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One point interests a lot of people, two points interest much more
The long sequence of acquisitions of retail chains by other chains demonstrates that the main objective is to incorporate a series of matured locations.
The purchase prices, always much higher than the actual construction cost, embed the perception that there is no alternative to “do it at home”, that is, looking for other points and opening new stores on your own.
Buying another network represents accelerating a job that would otherwise take years and would bring various risks
💰 Hence the Premium Price I usually pay.
Even though the retail mantra is location, location, location, this perception of the value of Commercial Points cannot be fully attributed to Geomarketing.
A Commercial Point is the sum of efforts that include Geomarketing, but its final value, in the tens of millions, is the result of a good selection of locations, the implementation of the store and years of efficient operation to form a customer base.
The Americanas paid close to R$ 4 million per Blockbuster store, Carrefour R$ 65 million per Makro store and, for now, the Muffato chain is considering paying an even higher price for the remaining stores of the Dutch chain in the State of São Paulo, including points in the capital.
We can agree that a Commercial Point is worth a lot.
💿 Millions CD-Rom
Now we will start to extract the fair share of Geomarketing in the midst of the value of the Commercial Points.
A classic location study used to involve presentations marked on maps and tables in Excel.
- Markings on the map indicated concentrations of target audience and competitors.
- Excel tables added sales potential to the public and subtracted sales where there were competitors.
- Market capture scenarios were created and combined using the Monte Carlo technique to consolidate more probable scenarios.
- A feasibility study was being carried out for the store.
This work consumed hours of several qualified professionals, knowledge shared by the retail chain, their performance data, notions of competitors' performance.
A composition of effort, know-how and technology recorded on a CD-Rom.
A Commercial Point is worth a lot, but it must exist and be successful for a few years to reach its maximum value.
What about while it's just a bunch of easily copyable information?
In terms of study value, technology and know-how are contained in the archives and are worth the committed effort, which could be measured by hours of consulting.
A good study can rule out robberies, be categorical in saying that such a store should not be opened.
This can be of enormous value, such as the costs of opening and closing a low-performing store.
Learning from this pain will lead to studies that indicate where to open a store.
Lesson #1 🎁
Geomarketing is worth much more when the store is open.
When analyzing very restricted situations, such as a store, a neighborhood, understand that they limit your possibilities of finding a Commercial Point where the store can be opened.
Define the scope of your study on a wider scale, something like the city or the group of neighboring cities.
This will give more room to rule out bad points and still find alternatives with potential.
Even if it took twice as much effort to conclude that a store should not be opened, contrary to customer expectations is often more work, and your work will be worth less in their eyes.
Lesson #2 🎓
The school of life is always expensive
When the customer insists on paying for the number of stores that will open, not for the studies, a perverse incentive is created that will relax the requirements.
The consequences will come in underperformance, bankruptcies, and a lot of responsibility thrown back into studies.
You put your name on unsupported projects, the client is speaking ill everywhere, your reputation is affected.
⚠️ When the client insists on opening at a low potential point, but still wants a study to validate, insist, write, state categorically that you are against it.
When things go wrong he will remember that you were firm and professional in your conduct.
At this point, he paid dearly, but he finally learned the value of Geomarketing.
Lesson #3 👀
It's worth more and the price is the same
Take a look at the dilemma faced by Geomarketers, knowing that their work is worth more when the store is opened, but not being able to do anything to make it happen.
Professionally speaking, there is no difference between the price of a study that points to openness and a study that rejects it.
Lesson #4 🧐
Insider trading
“Investing from inside information”
Doing this on the stock exchange is a crime, elsewhere a dream.
Everyone seeks such a superior understanding of market conditions, something so above the standard, that it can be considered a privilege.
In fact, it is a privilege to have a good Geomarketing study and countless cases of Inside Trading they are about negative information about companies that lead to the sale of shares.
In other words, in the financial market, negative information is worth as much as positive information, as long as it can be taken advantage of.
In short, every Geomarketing study must provide useful information to generate profits or avoid losses.
Having established that there is no difference in value between studies that indicate openings or not, let's move on to the specific contribution that Geomarketing makes to the value of a Commercial Point.
Lesson #5 🤔
Geomarketing is what the other understands
In 1928, Ralph Hartley published the article Transmission of Information, where the word information appears as a measure of the recipient's reception capacity.
Twenty years later, Claude Shannon published the article A Mathematical Theory of Communication, in which he resorted to mathematics to establish the fundamental limits of the transmission of information.
The combination of these two works gave rise to Shannon—Hartley theorem.
In essence, they measure three aspects: (1) technical transmission, (2) semantic transmission, and (3) its influence on the receiver.
1 - Technical transmission is the message arriving in its entirety, such as the CD-Rom of the classic Geomarketing studies being delivered without scratches, the message being fully preserved.
2 - Semantic transmission is the message to be understood by the receiver, the presentations with maps and the Excel spreadsheets telling a clear and concise story.
3 - Influence on the receiver. Even if 1 and 2 were successful, it is up to the receiver to react to the message.
Therefore, when we recall Lesson #1 “Geomarketing is worth much more when the store is opened”, we can see that it refers to action, or rather, to the customer's reaction to the study message.
There is no problem in carrying out a study that suggests that a store is not opening, as long as the customer's reaction is consistent with what the study says.
Lesson #6 👩🏾 🍳
Geomarketing is a medium activity
It should already be very clear that no one seeks a Geomarketing study to have a notebook with maps, a CD-Rom, or a folder on Google Drive.
Just like no one goes to a restaurant just for the service, even though it's important that the waiters deliver the desired meal well.
On the other hand, poor service ruins everything.
The average activity is only valuable for those who are seeking the end.
The popular expression “the ends justify the means” embeds a perception that the means to reach the ends were more expensive than the result achieved.
That's right, an average activity should not cost more than the end it leads to, unless it's the only means, a situation in which it will be confused with the end.
Geomarketing must be worth less than a Commercial Point.
Fortunately, we have already established that a Commercial Point can be worth millions, so there is plenty of space.
Another advantage of medium activities is their versatility.
A waiter brings drinks, dishes, sets the table, pulls the chair, puts his shoe on the table, changes a lamp, brings the bill, takes it to the door.
A good Geomarketing study can do much more than indicate where to open a Shopping Point, by directing the store layout, its finishing pattern, pricing strategy and promotions, the opening campaign, the distribution of brochures, the sound car route, the loyalty card.
In addition to pointing out where to open the Commercial Point, Geomarketing helps to consolidate it.
Lesson #7 🏚
The intrinsic value of Geomarketing
Returning to the case of the acquisition of Blockbuster by Americanas, we have a rare situation in which the economic value of the video store network was exhausted, the business faced piracy and the rise of streaming, such as Netflix.
Still, the Americanas paid R$ 4 million per store.
The Blockbuster network was famous for its operational efficiency, with many copies of the same title, easy return at the store door or at strategic points.
In the end, all this was worthless and the network was still sold at a good price on account of its Commercial Points.
Lesson #8 🦸🏻 ♂️
The increasingly rich
A small retailer will have no interest in paying for an expensive and sophisticated study, because its billing is moderate and its profit margin is narrow.
Although a study indicates a good point, renovation and rent costs can be prohibitive.
Going back to lesson #4 Inside Trading, only those who have what to invest can invest based on privileged information.
Information is more valuable to those who have more uses for it.
A large, capitalized company that can accumulate scale gains will see more value in Geomarketing studies than a small company.
Lesson #9 🤯
The customer's economic value
1 - Geomarketing will be worth more as it is put to use.
2 - To resist is to win, don't give in to the temptation to win by open store.
3 - Privileged people value privileged information.
There are only two types of customer in Geomarketing, the one that is large and the one that seeks to be.
Lesson #10 🌎
The economic value of Geomarketing
We have arrived at the part where we can discuss the forms of pricing studies.
So far, its importance and how Geomarketing acts for the success of a Commercial Point has become clear.
Now let's discuss the possible counterparts for those doing the study.
Bulk geomarketing or consulting hours.
When the scope is not clear, the relationship with the client has not yet been well established, it makes sense to charge per hour worked.
This is a path for those who are just starting out or someone who is very established who charges fees even when they are called for lunch, as lawyers do.
The problem here is the same if you get into a taxi or Uber without having any idea how much the ride will cost.
Customers will want a reference of how much it may cost, even if it is a range from time to time.
Service packages
When you submit a reference for a project of the same type, you will be packing that activity, which is a grade above in professionalism.
The packaging of activities presupposes previous experience in projects of this type, their risks, overtime already contemplated, and an execution and delivery schedule.
Customers like this approach, especially when they see that it ensures the quality of deliveries.
Monthly Fee
This would be the most advanced stage of the relationship with customers, since it establishes recurring revenue in an open scope.
It may seem like a dream to have that amount guaranteed by contract, but if the customer requires proportionately more, you will be losing business on other fronts to guarantee that fixed income.
The great advantage of the monthly amount is to align the consultancy's work with long-term results.
In other words, the consultancy will not propose situations that become complicated in the future because it intends to continue with the client.
Building the full value of a Commercial Point takes years and it makes sense that everyone is aligned in this effort.
Own team
Once all previous stages have been completed, a company will consider forming an internal team, which wears the company jersey to win the best Commercial Points.
The break-even point is when the costs of separate studies and monthly fees exceed the costs of setting up an internal team.
Employees have other motivations, in addition to their positions, salaries and bonuses, they are more susceptible to pressure for studies that indicate the opening of stores, as well as thinking in terms of their careers, being able to migrate to competitors.
A good practice is to maintain some level of relationship with the consultancy that serves for a fee, sometimes bringing in some consultants as team leaders, at other times inviting a consulting partner to participate in the Expansion Committees.
Access the reference tables for Geomarketing values here.
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