Customer penetration by trade area, against purchase activity
The short answer
Divide the active customers living in each trade area by the number of households there, per 1,000 households, to get customer penetration by trade area. Then compare it with spend per customer. Areas with low penetration but high spend per customer are underweight, because the customers you have value you while too few households know you.
What is customer penetration, area by area
Why it matters
Store and marketing plans usually follow sales, which favors areas you already serve well. Penetration shows where the brand is thin on the ground, so you can find growth in areas whose existing customers prove the demand is there.
The question to ask
Copy this into Lexi as written.
How to work it out
1. Map customers to trade areas. Assign each active customer to a trade area by ZIP code, including online customers.
2. Add households. Use census household counts for each trade area.
3. Compare penetration and spend. Calculate customers per 1,000 households and spend per customer, and flag areas low on the first and high on the second.
What the answer looks like
Illustrative output on sample data
Illustrative example: how Lexi answers this for a sporting goods retailer. It divides active customers by households in each trade area to get customer penetration per 1,000 households.
- Area A: 120 per 1,000, $310 spend per customer
- Area B: 50 per 1,000, $360 spend per customer
- Area C: 150 per 1,000, $240 spend per customer
What the data shows
Area B is underweight. Its customers spend the most, but only 50 in every 1,000 households shop there.
What it means
Most Area B customers buy online and live over 25 miles from a store.
What to do
Test local marketing or a pickup point in Area B.
Household counts come from census data, so check they match your trade area boundaries. Want me to show the channel mix for each area?
Frequently asked questions
What is customer penetration?
Customer penetration is the share of potential customers in an area who buy from you, often expressed as customers per 1,000 households. It shows how deeply a brand reaches into a market, which sales totals cannot, because one area's sales may come from a few heavy spenders.
Why compare penetration with spend per customer?
Low penetration alone may mean an area does not suit your range. Low penetration with high spend per customer means the customers you do have value you, which points to untapped demand. Reading the two together separates weak markets from underserved ones.
How is market penetration in retail different from customer penetration?
Market penetration often refers to share of total category sales in a market, which needs competitor data. Customer penetration uses your own customer file and household counts, so it is easier to calculate and track. Both measure reach, from different angles.