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Expert Answers to Biz Questions

Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

color business bar

The Biz Question

What's the best way to find out if the business you're thinking about starting (Coffee Bar) will work in the area you live in, demographic-wise? How do you check to see if the population would use your services? There are plenty of Dunkin Donuts, etc. around. Mine would be specialty blends though. Any suggestions?

Robin

Answer from our Guest Expert Kent Capener of Capener Consulting

Dear Robin:

Good question! But when it comes to demographics and marketing, there's really no "best way" answer. Marketing has too many ingredients. In fact, unless you're in a unique situation, it's nearly impossible to determine with 100 percent certainty that any new biz will work.

But hey! All is not lost! You're right on the money to begin your biz idea with an assessment of your market. Let's get started on working with demographics.

What Are Demographics Anyway?

Simply put, demographics break down society by categories -- such as gender, age groups, education levels, household incomes and expenditures, and home ownership, to name a few.

The good news is obtaining demographic information for any market is relatively easy. Two government websites to start with are:

  • U.S. Census Bureau at http://www.census.gov
  • U.S. Bureau of Labor Statistics at http://www.stats.bls.gov

You can also head down to your local library for demographic reference material, and maybe even some local census information. Your local chamber of commerce may have some demographic information readily available to you as a new biz start-up. Be sure to check these resources out.

When you begin to gather demographic data, try to get an understanding of the make up of your geographical market or your trading area. Or, in other words, the distance that anyone will likely drive to spend money at your biz. Ask yourself, "Will somebody drive five miles to buy my gourmet coffee and by pass all those donut places on the way?"

Go Psycho!

Demographics, however, don't cut the mustard when it comes to helping you determine people's buying habits and whether they'll come to you or not. To get a better fix on buying habits, you'll want to research your market's psychographics. (No, I'm not talking about drawings by the mentally ill!) Psychographics are the lifestyle quirks of a target market -- such as hobbies, preferences, or social groups. These lifestyle characteristics help tell you the best way to appeal to your prospective customers -- and to get them to pass by Dunkin' Donuts and head over to your coffee bar!

If You Build it, Will They Come and Spend?

This is the $64,000 question for you, Robin. But how do you learn the buying habits of your market, or in your case, the trading area of the proposed up-scale coffee bar?

Your biz choice is helpful because there's a strong "coffee trend" sweeping the country for specialty/gourmet coffee.This market (and our consumption) for specialty coffee grew as our prosperity grew. Not long ago, it was "Hey Buddy, can you spare a dime for a cup of coffee?" On the eve of the new millennium, it's, "Hey Dude, got Five for a Cappuccino?"

If you've selected a location -- and the area within say three miles in all directions is populated by people who's household incomes and disposable income are low -- the chances aren't too perky for your coffee bar biz.On the other hand, if the same area is populated by people who's household incomes and disposable income are high, then your chances are quite good. These are visible psychographics.

If you haven't selected a location -- and "coffee trend" hasn't yet generated a stampede of coffee lovers in your area -- then nuzzle your way into those high disposable income areas. And do it with flair and as much visibility as possible.

If the "coffee trend" has arrived, still nuzzle as close as possible to the disposable income, but be sure to check out in detail what the competition's doing and see how your new biz would compare and fare.

Getting the Pyscho and Demo Goods for Your Market

How's that done? Spy! Put on your best pair of sunglasses and watch coffee customers come and go. Make mental notes on who orders what. How do they act about their cup of Joe? What do they drive? A lot can be learned about people by watching them -- both demographically and psychographically. With enough snooping, determine a set pattern and you have what's called a "customer profile".

One More "Graphic"

One other "graphic" to consider is what I call "traffigraphics". This means to locate your coffee bar where those prospective customers can see you. Make your locale convenient for them to do biz with you . Can they make that left turn easy? Does that traffic light mess things up? Does your biz go with or against the prevailing traffic patterns? Knowing about this "graphic" might help you get those clients comin' your way.

In a Nutshell

Compare your customer profiles (psychographics) to the demographic data and determine the market size from the comparison. Factor in your traffigraphics. If your crystal ball says, "Yes, there's a market! Go for it!" You'll have the beginning -- the biz appetizer you're after.

Hope this Helps!

Kent

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