Maximize Your Pet Hospital's Market Potential: Trade Area Analysis Guide

Understanding the business coverage area and potential area of your pet hospital helps to:

A geographical location with the most concentrated customer distribution and the highest market penetration. The traditional criterion for defining a trade area is that 80% of customers come from the same region. A trade area is also called a "sphere of influence" or "service area".

Collecting zip code statistics is a good method to identify where current customers come from. In the past, people determined the trade area by counting the number of customers in each zip code. This can show which area has the densest customer base, and it works best when you have all zip codes of a certain region. However, zip codes that cover too large an area are less meaningful. With current veterinary hospital management software, it is easy to collect and analyze customer zip code statistics.

Estimate the trade area based on driving time. Combining this method with zip code statistics can help delineate the boundaries of the trade area more effectively.

Hospital management systems contain a wealth of data, including customer address information. These data can be geocoded or mapped, allowing you to visualize the actual distribution of your customer base.

For newly established hospitals, it is crucial to evaluate the market potential of the target location before investing all time and resources. In other words, you need to determine whether the area can support one (or a second) veterinary hospital.

The first step of the evaluation is to delineate the potential trade area. It is possible to reasonably determine the potential trade area (where most customers will come from) even without customer data. There are two methods for newly established hospitals to delineate the potential trade area:

For small animal clinics in non-suburban areas, the traditional method to measure the size of the trade area is to draw a circle with a radius of 4.8 kilometers or 8 kilometers centered on the clinic.

This method is simple but not always consistent with actual situations. The reason is that simply drawing a circle does not take into account other factors that affect customer flow, such as accessibility (quality of the road network) and physical barriers (e.g., lakes, mountains, and insufficient roads).

Estimating the potential trade area based on driving time can take more factors into consideration. Moreover, when compared with the known trade area, driving time is more representative than a drawn circle.

Figure 1-4-2 compares the difference between an 8-kilometer radius ring and a coverage area within a 10-minute driving time. A hospital located on a main road is easily accessible to customers, which expands the potential trade area in some aspects but also has certain disadvantages.

The appropriate driving time to choose depends on several factors, including the type of clinic, its location (urban, suburban, or rural), and traffic congestion conditions. In general, customers in rural and suburban areas are more willing to drive longer distances than those in urban areas. The following references are calculated based on known European and American data:

To estimate the trade area, start from the clinic location, drive in different directions for the predetermined time, and mark the destinations on a map. From a more user-friendly perspective, you may want to take the same routes twice—once during off-peak traffic hours and once during peak hours.

For a newly established clinic, delineating the potential trade area helps analyze the market potential of the unopened clinic. For an existing clinic, understanding its trade area is conducive to focusing on areas where customers are truly concentrated and areas with potential customers.

From_Lowell Ackerman, DVM, DACVD, MBA, MPA, CVA, MRCVS