Originally published in July-August 2010 issue of our Leisure eNewsletter.
by Randy White, CEO
© 2010 White Hutchinson Leisure & Learning Group
In market research, socio-economics refers to classifying people by their social, economic and educational status. In a sense, it is about ‘class’, such as blue-collar or white-collar, rich or poor, etc. However, when examining people’s ‘class’, we often include their lifestyles, values and behaviors into what are called socio-economic/lifestyles, or SELs for short. SELs are far better predictors of people’s behaviors as consumers than just demographics or socio-economics.
SELs can get quite complex. When conducting feasibility studies and developing enhancement or turnaround strategies for existing location-based entertainment (LBE) businesses, our company uses an SEL segmentation system that breaks the American population into 66 distinctive groups.
SELs give much more information than demographics. Demographics group people in large categories. The best that demographics can provide is a picture of the population in aggregate and in averages and medians. Perhaps you are looking at households that have incomes over $75,000. Yes, it is good to understand how many there are in the market area, but who are they? How many are dual-income couples with young children? How many are singles and what age? How many might be high paid factory workers without a college degree? How many are white-collar professionals with a graduate degree? How many and which groups live in apartments? How many and which groups own houses? Examining demographics doesn’t really give you an understanding of the composition of the market area population, or even your existing customers. SELs tell you more. SELs tell you who your potential customers really are: their values, their behaviors, their aspirations and their lifestyles. SELs are important because people tend to choose one business or product over another primarily because the values of one reflects their own identity, a concept that retailers call lifestyle marketing
Here’s a condensed description of just two different SEL families with children groups to give you an idea of how different SELs can be:
Understanding the SELs of a venue’s trade area is critical to the success of developing and operating any LBE. Different SELs have different tastes, values and expectations. Different SELs have different spending preferences and expenditure levels for entertainment and food away-from-home. Market areas are rarely homogenous with only one or two SELs. There will be a variety. Certain groupings with similar traits need to be targeted if you wish to have high appeal to them. A LBEs design and operations needs to be matched to the target SELs to have the highest appeal, per capita spending and repeat business. Yes, the interior and exterior design, the mix of attractions, the menu, the level of service, the pricing, the type and quality of customer service, everything about the LBE, its operations and marketing needs to be matched to the target SELs in order to be successful.
Think about the difference between a Denny’s restaurant and a Ruth’s Chris restaurant. They have different qualities of finish and decor, different qualities of food, different presentations of food, different prices and different levels for customer service. That is because each is targeting a different group of similar SELs.
Here’s where a lot of LBEs get in trouble. They try to target all the SELs. Birds of a feather like to flock together. People like to hang out with people with similar SELs. We choose to be around people like ourselves, and the evidence is as close as your neighborhood. Not all SELs mix. Denny’s customers don’t feel comfortable in a Ruth’s Chris restaurant and you won’t find Ruth’s Chris customers frequenting Denny’s. Walmart attracts a distinctly different set of SEL customers than Target. Panera Bread attracts a completely different set of SELs than an Arby’s. Think about how different the businesses above are. That is because each understands who their target SELs are and they design their businesses specifically to match the tastes, values and expectations for those target SELs. They target with a laser rather than a shotgun.
The following is example of how helpful SEL analysis can be to a project’s success. While conducting feasibility and design for the expansion of Putter’s Paradise in Lee’s Summit, Missouri to become the much larger Paradise Park, we analyzed the market area’s SELs. We found two dominate SEL groups with families that we determined should be the target market. When we looked at their food preferences, we found that they both liked Caffeine-free Diet Coke and this was back in the days before Caffeine-free Diet Coke was even remotely popular. One day our CEO was talking to the owner at the old Putter’s Paradise concession stand and he looked over at the soda dispenser and noticed that Caffeine-free Diet Coke was one of the selections. Curious, he asked the owner why he had Caffeine-free Diet Coke instead of just plain Diet Coke. The owner replied it was because all his customers keep asking for it. Yes, SELs help you to really zero in on the target market and customerize for them.
Our company sees hundreds of different LBEs each year. Some are highly successful and some are marginal or failing. We are often hired by sick LBEs to determine the root causes of their poor performance and develop strategies to turn them around to profitability. In almost all cases, we find the primary reason that the sick ones are sick is either because they failed to match their businesses to the right group of SELs or they located at a poor location with the wrong SELs.
In some cases, the LBE is located in an area of higher socio-economic SELs, but the design, the finishes, the food, the mix of attractions fails to match those SELs. So what happens? The LBE starts to attract the lower socio-economic SELs, which becomes an even greater turn-off to the desired higher socio-economic SELS (remember, birds-of-a-feather like to flock together). The owner’s investment strategy of trying to minimize the investment in the LBE to maximize profits backfires, as the lower quality center doesn’t attract the desired customers. If you want Target customers, you can’t design like a Walmart. If you are Nordstrom, you design and run your business different than Target.
Understanding SELs and where they are geographically located within the market area is important to properly locating an LBE. The major root cause of poor performance we often encounter is an LBE that has a good overall market area with predominately higher SELs, yet the LBE is located in a low SEL geographic area. Higher SELs, and especially mothers, are not comfortable visiting a lower SEL geographic area whereas lower SELs will travel into a higher SEL area. You don’t want to be located on the wrong side of the railroad track. We call this phenomena a psychological barrier.
It is important to locate an LBE in an area with the right mix of SELs. There is a dramatic increase in both entertainment and restaurant spending as you go up the socio-economic ladder. For example, college graduates spend almost twice (1.8 times) as much for food away-from-home as high school graduates. When it comes to out-of-home entertainment spending, the difference is even more dramatic, 3.5 times higher. 38% of all households have an adult with an associate or higher college degree, yet they account for 51% of all food away-from-home and two-thirds (66%) of all out-of-home entertainment spending.
Yes, they say that location, location and location are important; and it is. But with location comes understanding its SELs and customizing the LBE to a targeted grouping of SELs.
Randy White is CEO of the White Hutchinson Leisure & Learning Group, an international firm that specializes in production, design and consulting for family and children's leisure & entertainment venues. Randy can be reached via the company's website www.whitehutchinson.com or at +1.816.931-1040, ext 100.