As technological innovation grows, the consumer market also undergoes a behavioral change - whether financial, social, or demographic.
Thus, one of the most promising fields at the intersection between entrepreneurship and data science is Geomarketing, which, using software, generates socio-demographic analyses to guide expansion strategies and decision-making.
With this strategy, entrepreneurs can understand the profile of their clients, identify the best places to open new units, and customize their actions according to the characteristics of each region.
Since 2020, Mapfry, a platform that generates sociodemographic data, consumption habits and evaluation of competitors, works with the mission of providing easy and accessible access to geomarketing for small and medium-sized enterprises (SMEs), which, according to Sebrae, tend to fail mainly due to the lack of prior planning regarding the demand of the region in which they operate.
In this article, João Caetano, Professor of Geomarketing at USP, ESPM and ABF Education, answers questions related to possibilities of using Geomarketing, the growth of the profession in the future market and how entrepreneurs can use this strategy to boost their business.
Why, just now, does Geomarketing reach the general public?
Imagine coloring every block of a city with information about the profiles of the families that live there.
Such work, even if carried out by a team, would take years to complete.
This is how the first market maps were made.
Labour and Life of the People (London)
Work and life of the population of London
Charles Booth's team worked in the period between 1886 and 1903, that is, 8 years, in the collection and mapping of information.
This huge research had one objective, they hoped to prove that there was a causal relationship between low income and criminal behavior, which ended up not being confirmed.
The complete research surveys amount to 450 books containing the questionnaire records, which were represented item by item on the map.
Decades later, between 1930 and 1934, this research was updated, The New Survey of London Life and Labour, their questionnaires addressed issues such as: age, occupation, place of work, travel and earnings of each employee.
The material collected in this second research is collected in 63 boxes stored in the library of London School of Economics.
Until the end of the 20th century, the social research landscape on maps had changed little.
Computerized information mapping systems had existed since 1960, but such systems were extremely expensive and complex.
Therefore, they were used in capital-intensive sectors, such as defense, mining, transportation, and communications.
The mechanics of using these systems were massive, large servers, technical teams, specialized analysts.
It was only with the spread of personal computing that commercial systems aimed at analyzing maps became less expensive and complex.
More than a century after Charles Booth's research, the technological moment presents us with information and analysis resources that allow us to recreate in minutes such researches that took years.
This is possible because surveys such as the Census and other official surveys are available in easily mapable digital formats.
At the other end, digital maps are more accessible and faster, allowing you to integrate data into maps in thousandths of a second right on your computer screen.
Finally, we can offer small and medium-sized companies analysis resources equivalent to those used by telephone companies, oil companies, and consumer goods industries two decades ago.
Speaking of which, how were market analyses carried out 10-20 years ago?
The analyses of the most recent past can be divided into two parts:
1. Between 2000-2010, analyses were performed on personal computers that ran systems originally created for environmental analysis.
Highly specialized professionals knew how to adapt these systems for social research and offered their consulting services.
2nd Between 2010 and 2020, we saw the arrival of Software as a Service, the data compilation and information gathering part typical of consultancies could now be offered directly to clients.
The only thing that hasn't changed in those more than a hundred years was the importance of the specialist in analysis.
Over time, these professionals played different roles, always fundamental, and this has not changed and should not change.
Today you can find in Mapfry a platform that is radically simpler and more objective than the systems of previous generations, this allows many people to venture into using it. Facilitating this access is our purpose.
But when the analysis is real, involving investments and risks, it is clear that Geomarketing is not a toy.
Right now, the professionals come on the scene.
What is the typical compensation of a Geomarketing consultant?
A professional in this segment has two paths, first acting as an independent consultant, being remunerated per project, or being part of the professional staff of a company.
Analysis-intensive companies, such as retail chains, large industries, and franchises will have an advantage in setting up an internal team, since they may require further studies for a reasonably fixed cost.
However, it is much more common for companies to experience cycles of numerical expansion, more units, followed by cycles of weighted growth, more market capture.
In these cases, it makes more sense to find a specialist consultancy.
Himself World Economic Forum listed the 10 professions of the future and 3 of them are closely related to data analysis:
Therefore, any professional trained in Geomarketing can expect compensation in the range of 5 to 15 minimum salaries.
How can Geomarketing stand out from other market research strategies?
Every company wants to increase its sales, size is that sense of urgency to grow that some say that the company that doesn't grow is dying.
A company that focuses its resources on maintaining what it has achieved will have a large proportion of its capital invested in activities of the day, operating expenses (OPEX).
But every prosperous economic group, to the extent that capital is left over from its operating expenses, will invest a part of this excess in investments, capital expenditures (CAPEX).
Guiding these investments is the mission of research areas and professionals.
The advantage of Geomarketing is its super-precision, the ability to identify and delimit areas of opportunity even in complex environments.
Imagine a city or neighborhood that is experiencing an overvaluation, everyone watching that growth, land, real estate, and rents rising.
A Geomarketing analysis can identify if this trend is sustained over time, if there are spaces not yet captured by valuation, allowing immediate gains to be made, if it is worth paying more to be at this point or if there is a neighboring region that will be the next to be valued.
The result of this is the high confidence that the capital will be invested safely and with good returns.
How can Geomarketing consultancy help businesses to consolidate in the consumer market?
We have several cases of small businesses that found their way to grow based on studies carried out by consultants.
From a barbershop in São Luís do Maranhão, to a cake shop in Belo Horizonte, ideal routes for sound cars, to the design of a marmitex delivery area.
It is worth highlighting the case of a small ice cream industry that was looking for a place to set up its factory store.
This project was very transformative for the company and for us.
Setting up an ice cream factory is not very expensive, so most of them will fight over price with the big brands, always betting on the popular version of renowned flavors.
So far we're seeing more of the same happening everywhere.
So much so that the entrepreneur came to us looking for a place to open a store where he could offer his products at even lower prices directly to consumers.
When the consultant analyzed the profile of the host city and neighboring cities, she found a pattern that is quite common in Brazil, a kind of pareto balance in which 20% of the population has 80% of the Consumer Potential.
This creates tension for brands, either they focus on low costs to serve the 80% of the population that has 20% of the Potential or they aim at more elaborate products for the richest 20%.
You just can't be everything to everyone.
That's when we asked the ice cream entrepreneur if it was too complicated to produce popular and sophisticated versions in his small factory.
To our joy he said it wouldn't be a problem, once the product is frozen, he could produce batches of each version and store.
His brand was very popular, so it would be necessary to create another one with a more premium positioning.
What would be a commercial point became a complete strategic review.
This also taught them something, so seeing the numbers, we always think we already know, but practice is the best school.
In the end, we learned that it makes sense for businesses to target two audiences, as long as they can be profitable that way.
What services include Geomarketing consulting and data search?
There is a wide list of possible studies, rather than enumerating, I will describe a very complete project flow.
First, the consultant collects business information, such as:
- List of stores with billing information per square meter and opening date
- Customer mailing list with purchase information
- List of main competitors
- Standardization of bases for mapping and geographical analysis
She then looks at the information in search of the patterns of success.
- Market penetration analyses of network units in relation to the potential offered by the market
- Correlation of performance variables with local characteristics
- Causality, that is, Identifying which correlations most influence performance
From then on, it's time to point out where and how the business can grow its sales.
Not all units, or stores, are well positioned to grow, some may even be closed.
In this phase of the study, the parts of the business will be grouped into common characteristics, for example:
- Premium stores
- Standard stores
- Standard stores with premium potential
- Premium stores with standard profile
- Standard stores with the potential to be popular (may be a suggestion)
Or by capturing market potential:
- Pineapples - stores with low performance and little potential, must be closed
- Dog - stores with low performance and good potential, deserve a second chance
- Dairy cow - stores with high performance and good potential, support the chain
- Estrelas - stores with high potential and good performance, will be the next dairy cows
You can also group by area of average influence:
- Neighborhood stores - proximity or convenience
- Central stores - centrality
- Stores in malls - depend on the strength of the mall
- Outlet stores - use price to increase attractiveness
The sum of these and other possible segmentations is the conclusion of the Diagnostic phase.
Notice how valuable it is for a company to know so much about itself, its markets, and competitors.
From the diagnosis, recommendations for action are derived, which may include:
- More is better - where and how the network must grow to replicate its best standards
- New and better - how the network can innovate to capture opportunities that have been identified
- Less is more - tactical reduction for cash balance
- Packaging - presentation of potential studies for the acquisition of the network by another group
Not every business will need a project of this size, but this is a reality for entrepreneurs who are using data science to grow more, with lower costs and better service.
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