Research: Demographics and Location, Part 2

In my last post, I wrote about how I used a free online tool from Nielsen to research basic demographic information for potential taphouse locations.  Today I want to show how I used another free online tool to gather more detailed information about the same locations.

King County Library System

Because I am a resident of King County here in beautiful Washington State, I have access to the King County Library System.  If you are a resident of King County and are considering starting a business, run out and get yourself a library card if you don’t already have one.  Online, you can verify that you are in the KCLS service area and apply for a card, though you’ll obtain your card faster if you go into a KCLS location and fill out an application in-person.  Many of the research tools provided by the library system are not really affordable for individuals and small businesses, so kudos to KCLS for buying subscriptions and making them available to their patrons online!

If you are not within the KCLS service area, check with the library systems in your area to see if they offer SimplyMap or other similar products.

On the KCLS home page, I scrolled down and clicked on the “Databases” link found under the “Browse for…” header.  On the next page, I selected the link for “Business, Economics & Investing”.  There are a number of databases available here.  KCLS provides YouTube videos to help you use of some of these tools.  I selected the link for SimplyMap.

There was a learning curve with SimplyMap, but the YouTube video helped a lot.  I started by selecting a location.  Here is the list of locations I researched in my last post:

  • 98001 (Auburn)
  • 98002 (Auburn)
  • 98092 (Auburn)
  • 98010 (Black Diamond)
  • 98038 (Maple Valley)
  • 98042 (Maple Valley)
  • 98027 (Issaquah)
  • 98029 (Issaquah)

I clicked on the “Locations” tab, then selected “Find location by: Zip Codes” and entered the first zip from the list, 98001, then clicked the “Use this location” button.  A little box popped up at the bottom of the screen to let me know that the location was selected, but otherwise I couldn’t tell that I had accomplished anything.

Next I clicked on the “Variables” tab.  This is where I got to pick from some awesome data sets.  One of the categories listed is Consumer Expenditure — how much money people spend on things.  That sounded like something I’d like to know, so I selected it.  Then it prompted me for a “Folder”, so I selected 2010 to get the most recent map data.  The list for 2010 expanded to offer about a dozen industry types.  I chose “Food”, because it seemed to most closely match my business.  Food expanded into three subcategories, one of which was “Alcoholic Beverages”.  That expanded into two more categories, from which I selected “Away from Home”.  Finally, an actual list of variables appeared, one of which was “Beer and ale away (Household Average)”.  That sounds like some good data to me, so I selected it.  Another little box popped up at the bottom of the screen, but otherwise nothing changed.

SimplyMap - 98001 Beer Away %

There must be a better way to display this information.

It took me a while to realize that, in the background, the map had populated with the information I requested.  To actually see the map I had to close the window I’d been using to select the location and variable.  The resulting map was fugly to look at. I could have tweaked the colors in the tool if I wanted to pretty it up.  From here it was just a matter of associating the color of the zip code with the numbers in the legend, which in this case reads “52.76 – 55.22”.  Unfortunately, I have no idea what those numbers mean!

I poked around in the help and did some searching online, but I was unable to find anything to help me clarify exactly what this data means.  If you know, please leave a comment.  Because the numbers in the legend range from 0 – 100, I assumed they represent percentages. So, approximately 54% of households in the zip code 98001 went out and had a beer in the past year?  That’s what we’ll say until someone tells me otherwise.

Beer and ale away %

New column on the sheet: Beer and Ale Away %

I recorded the data for the rest of my target zip codes and stepped back for a look.  It didn’t actually go into the level of detail that I had hoped, but one thing did stand out:  Auburn looks like an even worse option than it did before.  Not only do the Auburn zip codes have lower incomes and lower spending, but when they do spend their money it doesn’t seem to be on beer.  Conversely, Maple Valley and Issaquah have beer spending habits at the top of the range.

The other variable I wanted to look at was how much money these potential customers typically spent on beer.  These numbers were even less telling.

demographics - by zip code xls - beer and ale away $

New column on the sheet: Beer and Ale Away $

Fortunately the map can be broken down into smaller chunks called block groups, and by looking at that data I can identify areas within the zip code that spend more on beer.  Theoretically, these areas are where I should be looking to locate the taphouse.

After some fiddling around, I was able to create custom locations in SimplyMap that grouped together my common zip codes.  This pic shows the block groups within the highlighted 98010, 98038 and 98042 zip codes, and the amount of money they spent on beer away from home.

SimplyMap - Maple Valley Beer Away $

This view shows better detail about who is spending the most money on beer.

There is a lot more data available here. In my next post I’ll be looking closer at the buying habits of my target markets.

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Research: Demographics and Location

In my last post, I wrote about my experience researching competition for my proposed taphouse.  I did the research at the behest of my advisers at the Small Business Assistance Center and they didn’t steer me wrong.  In the process, I learned a great deal about my customers and what my competition is doing to attract them.

Next, I wanted to learn more about where I should locate the taphouse.  Until recently, my plan was to find something in downtown Auburn, but I decided that as long as I’m starting over from scratch I should also open myself to the idea of doing business elsewhere.  What do they say about what makes a business successful?  Location, location, location?  Well, that may not truly be what they say, but the sentiment is spot-on.  An otherwise great business in a poor location may never reach its potential.

To start, I looked at a few basic statistics for a number of zip codes immediately around my own.  I used a free tool provided by Nielsen, the same company responsible for TV viewership ratings.  Enter the zip code for the area of interest and you get a quick snapshot of demographic data.

Neilsen Data for 98092

More data!

I chose to examine a few specific details:

  • Population, which gives me an idea of how many potential customers live in the target area.
  • Median income, which gives me an idea of how much discretionary income these potential customers might have to work with.
  • Per-household spending, which gives me a good idea of how much money these potential customers tend to spend.

I selected the following markets:

  • 98001 (Auburn)
  • 98002 (Auburn)
  • 98092 (Auburn)
  • 98010 (Black Diamond)
  • 98038 (Maple Valley)
  • 98042 (Maple Valley)
  • 98027 (Issaquah)
  • 98029 (Issaquah)

I chose these markets for the following reasons: 1) They are close to my home, 2) They are areas I expect to have income and spending levels that will support a luxury business, and 3) They are areas I think have market space for a taphouse.  Arguably, I’ve left off a few good potential zip codes and a couple of good data points.  The good news is I can easily do this analysis again with any other zip code or data point.

Nielsen demographics by zip code XLS

Numbers and colors. This must be important.

As I did with my competition research, I created a spreadsheet to help me track and compare the data.  Using colors, I grouped the results into “neighborhoods” that make up a common market.  There’s one color each for Auburn, Maple Valley/Black Diamond, and Issaquah.

Looking at these numbers, the Issaquah and Maple Valley markets stand out as having the best overall demographics: Issaquah has the highest per-household spending and median income, and Maple Valley has the highest population but only slightly lower per-household spending.  Auburn, unfortunately for me as a hometown supporter, doesn’t pan out as well for a luxury market–there are more people, but significantly lower income and spending.

In my next post, I’ll discuss another online tool, SimplyMap, that helps me understand my demographics in different detail.

Research: The Competition

In my last post, I wrote about restarting the start-up process for the business I want to open.  First I wanted to open a brewery, but now I want to open a taphouse.  Dreaming up these businesses was the easy part, but understanding what to do next was less clear.  My instant gratification personality told me to go find a location, but my advisers steered me in a different direction.

One of the first things to do, they said, was to get to know my competition. As an avid beer drinker, I already have a good idea of which businesses I’ll be competing against, so I put a few of their names down on paper:

There are hundreds of pubs, taverns, bars and restaurants around me, so why did I choose these particular ones?  1) They offer products and services similar to what I want to offer. 2) They are geographically situated near locations I’m considering.  3) They have proven to be popular with customers.  4) I have been a repeat customer at each of these businesses.

I entered the business name and city into Yelp’s search engine and examined the results.  In addition to reviews, Yelp provides basic information that a customer would want to know, like business hours and amenities, so I built out a template in Excel to keep track of some of the common information I wanted to compare.

Competitors Template

I love data!

Qualities List

Whoa.

Then I plugged through every review for every competitor on the list and I recorded each time a quality was mentioned positively or negatively.  I built the list as I went along and the template filled out substantially.

Tallying reviewer comments took some time, because you often have to interpret what someone is trying to say and tie it to a specific label.  Certainly, it’s not a scientific process, but I’m sure some marketing company somewhere has turned it into one.

Many of these qualities were common to all of the competition, but some were specific to one business.  Finding unique qualities and quantifying the number of people who talked about those qualities really helped me understand the identity (or story, as a marketer might call it) of that business. It also became clear very quickly which common qualities, like friendly and attentive service, customers look for in their pubs.

competitors - data

Lots of pretty numbers.

Using this template, I can move on to profile businesses within a more specific geographic location, or ones that have not met their customers’ expectations, or ones that share the same “unique quality”, all of which can help me better understand how I might be more successful with my own business.

What I Learned

A few clear facts emerged during this first run at competition comparison: 1) People expect pub food at a pub, and having good pub food means they are more likely to come back.  2) If you’re going to serve food, people really notice if you also offer vegan, vegetarian and gluten-free options.  3) People will come back if they feel they are getting a good value.  4) People want to have entertainment options.

I suppose none of this should come as a surprise, but it changed my thinking about a number of things:

I didn’t want to open with an in-house kitchen, but now I’ve heard it loud and clear: People expect to have food with their beer.  I knew this, really, but my answer was to locate in an area where there were plenty of take-out options from restaurants nearby.  These kind of off-site food arrangements seem to be awkward for the customer, though, and I would sacrifice a lot of potential revenue if I wasn’t providing the food, myself.  If John Taffer is right, customers are likely to spend 52 minutes more in my taphouse if I have food available.  So, in addition to profit on the food, that would typically include another beer.

I was blown away by the number of comments related to diet-specific concerns.  I should understand this because, hey, I’m lactose intolerant.  I tend to avoid certain menu items when I eat out, so why wouldn’t someone else do the same?  My real takeaway from this, however, is that having good and plentiful diet-specific options really makes you stand out.

One business in particular received props again and again for the value they provided.  Their food is cheap and easy to prepare, which allows the business to keep prices low. The tantalizing preparation options really engage the customer and encourage them to come back for more, which they will because it’s such a great value!  This will be a challenge for me:  How can I create a similar value?

Dartboard

Entertain me.

Finally, people want to have entertainment options at the pub.  Originally, I envisioned a quiet place with nooks and crannies for people to tuck themselves away with a book or a tablet or for a quiet conversation.  Well… that’s what I would want, but I think I saw maybe one comment about how great it was to be left alone in a bar.  Instead, dozens of reviewers talked about shuffleboard, pinball, pool, darts, TV and movies.  “I loved that we could play a game of Boggle!” said no one, ever, apparently.

And that’s a perfect example of why research is important — it encourages you to compare your expectations against real data.  What you like isn’t necessarily what will sell.  Your niche may not be much of a niche.  Your target market might not be what you think it is.

Next up: Where should I set up shop?

Where to Begin?

Over the past couple of weeks I’ve been particularly focused on my business.  Recently, I made the decision to change course, and because that means starting the “start-up” process over again, I thought I’d make a better effort at blogging about what I’m doing.

Maze

This is what starting a business can look like from a high level.

When I first met with them, the Small Business Assistance Center provided me with a basic map for the start-up process.  From a very high level they break it down into nine stages:  1) Concept, 2) Research, 3) Planning, 4) Protection, 5) Funding, 6) Start Up, 7) First Mile, 8) Growth, 9) Profit!

The first step, your concept, should be the easy part because all you have to do is conceptualize what you want.  Presumably, you’ve already been doing that.  Until recently, I wanted to open a brewery (I still do), but today I’m envisioning a taphouse with many, many more beers than just my own.  I see two dozen taps, top-notch service staff, and a physical space that encourages customers to settle in for a couple of drinks.

It’s fun to play around in the concept stage and dream many dreams, but at some point you have to act or the dreams will go nowhere.  Once you have an idea of what you want to do, it’s time to do some research.  Kirk Davis from the SBAC says that this is a step that many new business owners overlook or don’t appreciate enough.  I was one of those.  I wanted to go from the concept stage to the planning stage to the start up stage, but it’s simply not effective to try to do that.  In my next article, I’ll talk about what kind of research I’m doing and what I’ve discovered so far.