How Thiessen Polygons (Business Analyst) works
Thiessen polygon boundaries define the area closest to each store relative to all other store locations. Thiessen polygons are generated from a set of three or more store locations.
Thiessen polygons are also referred to as spatial monopoly, Voronoi, or equal competition trade areas. This type of market area assumes that consumers will travel to the closest store or facility. A line is drawn halfway between two competing centers, and they are mathematically defined by the perpendicular bisectors at these midpoints.
Thiessen polygons provide a better understanding of the natural market areas of a facility. This is the best type of market area to use for store-specific direct mail. Each customer gets advertising geared toward a specific store location. There are no multiple mailings, and the customer is directed to the nearest store. This lowers direct mail costs and generally increases the hit rate.
Pizza delivery stores have used equal competition areas to define delivery markets. The order is directed to the outlet closest to the customer, and there is no competing overlap. All locations in each equal competition area can be geocoded by street address or by telephone number and street address. Each incoming call can be automatically routed to the proper store either by telephone number caller ID or by asking the customer for a street address.
Equal competition areas provide excellent estimates of store market areas for operations without customer records. The corners of multiple equal competition areas are often good locations for new store expansion. Available area is apportioned into trade areas for each store by creating boundary lines equidistant from each store location.