Quyen Chan Vuong

Trade area analysis is a popular retail location tool used to help maximize the efficiency of operations for many industries, including the banking industry. Conducting such analyses allow for the identification of the demographic composition around an establishment, which can contribute to a better understanding of the market and used to identify the geodemographic profiles necessary for target marketing. In the case of banks, conducting trade area analysis allow the bank to identify changes in consumer banking to more effectively understand consumers and sell their products. For example, trade areas can be used to determine the spatial extent of the whole market and target market, and to identify which market segments should be targeted, and the kind of branch network needed to serve the market. Thus an accurate and reliable trade area model for a bank would increase their accuracy in predicting the banking/financial environment, and help them to achieve an optimal location network. This paper compares the existing methods of trade area analysis used by Scotiabank to that of the Huff model-a widely accepted and sophisticated trade area tool, to assess the efficiency of each model with respect to the entire banking unit (market) and the three sub-market branch types-downtown, urban, rural. The purpose of the paper is to evaluate trade area models and to select a trade area model that most effectively captures Scotiabank's existing customers, that is, how close to sixty percent of the branch's customers are from within the trade areas calculated by the models.