Subaru of America, Inc.Targets Prime Markets Accurately and Efficiently

By David Huffman

Making the wrong decision about the location of a business can be costly. Demographics, accessibility to the site, compatibility with neighboring storefronts, visibility to potential clients, competition, environmental assessment, architectural concerns, and several other factors must be taken into consideration. Two of the biggest issues with site location research are using this information properly and communicating the results.

Subaru of America, Inc. is one company that understands the importance of assessing this information accurately. Unlike its much larger competitors in the automotive industry, Subaru is a niche player that targets specific customer groups. Being able to see and analyze information to make decisions about where to place dealerships is paramount.Using GIS software, it is possible to analyze the data and then present it in an easy to understand format.Sean O'Halloran, geographic decision support specialist at Subaru of America, explains, "Successful site selection analysis at Subaru combines the use of quality demographics and powerful GIS technology to locate our best dealer store sites."

Subaru of America, Inc.is a wholly owned subsidiary of Fuji Heavy Industries Ltd.of Japan. Headquartered in Cherry Hill, New Jersey, the company markets and distributes all-wheel drive Subaru vehicles, parts, and accessories through a network of approximately 600 dealers across the United States.These dealerships each employ approximately five to 50 people. In 2002, Subaru dealers sold 180,020 vehicles.

Subaru stands out in the industry as the only automobile manufacturer to offer all-wheel drive as standard equipment on every vehicle they make. This niche-focused product strategy requires Subaru to precisely target its customer groups.They realize the importance of developing an in-house process to produce timely and accurate market studies using its franchise territories to determine prime site locations.

"The constant upgrading, finding new, or 'filling the holes' for dealer locations is an integral part of our everyday decision making," says O'Halloran who had previously used demographic data and software from another vendor for a couple of years.Subaru sought an alternate solution.

O'Halloran was familiar with GIS and developed a short list of GIS vendors to review.In just two years since Subaru integrated mapping and GIS analysis into its market development, the data cost had dropped dramatically while the quality of the GIS software rose. After reviewing several software packages, O'Halloran selected ESRI's ArcGIS Business Analyst software along with ESRI Business Information Solutions (ESRI BIS) segmentation data, for a number of reasons. He says, "I liked the product, especially the map making aspects. It was easy to import data from a variety of sources, and the price was pretty competitive."

ESRI BIS is a business unit of ESRI that develops demographic and business geographic data sets packaged for use with a variety of software solutions. In 2002, ESRI purchased CACI Marketing Systems, which is now ESRI BIS.The staff at ESRI BIS is made up of teams of experts who guide clients through each stage of marketing automation.ESRI BIS designed a solution that fit Subaru's demographic and mapping analysis requirements within the budget requested by O'Halloran.

Previously, Subaru used CACI Marketing Systems for demographic cluster data before they decided on ESRI's ArcGIS Business Analyst software.Migrating the data from the previous system into ArcGIS Business Analyst was seamless; Subaru didn't lose valuable information, and they could continue using data from a familiar source.

O'Halloran spends a lot of time developing studies for different markets. He looks for areas of high and low potential for new dealerships throughout the United States.The maps he and his boss create are a culmination of data from many different sources; demographic data from ESRI BIS, sales information from their dealer franchisees, vehicle registration numbers at the ZIP Code level, and geographic information. These maps are used internally and outside of the company for presentations to dealers to show the results of their analysis and to provide a concrete basis for their decisions.

"We use the GIS to answer our business questions," says O'Halloran."We've always had this data in tabular form, but now we have the geography to display the outcome of the analysis. GIS is basically a high- level extension of our database."

When O'Halloran is not analyzing markets or creating presentation maps, he is maintaining vast amounts of data.He says ArcGIS Business Analyst makes it easy to integrate data from all of his sources, because it works directly with Microsoft Access, Subaru's database of choice. One of the biggest changes with this new GIS solution was the ability to take ownership of his data. Instead of outsourcing his sales data for geocoding and demographic profiling, can perform these applications himself.

ESRI BIS's Community Coder 5 software allows him to assign latitude/longitude coordinates and FIPS Codes to his customer files.He also integrates ESRI BIS Community Tapestry lifestyle segmentation data to further enhance his sales records for more comprehensive customer profiling. Tapestry data is divided into 65 segments describing U.S.residential areas based on demographic variables such as age, income, home value, occupation, household type, education, and other consumer behavior characteristics. For example, Boomburbs, Tapestry Segment 04, is described as:

"The newest additions to the suburbs, these communities are home to younger families with a busy, upscale lifestyle. Median home value is $275,000 (and growing), and most households have two workers and two vehicles. Growth is characteristic of the communities and these families. These affluent families, who recently moved to their homes, focus their attention on upgrades, furnishing and landscaping. Boomburbs residents spend on family, leisure, and other activities, too. They are one of the top markets for sport utility vehicles. They participate in golf, tennis, and swimming and own an array of electronic equipment."

Says O'Halloran, "Analyzing current sales figures by our targeted segments enables us to identify and prioritize our target customers into various groups.Using (the GIS software), we are able to shade target values by each appropriate segment, determine success levels for existing locations, plot dealer information, and display major shopping centers."

ArcGIS Business Analyst software and ESRI BIS data has allowed Subaru to dramatically decrease its site selection operation costs by 75 percent.They have also improved the quality of their analysis, increased the efficiency and accuracy of their site selection process, and reduced the risk of erroneous site selection.

"The biggest advantage of using GIS technology with ESRI BIS data has been having the tools in hand before we make actual location decisions," says O'Halloran. "Using (the mapping application in ArcGIS Business Analyst) has become an everyday tool for our analysis process."

Published Monday, February 14th, 2005

Written by David Huffman



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