Consumer Segmentation for New Restaurant Concept
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1 Consumer Segmentation for New Restaurant Concept This is a summary report prepared for a new restaurant concept prior to their planned direct mail marketing campaign. The analysis serves as a benchmark for consumer segmentation profiling, micro-targeting consumer markets by zip code, consumer expenditures relative to potential restaurant sales, and new store sales forecasting. The analysis is used in combination with examination of unstructured data regarding consumer attitudes, tastes, and preferences toward the restaurant concept (i.e., Facebook, Yelp, Urban Spoon, TripAdvisor, etc.) 2015 Hoffman Strategy Group
2 Sample of Work Product, 2015 Re: Targeted household profiles for direct mail marketing and trade area expenditures This is a summary report prepared for a Restaurant Concept prior to a planned direct mail marketing campaign. The report provides the following information to support that campaign. Location of Ideal Consumer Profile In our conversations, two consumer profiles were discussed for purposes of targeting new customer growth and retention of existing customers. Generally, the two profiles include a young family household population between 24 and 44 and a mature family household population 55 years of age and older. We have mapped customer profiles by zip code using Mosaic lifestyle segmentation system. Trade Area Restaurant Expenditures For full-service restaurants within a 10-minute drive time of the Restaurant Concept location at 2015 Culinary Avenue, we have estimated total consumer expenditures and have allocated those expenditures on food away from home by meal times (i.e., breakfast, lunch, and dinner). Outside the scope of analysis is the estimated forecasting of sales revenue. The analysis provided in this report may serve as a benchmark for additional consumer profiling and target marketing, trade area analysis, and store sales forecasting. We can also use this as a baseline to examine unstructured data (i.e., Twitter, Facebook, Yelp, Urban Spoon, TripAdvisor, etc.) regarding consumer attitudes toward Restaurant Concept.
3 Restaurant Report on Targeted Consumer Profile Summary Restaurant Concept s 2015 Culinary Avenue store location draws customers primarily from a 10-minute drive time. Residents living in this trade area spend a total of $78,432,759 at fullservice restaurants (NAICS 7221) and another $89,299,493 at limited-service or fast food eating place (NAICS 7222). The Mosaic household distribution in this 10-minute drive time trade area is predominantly composed of three lifestyle clusters. These are: Booming with Confidence (5,043 households) Prosperous, established couples in their peak earning years and approaching retirement living in suburban homes. As consumers, tend to have sophisticated tastes and like to spend on nightlife, going to plays, concerts, movies and restaurants. Flourishing Families (4,597 households) Affluent, middle-aged families and couples earning prosperous incomes and living very comfortable, active lifestyles. Most of the adults are married, in their 30s and 40s and college-educated. As consumers, the parents get me-time while dining out, going to movies and enjoying cultural offerings like plays and classical concerts. Power Elite (3,765 households) Platinum Prosperity and Picture Perfect Families are the two sub-clusters within the Power Elite segmentation group. Generally, these are among the wealthiest households in the US, living in exclusive neighborhoods (e.g., Firethorn), and enjoying all that life has to offer. As consumers, they have regal tastes. They re philanthropic supporters of the arts who go to plays, classical music concerts, dance performances, and museums. They re free to go out to dinner often. The summary lifestyle segmentation profile provides target marketing strategies. For example, Booming with Confidence, Flourishing Families, and Power Elite households enjoy plays, cultural offerings, and dining out. This may mean target cultural market channels such as ads in the Lied Center for the Performing Arts concert series flyers, provide a food booth at Jazz in June, and engage in cross-channel social media targeting. Where these dominant lifestyle segments are located is addressed in the next report section.
4 Restaurant Report on Targeted Consumer Profile Ideal Consumer Profile Restaurant Concept has generally targeted two consumer lifestyle profiles for new customer growth and retention of existing customers. Generally, the two profiles include a young family household population between 24 and 44 and a mature family household population 55 years of age and older. In our analysis of households within a 10-minute drive time trade, we have determined that the closest fitting Mosaic lifestyle profile groups and their sub-clusters are described in the following table. 10-Minute Drive Time Trade Area Dominant Consumer Lifestyle Segmentation Profiles Mosaic Group Cluster Description How They Live Their Lives Dominant Zip Code(s) Booming w/ Confidence (5,043 HH) Aging of Aquarius (3,387 HH) Upscale empty-nesting couples between 50 and 65, and more than 80% have no children at home. They earn high incomes. Frequent the theater, museums, classical music concerts. Enjoy golf, yoga, boating, gardening, cooking. Especially enjoy dining out Flourishing Families (4,597 HH) Babies & Bliss and Family Fun-tastic (3,379 HH) Parents in their 30s and 40s with large families and active lives in affluent suburbia. Child-centered lifestyle parks, zoos, museums, aquariums, and team sports. Parents frequent restaurants, concerts, movies Power Elite (3,765 HH) Platinum Prosperity (1,528 HH) Picture Perfect Families (1,260 HH) Wealth and established empty-nesting couples living in suburban and intown homes. Established families of child-rearing households living in wealthy suburbs. Parents in mid-30s through 50s. Make time for cultured and athletic pursuits. Go to theaters, museums, dance performances and concerts particularly jazz and classical music. Attend sporting events. Cultured sensibilities with high rates for going to theaters, concerts, museums. Lead active lifestyles swimming, tennis, skiing, horseback riding. Attend sporting events and enjoy elaborate tailgate parties The descriptions provided in the above table may be used to prepare strategic target marketing campaigns. For example, common venues among the consumer segmentations include cultural and sporting events. This includes the Lied Center for Performing Arts, Jazz in June concert series, Children s Museum, Lincoln Children s Zoo and the Henry Doorley Zoo in Omaha, Pinnacle Bank Arena, tailgates at Husker football games, Hi Mark and Firethorn golf courses, and Lincoln YMCA youth sports leagues are among an array of places that offer targeted marketing campaign opportunities.
5 Restaurant Report on Targeted Consumer Profile The following maps contain the households that best fit these consumer lifestyle segments by dominant zip codes. These are presented to visually illustrate the targeted households for direct mail marketing. Booming with Confidence households (5,043) predominantly reside in zip codes 68526, 68516, and
6 Restaurant Report on Targeted Consumer Profile Flourishing Families households (4,597) are distributed in two zip codes held in common with Booming with Confidence Households: and The additional zip codes and are presented because this household segment contains more variation in income levels associated with a younger population.
7 Restaurant Report on Targeted Consumer Profile Power Elite households (3,765) are predominantly concentrated in the zip code. Two zip codes that exceed the city limits for Lincoln and are not part of this map are and These should be included in the targeted direct mail campaign because Power Elite is the dominant household lifestyle segment in each zip code: 542 HH (68523) and 470 HH (68520). This is addressed in the next map and a table of household profiles by zip code.
8 Restaurant Report on Targeted Consumer Profile A targeted direct mail marketing campaign would reach 37,037 total households located in the zip codes of 68506, 68512, 68516, 68520, 68523, and Of that, 22,537 are households that fit Restaurant Concept s targeted lifestyle segmentation. That represents 60.8 percent of targeted households.
9 Restaurant Report on Targeted Consumer Profile The table below provides household counts by lifestyle segmentation profile for each targeted zip code. Household Count by Zip Code for Direct Mail Marketing Campaign Zip Code Booming w/ Confidence Flourishing Families Power Elite Sub Total Total % ,219 1, ,293 12, % , ,746 4, % ,469 6, ,621 16, % % % , ,865 1, % Total 9,657 10,202 2,678 22,537 37, % Direct mail marketing campaign strategy is beyond the scope of this report. However, the table above may be used to support a phased marketing campaign and/or a narrowly targeted campaign based on either household segmentation counts or zip codes or some combination. For example, a campaign may target Flourishing Families for a period of 90-days. That would account for 10,202 households across the six identified zip codes. This strategy would require household targeting and the extraction of mailing addresses at the block group level. While Hoffman Strategy Group can identify those households and provide mapping at this granular level, it is beyond the scope of this report. A 90-day campaign may focus on households in the zip code wherein 77.2 percent are composed of the targeted lifestyle segmentations. While a broad direct mail piece would be sent to 16,354 households, this zip code contains a high proportion of targeted lifestyle segmentation profiles. Using this analysis to guide direct mail marketing should be discussed with Restaurant Concept s marketing consultant and the third-party address list source.
10 Restaurant Report on Targeted Consumer Profile Trade Area A store trade area geographic determination is necessary to measure consumer expenditures on restaurants. We have defined Restaurant Concept s trade area according to a 10-minute drive time using the 2015 Culinary Avenue location as the centroid. This approximates a 3-mile radius. The radius is not used because sales performance of and site location for retail stores and restaurants is largely dependent on traffic volumes (i.e., vehicle and/or pedestrian). Trade areas based on drive times are more predictive of consumer expenditure estimates; whereas, expenditures tend to be under-estimated using a radius-defined trade area. Restaurant Concept s trade area is presented in the following map.
11 Restaurant Report on Targeted Consumer Profile Residential Consumer Expenditures on Full-Service Restaurants (NAICS 7221) We estimated consumer expenditures on full-service restaurants by residents living within the 10-minute drive time trade area. Spending estimates on full-service restaurants by the targeted household segments in the targeted zip codes by lifestyle segmentation profiles are provided as a consumer submarket in a separate table. Estimated Consumer Expenditures on Full-Service Restaurants (2014) Trade Area Consumer Expenditures Retail Sales Gap/Surplus 10-Minutes $78,432,759 $78,725,149 ($292,390) 2014 Estimates 2019 Forecasts % Change Breakfast $5,140,000 $5,510, % Lunch $14,682,000 $15,914, % Dinner $34,171,000 $37,768, % Due to the use of different data sources for consumer spending by NAICS code and consumer spending on food away from home by type (i.e., breakfast, lunch, and dinner), the totals will not equal. On the demand side, consumers resident to the trade area spend an estimated $78,432,759 on full-service restaurants (NAICS 7221). Restaurant Concept is in this business category. On the supply side, restaurant sales of $78,725,149 are greater than residential consumer expenditures. The trade area pulls in consumers that are not living within the trade area. This signifies a market surplus of $292,390 which means Restaurant Concept s trade area is highly competitive. The consumer submarket spending estimates on full-service restaurants are provided in the table below.
12 Restaurant Report on Targeted Consumer Profile Submarket Estimated Consumer Spending on Full-Service Restaurants (2014) Zip Code Breakfast Lunch Dinner Wine Sub Total $2,707,233 $9,607,592 $13,905,078 $283,503 $26,503, $1,057,891 $4,460,139 $6,509,619 $134,173 $12,161, $3,685,374 $15,879,407 $23,093,974 $493,891 $43,152, $140,462 $546,109 $816,303 $20,922 $1,523, $136,476 $589,214 $846,815 $21,832 $1,594, $433,806 $1,980,062 $2,878,835 $61,833 $5,354,535 Total $8,161,242 $33,062,521 $48,050,623 $1,016,154 $90,290,540 The consumer spending sub-total of $90,290,540 being greater than the consumer spending within the 10-minute trade area of $78,432,759 is attributed to two zip codes not being included in the trade area spending estimates: and Consumers residing in these two zip codes increase restaurant spending by an estimated $11,857,781. Note, too, that the average household annual average spending on food away from home increases in the more affluent zip codes. Submarket Average HH Annual Average Spending on Food (2014) Zip Code Breakfast Lunch Dinner Wine Sub Total Median Age Median HH Income $211 $750 $1,086 $22 $2, $53, $216 $909 $1,327 $27 $2, $66, $225 $971 $1,412 $30 $2, $76, $253 $982 $1,468 $38 $2, $86, $252 $1,087 $1,562 $40 $2, $97, $231 $1,055 $1,535 $33 $2, $88,017 Average $231 $959 $1,398 $32 $2,621 For example, consumers living in the zip code spend nearly twice as much (1.8 times) on wine in restaurants than consumers in the zip code. They also spend 1.4 times more on dinner, annually, than consumers in the zip code. This is why we simultaneously evaluate two trade area types: 1. Drive-time trade area based on natural traffic patterns; and
13 Restaurant Report on Targeted Consumer Profile 2. Trade area spending potential determined by the location of households targeted by lifestyle segmentation profiles. By picking up two zip codes outside the 10-minute drive time trade area, Restaurant Concept is able to target these households via omni-channel marketing strategies. This is worthwhile for two principal reasons: 1. These two zip codes (68520 and 68523) add over $11.8 million in restaurant sales potential. 2. Restaurant Concept is located in a highly competitive restaurant market as defined by a 10-minute drive time trade area. To be competitive long term, Restaurant Concept will need to attract consumers from outside this trade area through a differentiated brand and marketing strategy.
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