Ives [email protected] or Jason Henderson [email protected] (800) 425-9035

MapPoint users please consider www.MapBusinessOnline.com as your MapPoint Replacement .

Please read customer reviews or review us at Capterra , G2Crowd (LinkedIn connected), or at the Salesforce.com AppExchange .

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