November 1996 No. 1Estimating Market Demand using the Consumer Expenditure SurveyBill Pinkovitz
Do you think your community needs a pharmacy? Another video store? A dentist? More importantly, is there sufficient consumer demand in your community to support any of these businesses? Now, reliable information to help you answer questions like these is readily available through the Internet. Anyone with access to the Internet can easily find valuable market information that previously was only available to those with the budgets and expertise to obtain it. One example is the Consumer Expenditure Survey (CES) available through the U.S. Bureau of Labor Statistics Home Page. The CES includes detailed consumer expenditure data for very specific goods and services. The data is reported for a variety of demographic categories (i.e. age, income, or household type). Products and services include: Food, housing, household furnishings and supplies, apparel, transportation, health care, personal care, entertainment, financial services, and gifts. The range of products and services within these major categories is quite specific (Table 1). Expenditure data at the level of detail in Table 1 is available on-line through the BLS Home Page. More detailed expenditure information is available from the CES. For example, spending for medical services is further divided into expenditures for physicians services, dental services, nursing and therapy services, eye care services, lab tests, hospital rooms, convalescent and nursing home care, and prescription drugs. Currently, this level of detail is available on CD-ROM, tapes, and through several private vendors.
According to the BLS, Consumer Expenditure Survey data is used in analyzing the demand for specific goods and services and groups of goods and services. The data provides a means for tracking spending trends of different types of consumers. Government officials and agencies can use the data to study the welfare of particular segments of the population, such as consumers age 65 and over or under age 25, or low-income consumer units. Economic policymakers use the data to assess the potential impact of policy changes. Researchers use the data in a variety of studies, including those that focus on the spending behavior of different family types, trends in expenditures on various expenditure components including new types of goods and services, gift-giving behavior, consumption studies, and historical spending trends. The BLS uses the data to periodically revise the Bureau's Consumer Price Index (CPI). How might you use this type of information? Let's take a look at a pharmacy. A careful analysis of the CES data for prescription drugs reveals that:
By itself, data like this provides some useful insights into the local market for prescription drugs. Combining it with local census data provides an excellent foundation to begin estimating local market potential. It is also useful in analyzing alternative store locations. How do you find information like this on the Internet? For experienced Internet users simply to the Bureau of Labor Statistics Home Page at http://stats.bls.gov/. Once at the BLS Home Page simply select the following options from the BLS menu:
Step 5 automatically transfers you to a GOPHER server. While not as user friendly, negotiating through GOPHERSPACE is fairly easy. For example, selecting "Standard" on the first gopher page will get you into a menu that enables you to obtain consumption data reported by age, income, education, occupation and other consumer characteristics. Selecting "crosstabs" provides consumption data across two variables (i.e. age and income). For those who need a little help, look under Information Resources on the Center for Community Economic Development Home Page (http://www.uwex.edu/ces/cced/). A caution: As good as the CES data is, it is only one source. Like all data it has limitations. It is dangerous to draw any conclusions or make decisions based on a single source. There are many excellent information sources. Don't stop looking simply because you found the answer you want. Keep looking! Test your assumptions. The more good information you have, the better your decisions are likely to be. For additional information on this data source, click on "Information Resources" on the Center for Community Economic Development Home Page: http://www.uwex.edu/ces/cced/ |
