Target Market Methodology
The proprietary target market methodology developed by Zimmerman/Volk Associates, Inc. uses the Claritas prizm Premier household clustering system to establish the optimum market position for residential development of any property—from a specific site to an entire political jurisdiction—through cluster analysis of households living within designated draw areas.
This methodology was developed in response to the challenges that are inherent in the application of conventional supply/demand analysis to urban redevelopment. Historically, many urban areas have experienced population loss; since conventional supply/demand analyses generally project the continuation of past trends, the projections of “demand” in urban areas are often minimal, if not negative. Supply/demand analysis ignores the potential impact of newly-introduced housing supply on settlement patterns, which can be substantial when that supply is specifically targeted to match the housing preferences and financial capabilities of the draw area households.
In contrast to supply/demand analysis, then—which is based on supply-side dynamics and baseline demographic projections—target market analysis can determine the depth and breadth of the potential market derived from the housing preferences and socio-economic characteristics of households in the defined draw area, even in locations where no close comparables exist.
Clusters of households (usually between 10 and 15) are grouped according to a variety of significant “predictor variables,” ranging from basic demographic characteristics, such as income qualification and age, to less-frequently considered attributes known as “behaviors,” such as mobility rates, lifestyle choices and purchase preferences. Zimmerman/Volk Associates has refined the analysis of these household clusters through the correlation of more than 500 data points related to housing preferences and consumer and lifestyle characteristics.
As a result of this process, Zimmerman/Volk Associates has identified 47 target market groups with median incomes that enable most of the households within each group to qualify for market-rate housing. The most affluent of the 47 groups can afford the most expensive new ownership units; the least prosperous are candidates for the least expensive existing rental apartments. Another 21 groups have median incomes such that most of the households require housing finance assistance.
Once the draw areas for a property have been identified—through field investigation, analysis of historical migration and development trends, and employment and commutation patterns—the households within those areas are quantified using the target market methodology. The potential market for new units is then determined by the correlation of a number of factors—including, but not limited to: household mobility rates; median incomes; lifestyle characteristics and housing preferences; the location of the site; and the competitive environment.
The end result of this series of filters is the optimum market position—by tenure, building configuration and household type, including specific recommendations for unit sizes, rents and/or prices—and projections of absorption within the local housing context.