Let’s face it, not everyone has an analyst on staff. But does that mean that you can’t use some solid techniques to better understand the various dynamics of your various locations? Of course not!
Profiling is a term used to describe the method by which we find commonalities between people, objects or places. Being able to profile helps you make calculated decisions on potential opportunities.
Unfortunately, profiling, which a means of correlating various data points between two or more objects does not equate to predicting outcomes. In truth, you may find a strong correlation between seemingly unrelated items but just because they appear together in your analysis does not mean that you can use those characteristics to predict an outcome. For example, just because two areas both have a higher than average concentration of a particular demographic — say, Asian Women ages 18-34 — you can’t assume that that particular variable accounts for the variation in sales in a territory. Correlation is not causation — as any good statistician will tell you.
So what good is profiling?
Profiling is akin to “fishing where the fish are.” The idea is that you use what you know about your current locations to form a blueprint for other areas that have similar potential. If your top locations do well in areas with high traffic counts, high daytime population and sales drop off at the end of the work day — you would use those characteristics to help you find other locations with similar profiles.
Predictive Profiling takes those characteristics that are highly correlated with success and creates rules or models that weight each of the characteristics as they relate to a measured outcome — for example: gross receipts. Using a model — the characteristics can predict potential outcome.
The problem however, is that nothing in future is as predictable as the past. And in retail, there are many variables that are difficult to measure (e.g. talent of managers, team cohesion.) That said though, it’s better to start with the obvious physical characteristics that you can measure and then tweak the elements that have less to do with site specifics than staffing.
Profiling can be as simple or as complicated as you wish to make it.
The technique below is one method that can be used to determine at a glance:
- How similar current locations are relative to each other
- How similar proposed locations are to a known location
- How relevant physical characteristics of the main trade area are relative to sales
What’s the magic formula? It’s a simple calculation called an index. To create an index you need to create a spreadsheet with columns of data that you wish to analyze.