If the mountain will not come to Muhammad then Muhammad must go to the mountain

-Francis Bacon.

For a business to be successful, either the customers should come to the business or business should go to the customers. The topic examines how the interplay of customers and market at a location.

The diagram above suggests the different ways in which the customers and the market can coexist.

In the X axis we have a paradigm where customers don't exist on the left moving to the right customers exist, and then the Y dimension remove from market doesn't exist at the bottom to Market exists at the top.

The key point to note here is that business and customers should come together for a transaction to take place. The model suggests 4 ways in which customers and market can coexist.

1. Transitional

the market exists and the customers don't exist is akin to petrol stations on a long drive, midway restaurants, and tourist locations. The traffic or customers in such locations is brought by driving them through.

It's perhaps I'm taking a very purist point of view in saying all the customers in an area of tourists who are just passing through. The customers are not co-located with the markets they are simply passing through or visiting briefly from other parts of the planet.

Over time these hubs continue to bring customers from all around and gradually local population builds (settles) into the area which may in turn become the consumer of products and services do not necessarily in a very large way.

A very good example here would be Disneyland, or Gold Coast in Australia which offers Movie World Dreamworld, Wet and Wild World and similar services to the world and people tend to travel to that area to enjoy activities

Transportation network holds the key to business opportunity on how traffic is created and moves. As a business you need to understand and measure the flow and take advantage of opportunity it brings. It is also important to note how transport network it gets established, how people move from work to home and vice versa so they can identify clusters where people are living, working or areas where they're passing through to understand better on how the transportation impacts a given business.

If you are delivering products like grocery to a physical location, then you need to be mindful of who pays the cost of delivery (or responsible for pick up),

Though new models are emerging rapidly, understanding them well can impact the bottom line. If you are exploring online order and physical delivery, you must note that Amazon is currently trialling a system which will deliver within 30 minutes of placing the order even in remote locations using drones. The best way you can beat that is by differentiating your products or services enough to be desirable and making sure your secret sauce is not replicable.

We need to look at the rail network, road network, air network, sea networking foot travel opportunities around the business to establish how the customers are coming when they're coming and what are the motivations to buy.

As we know that most of the cities of got established around water and different cities have got different shapes. For example, Venice, it looks like fish, Delhi has got radial arrangement New York Manhattan are quadrangles. You can also have parallel system, of roads loop system of roads fish bone, serpent tree networks. Transportation networks are not only lifelines of an economy they are lifelines for any given business. You should be mindful of that around your business.

Foot traffic is one of the less analyzed, but very well understood key criteria for impulsive buying that happens in retail and don't get me wrong, the ticket size does not have to be small. The impulsive purchase can also happen when cost of products run in tens or hundreds of thousands of dollars. People who hang out to cause foot traffic on such streets do attaract a higher rent. It is just that impulsive buying as a behavior means that somebody is passing by, there is a goods or an item available on the shelf and customer is enticed to acquire that.

So the focus is more on immediate gratification thus the more the number “right” people, the greater the visibility and the bigger than number of buyers example in this case can be taken as ice cream shops. Whenever kids see ice cream, they would like to get one. For similar reasons Most of the McDonalds are located in high foot traffic area or high pass through regular traffic area, with golden arches increasing the visibility.

If you are looking clues how you can measure foot traffic in a business, I must suggest that Google records the MAC addresses of the mobile phones and computers in an area and it keeps track of the number of units that are moving within an area at a given point in time and that in turn results into the traffic volume, though the absolute figures are not given, the relative figures are available. So if you run a Google search on any business, you may be able to find foot traffic information relatively easily.,

Street buskers they use similar mechanism. To leverage the foot traffic in an area they usually go and park themselves first where there is reasonable amount of foot traffic. They entice people to come close to them. They increase the visibility and engage with the higher visibility customer who may be keenly looking sideways. The show must then begin to keep the engagement or the gathering walks off.

To have more people through the busines, you need to have a greater visibility to the “right” customer. Then they you need to have a greater engagement to entice them and that's when you have a greater probability of high volume and high value transactions occurring.

2. Centralised and competitive:

In this case a competitive environment exist as our customers as well as markets trying to reach out at the same time, like in a central business district.

Busineses offering customers similar or identical products or services and customers seeking similar products and then comparing on number of parameters including service levels and price.

Competition brings out the best in us. And likewise, it does to the business. Understanding competitive intensity is vital for business success. High competitive intensity is good when business is colocated and makes the total attaraction of an area higher to pull customers from a greater distance away. Hubs or market clusters⁠1 offering a specific niche start forming. Shopping Towns is one of the example, where a lot of shops, that may be doing similar sort of business and at times competing are co located.

The current practice in the market is to rank businesses based on revenue. This is also taken in consideration while making investment or exist decsisions. It is prudent to add another dimention of potential based on the market it serves. This will require an understanding of the location of business and its immediate catchment. The business may continue to perform in ideal situations. If they are not performing well in high potential areas they can be improved by redesign.

Bueinsses in low potential and low income category needs exit from the market. The business which demonstrates low potential but is demonstrating high income, though it needs to be studied in depth, a better outcome is achieved if it is harvested to the maximum.

3. Markets don't exist but the customers do exist:

The challenge here maybe that the number of customers a small or sporadic in terms of their preferences which prevents a physical outlet to be sustainable the opportunity here is ripe for a delivery service to the particular group of customers or for either an online service.

Do understand what scenarios apply in case of your business. It does help good businesses to be constantly tuning to the market and encourage the use of loyalty card, twitter, facebook, blogs social media accounts to make sure where the customers are and what they're talking about.

The dabba system⁠2 in Mumbai, is a classical study in this regard, as the customers wanted to have home cooked meal which makes the existence of outlets untenable however turning that into a service connecting each person to their own home cooked food has created a unique business and opportunity for many involved in the business.

The dabbawala service is legendary for its reliability. Since it was founded, in 1890, it has endured famines, wars, monsoons, Hindu-Muslim riots, and a series of terrorist attacks. It has attracted worldwide attention and visits by Prince Charles, Richard Branson, and employees of Federal Express, a company renowned for its own mastery of logistics.

4. Neither the customers or market exist.

There are two possibilities that may exist in such a scenario

A. The area is unlikely to have any opportunity as it may be Barren ( from an opportunity perspective)

B. The opportunity may exist in such an area however it has not yet been identified.

Areas that are barren or devoid completely of any business opportunity, can be turned creatively into a new opportunity area.

This requires sunk cost the areas where opportunity and customers are non existent a complete new venture creation from scratch and then bootstrapping the venture as it starts picking up. As the business picks up in the area, the areas in the immediate vicinity become more valuable. The business need to keep the future options in consideration to leverage the upside.

Matching customers and the opportunity eludes to classic example of establishment of Disneyland. It was one simple idea, but very compelling one that a place where people from all over the world will come and enjoy is a happy place it required a lot of initial capital investment and bringing the idea to fruition. Now kids all over the world know about Disneyland. or pretty much almost greater Springfield area and Australia where Mha Sina Thamby has created a massive housing complex. There were no customers to start with. There was no business. It was just barren land by bringing and seeding the opportunity. Of course, it requires huge amount of initial investment and The opportunity has been created.

As a business owner reflecting on the location of your business and interplay with the market is helpful. It is also helpful when you are making store opening and closing decisions where understanding the potential in conjuction with current outcome can set you up well for the long term game.

References:

1 Clusters and the New Economics of Competition Michael E. Porter HBR, NOVEMBER-DECEMBER 1998

2 Mumbai’s Models of Service Excellence, Stefan Thomke HBR, November 2012

Amp up the transactions by making the right location decisions