Exploring the use of Geographic Information Systems (GIS) in Geo-Marketing Segmentation and Retail Site location: A Case Study of Cement Market in Mukono District-Uganda

Abstract

Worldwide, the use of Geographic Information Systems (GIS) in business has increased with the improvement in technology and the availability of spatial data and more accurate digital maps. One of the most trending application of GIS in business is Geo-Marketing. In Uganda, the cement industry is one of the growing industries where geo-marketing could be fundamental for a firm to compete favorably, but cement marketers still depend on traditional methods to carryout market research and no study had been done to explore this new way of information-based marketing that is supported by GIS. The traditional market research methods like the sales forecast models, gravitational models and ratio methods that are currently being used by cement marketers to carry out market segmentation and retail site location in Uganda do not effectively analyze business spatial data and are greatly limited in scope. They also have little sensitivity to demographic variations in the market and they do not simultaneously consider the impact of multiple factors in retail site location. With the traditional methods, data files for market segmentation cannot be visually represented, decision-making for retail site location is difficult and decisions are made in the abstract. Therefore, the main aim of this research was to explore the use of GIS as a tool for geo-marketing segmentation and retail site location in Uganda’s cement market. This was achieved through determining the cement geo-market segments and optimum locations for retail cement stores in Mukono district. The cement geo-market segments were determined through replication of Hierarchical, K-mean and Two-step clustering analysis based on geographic and demographic spatial data of parishes in the Mukono district. The cement geo-market segments were clustered according to the number of potential cement buyers in each parish. The suitable locations for establishing cement retail stores were determine using the Analytical Hierarchy Process (AHP) technique loosely coupled with GIS technology. The GIS tools were used to analyze the spatial data that is always neglected with the use of traditional methods. From the study results, the eighty (80) parishes in Mukono district were grouped into three clusters of cement geo-market segments namely; Primary, Secondary and Tertiary cement market segments. Thirteen (13) optimal locations for retail cement stores were identified in nine parishes in Mukono district. All the identified optimal locations were within trading centres. The results showed that including spatial variables in market analysis improves market research. Therefore, geo-marketing is an effective technique cements marketers should embrace to compete favorably. In order to make informed decisions regarding planning marketing mix strategies and increasing return on investment, companies in Uganda can replicate this research in other districts. For better results, such further studies can be carried out using recent National population and housing census data at a village level. Hopefully, this information will encourage companies in Uganda to use GIS with traditional methods for market research.