Case Study: Market Assessment & Feasibility Study for New Attraction
by Stephen Davis, VP of Pricing and Revenue Services, Integrated Insight
Published March 2021
One of the toughest decisions for any business is often when to start and when to expand. Making the decision to develop a new attraction or to expand into new markets is always exciting. Creative juices flow and big plans get made, but when the rubber hits the road – what is the right decision?
Our experience shows that it can be hard to avoid the emotional pull of a particular concept. Temptations to take a sweetheart development deal or follow “gut instincts” are risky. There can be major pitfalls for businesses that forego an objective evaluation of competition, environmental forces, risks, and opportunities for business development. Spending the time, and money, to get things right from the start can eliminate more costly efforts in the future.
To take the emotions out of the equation, an objective and data driven market assessment and feasibility study is needed that leverages both quantitative and qualitative factors in the decision making.
Market assessment and feasibility studies can answer questions as macro as, “what market should we expand into?” and as micro as, “which neighborhood should we build in within a 25-mile radius?” For a recent client, both of those questions and more were addressed in a comprehensive assessment.
A eclectic art experience looking to expand into new markets engaged Integrated Insight to conduct a market assessment and feasibility study.
For potential markets, Integrated Insight prepared an in-depth opportunity assessment that included four components: (1) market sizing and analysis of resident and tourist population, (2) competitive assessment that identified competing activities and pricing in the relevant market area, (3) physical site assessment for potential locations, and (4) primary market research to understand concept appeal and pricing leverage.
Component 1: Demographic and Market Analysis
The demographic and market analysis helped the client better understand the expected market size of residents and tourists. Market demographic and sizing analysis included details around the resident population such as incomes, age distribution and presence of families. Overnight tourist visitation behaviors were also compiled from secondary sources to understand what types of tourists are coming into market.
Failing to understand the makeup of an expansion market can be a costly oversight. If your business relies heavily on adults 18-24 but expands into a market with an older demographic, performance may stall before it even gets going. Similarly, if there are not enough income qualified households in market you may find yourself constrained by the socioeconomics around your location.
Component 2: Competitive Assessment
The competitive assessment inventoried similar experiences and activities for each market. An in-depth analysis of venues was created which profiled amenities, pricing, market share, consumer appeal, and interior features.
An inventory of competing activities in market included price points and pricing structure. Potential client experience pricing was compared across a number of market competitors to provide a perspective on price positioning and the implied value proposition.
Evaluating your existing competition in market is essential to a successful launch. Entering into a market that is overcrowded means building awareness will be a challenge. Conversely, understanding the competition for time and wallet could help identify synergies between existing businesses in market.
Component 3: Physical Site Assessment
A site evaluation was performed to identify and compare potential locations for a new client installation. Sites were assessed at the micro level for each market, as small as a unique 3 to 5-mile radius. A standardized group of criteria were analyzed and scored for each site. Factors included, among others, availability of parking, culture/synergy for arts and entertainment, lack of crime, public transportation, neighborhood population, and local incomes. By measuring the same variables for each site, they were compared objectively relative to each other.
The selection of the physical site is one of the most critical when looking to create a new business or expand an existing one. Locations can make or break return on investment and should be a central consideration for feasibility. And the details matter. Even if your location has great visibility, all the visibility in the world won’t make it a success if it is difficult to physically reach your business and parking is not available.
Marketing budgets will always be necessary, but making a smart decision on location can give a boost in awareness early in the life cycle of your business. For example, understanding where there is beneficial foot traffic or existing business synergies, can put you in the heart of the action. Paying more for the right location now likely means paying less later to try and market your way into success – which is usually an uphill battle.
An example of a physical site assessment failure can be found in a national indoor sky diving experience. Without careful planning, the experience expanded quickly across the country chasing favorable land deals instead of making measured decisions. The results were challenging – unprofitable locations, poor foot traffic and high price points made some new operations unfeasible.
Component 4: Market Research
To further assess market feasibility for the eclectic art installations in consideration, primary market research was conducted to understand the appeal of the proposed project, price expectations for the experience and the potential unconstrained demand each market could support.
Entrepreneurs and expanding leisure experiences no doubt believe strongly in their product. But market research clears away any preconceived notions about how the general public sees a new experience and gets real answers from real consumers. What may “feel” like a great concept may not truly resonate and knowing this before investing heavily in a new market can prevent a costly mistake.
Primary research identifies the exact residents and tourists who have an interest in your product and speaks directly to them, quickly eliminating those who are rejectors and providing sizing of the interested target market to penetrate. Speaking directly with your consumers means you have the opportunity to learn about their demographics, leisure behaviors and overlapping interests. These learnings allow for customer segmentation and glean insights for communication and marketing strategies.
Beyond just assessing appeal of the new experience, our study identified price expectations among potential customers to gauge pricing leverage. This was measured across multiple markets to understand which may have the most pricing power. Failing to align the value proposition of the experience with the price can leave money on the table if priced too low, or limit demand if priced too high.
Through an understanding of who is likely to visit a new experience in a particular market, what they like about the experience, and what they’re willing to pay, an estimate for unconstrained demand can be reached. Knowing unconstrained demand helps assess the revenue potential and supportable investment a new market can offer – providing a clear answer to “will this market be feasible?”
The market assessment in conjunction with the site evaluations and market research were able to provide a holistic view of the potential markets in consideration. This eliminated most of the unknown risks associated with expansion, providing the client with the information needed to lead with their consumer and move forward with confidence in their potential new markets.
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