Use and interpret Market Potential data
Measuring demand in an area allows for effective business investment, improves ad placement, and guides support for community issues.
Esri's Data Development team produces demographic data (known as Updated Demographics) for the United States using a variety of sources to update small areas, beginning with the latest U.S. Census base along with a mixture of other private sources to capture demographic change. Alongside Updated Demographics, Esri provides U.S. Census Bureau and American Community Survey (ACS) demographics as a point of reference for understanding growth in an area and to provide additional community details. Data tutorials educate both the novice and the expert analyst to learn more about a topic to properly incorporate Esri Demographics that are accessible within various products. In this tutorial, you will learn about the following:
- How Market Potential is defined and developed
- Why the data is used
- How to interpret the data
- The value of leveraging Market Potential data in smart map and suitability analyses
- Important data considerations
- Where to find additional resources
First, you'll learn how Esri defines these variables and why using this measure can provide valuable insight for marketers.
Market Potential data
Market Potential data provides an unparalleled insight into American consumer preferences. Specifically, the database includes estimates of demand for a product or service in an area. These estimates have been produced by a household-level survey data from MRI-Simmons. Market Potential includes data covering more than 2,400 products, services, buying styles, activities, values, and general attitudes across 35 main categories, or groups. Reference Esri's data catalog for the current variable list, as well as the other data available for the U.S. and Puerto Rico.
Available data measures
Depending on the Esri data delivery mechanism, for every category, there are two primary ready-to-use demand measures available:
Expected Number of Consumers (Buyers)
Expected Number of Consumers (Buyers) is the expected number of adults or households engaging in a particular belief or purchasing behavior. The count represents a count estimate of local consumer demand within a trade area. The a or h appended to the end of the five-digit product code identifies whether the variable represents survey responses (from the MRI-Simmons survey) were specific to adults or households, respectively. And, unless otherwise noted, demand estimates represent a 12-month reference period.
Market Potential Index (MPI)
Market Potential Index (MPI) is the ratio of the local consumption rate for a product or service in the area relative to the U.S. consumption rate for the product or service, multiplied by 100. This measure complements the estimated expected number of consumers because the value quantifies how low or high demand is in your trade area compared to demand nationwide.
Depending on how you purchased the data, a third demand variable may be available to use or can be calculated.
Expected Number of Consumers (percent)
Expected Number of Consumers (percent) is the local consumption rate, or, expected number of consumers for a product or service in the area relative to the total number of households or adults within the area, expressed as a percentage. This variable is available in Esri products such as ArcGIS® Business Analyst Web App where the pre-computed percentage can be selected in the Data Browser window as shown below. In the ArcGIS Business Analyst Web App, you can scroll over the i icon to display any data variable's metadata.
Units displays how the Market Potential item was surveyed, which indicates the base used.
However, if the demand estimates are accessed from a standalone dataset, for example, only the two primary variables (number of buyers and the MPI) are available. The local consumption rate measure must be computed using the included base variables (adults or households). Remember to select the correct base as indicated by the a or h after the five-digit product code within the variable name as indicated in the data catalog. For example, if you are targeting digital book consumers and want to compute the percentage, the correct base to use is adults (population age 18 years or older).
Using Esri's data catalog, the base is indicated after the five-digit product code.
Why use Market Potential data
Market Potential data is widely used for understanding how people think, what they value, how they spend their time, and most importantly, how it spatially varies across the country. Often, measuring demand can only be obtained in a fragmented way, but with Market Potential data you can assess these consumer demand attributes for any geographic area within the U.S. For example, market potential measures can be used to account for differences in consumer demand nationally, by city or county, or within ZIP codes or census tracts. Market Potential data allows you to keep tabs on shifting customer demand in local markets or reveal potential sales opportunities in new markets as you continue to grow your business. Whether you are running a business looking to launch a new product or a service, determine merchandise mix, or understand an area’s potential for new locations, understanding consumer demand is vital.
Market Potential data calculations
Esri’s data team calculates the Market Potential data as a current year estimate by combining current year Tapestry™ Segmentation data with the most current Survey of the American Consumer Doublebase® from MRI-Simmons. The Doublebase is an integration of information from four consumer surveys. Each survey respondent can be identified by Tapestry segment, so a consumption rate by segment can be computed for a product or service.
Here’s how the data is calculated
Data access
You can access Esri Demographics using Esri software and through apps like ArcGIS Business Analyst or ArcGIS for Excel , or ready-to-use maps from ArcGIS Living Atlas of the World . For use outside of the Esri platform data files are available in CSV, dBase, Excel, shapefile, or file geodatabase formats.
Contact an Esri data sales specialist with data questions at 800-447-9778 or send us an email to: datasales@esri.com.
How to use and interpret Market Potential data
With Market Potential data you can gain insights into where demand for a product or service is high or low across the U.S. or for any specified trade area. Market Potential Index (MPI) values that equal 100 represent national demand. Values greater than 100 represent higher demand, while values less than 100 represent lower demand. For example, an index of 130 implies that demand in the area is likely to be 30 percent higher than the U.S. average; an index of 85 implies that demand that is 15 percent lower.
One of the best uses of this data is to map the MPI. This can provide a quick way to locate where demand is high or low within any trade area as demonstrated by the interactive map below.
In addition to the MPI, you can also analyze the data as a percentage or even directly use the estimated count of households or adult consumers in an area. There are many mapping techniques that can be applied to help add additional insight in your work. Using these estimates can assist your analysis in multiple ways to ensure, for example, adequate services and products are meeting your customers’ or community’s needs.
Business scenario
To demonstrate, you'll build off of the U.S. map that shows demand for hybrid vehicle ownership to help answer a “What if” business scenario.
A small grocery store chain in the Washington, D.C. metro area is interested in attracting more customers to its stores. The owner reads a news article stating that 87 percent of consumers tend to have a more positive image of a business that supports social or environmental issues. To increase the store’s branding and highlight its commitment to being environmentally sustainable, the grocery store decides to install a free charging station (EV) at one of its four locations. By offering a charging station, they hope to gain the following benefits:
• Foster customer loyalty by supporting green initiatives
• Boost customer traffic
• Increase sales and generate new revenue streams
• Attract and retain valuable employees
• Create environmental stewardship in its community
The grocer knows that some of its customers own electric cars but does not know where the electric car owners are concentrated. The grocer also does not know where existing charging stations are located. To determine the best store to install a charging station, both Market Potential data and Updated Demographics are used to answer these questions:
- How many charging stations are currently installed and how close in proximity are they to each of the four grocery stores?
- Where are the households that are most concerned about helping the environment, owning or leasing hybrid cars, and have a high percentage of disposable income?
- Which is the best grocery store location to install a charging station?
Use location analytics
To answer the question of "how many charging stations are currently installed and how close in proximity are they to each of the four grocery stores," in Business Analyst Web App, select the Add Data option to import the grocer's locations.
All four stores fall outside of downtown D.C.
Continuing to use the Add Data option, a file from the Department of Energy containing 745 Charging Stations is imported and mapped (shown right).
Observing each store location in proximity to existing charging stations provides valuable information to determine if and where a charging station should be installed.
What you learn
As you travel closer to downtown D.C., you see a dense cluster of charging stations. In areas north and south of D.C., charging stations appear less dense in proximity to the stores located in West Springfield and Bethesda.
Leveraging location analytics can help you identify areas that may be over saturated with charging stations or areas where they are too few relative to higher local demand, which is a key piece of information for this grocer.
Use Market Potential data
Knowing a population’s characteristics-such as demand for owning hybrid vehicles or understanding consumers' concerns for the environment-allows businesses to enhance their marketing strategy for new products or services.
Market Potential items are listed in the ArcGIS Business Analyst Web App Data Browser under the Behaviors category.
The hybrid vehicle variable can be found in the Automobiles & Automotive Products group.
Variables such as Likely to buy eco-friendly vehicles or Interest in helping the environment are located in the Psychographics & Advertising group.
These data are represented as an estimated count, the count expressed as a percent, and an index.
In this scenario, the index was chosen to quickly identify trade areas with above national averages.
Define areas using the Smart Map feature
In previous lessons, you learned that you can start gathering information for a geographic area by using the ArcGIS Business Analyst Web App to run reports or infographics . For this tutorial, you'll use two map analytical tools: Smart Map Search and Suitability Analysis to answer the next set of questions.
Which neighborhoods contain households that are environmentally conscientious, drive hybrid vehicles, and have sufficient disposable income?
To start, you will run the Smart Map Search tool. This allows you to select a maximum of five criteria and then further analyze the areas that match your selected characteristics. For this example, use the following variables and ranges for the search criteria:
Total households Population age 18 or older Market Potential Index > 100 for households owning/leasing hybrid vehicles Market Potential Index > 100 for adults interested in helping the environment, Areas with 40 percent or more that have disposable incomes greater than $100,000
The following graphic shows the results of the Smart Map Search tool:
What you learned:
- Census Tract areas shaded in gray meet the Smart Search criteria. Out of nearly 1,400 census tracts in the Greater Washington, D.C. metro area, 369 tracts met the criteria.
- Most of these areas are concentrated west of the District of Columbia.
- All four grocery store locations reside near or within the highlighted areas.
The results from a Smart Search in Table format.
Run a suitability analysis
Up until this point, Market Potential data has helped the grocery store owner understand where consumers exhibit the highest demand for owning hybrid vehicles and whether the area is more likely to be concerned about environmental issues. Knowing which areas have high disposable incomes and how close charging stations are to their existing stores should also be taken into consideration. This type of information helps you gain a better perspective of not only where most people are likely to afford and drive hybrids but which charging locations customers would ultimately use to charge their vehicles. But one question remains.
Which existing location would be optimal for the installation of a new charging station?
To identify the best site, run the Suitability Analysis tool. This tool qualifies, compares, and ranks candidate sites based on how closely they adhere to criteria that you select and define. The analysis was run using 10-minute drive-times around each grocery store along with a set of individually weighted criteria.
The store owner has determined that knowing where existing charging stations are located is the most important factor in their decision-making process. This criteria is assigned with the highest weight in the suitability criteria, followed by the Market Potential Index for households that own or lease a hybrid vehicle.
The result of the suitability analysis shown in the graphic indicates a ranking by color-coding each grocery location. A value of "1" represents the top ranked location.
The same result can be displayed showing each store's 10- minute drive time trade area.
The color ramp is applied to color-code the sites on the map by their final score. The score is calculated by adding the weighted scores for each of the four variables selected for the analysis.
As a result of the analysis, the grocery store owner's #2 location ranks highest.
The graphic shows the Suitability Analysis tool results in table format.
This map provides a closer look at the top-ranked location and proximity to existing charging stations from the suitability analysis.
Most existing stations are located near Bethesda and Chevy Chase, Maryland.
What you learn
The table provides a breakdown by store of the suitability results. For this scenario, the owner's #2 location, has the highest suitability score of 0.85 (Final Score). This score is calculated by adding the weighted scores for each of the four variables used in the analysis.
Learn how the Suitability Analysis tool calculates the weights.
The Business Analyst Web App Suitability Analysis tool results in table format.
Grocery Market #2 scored had the second lowest number of charging stations, while having the highest number of householders with disposable incomes of $100,000 or more. Other noteworthy statistics include ranking second for number of households (52,674 not shown), and Market Potential Indexes that measure either 67 or 77 percent higher than the national average.
This business scenario demonstrates how Market Potential data can help businesses make smarter data-driven informed decisions.
Data review and considerations
When using Market Potential data it is important to reference the correct base. Market Potential variables are calculated for either adults or households. Bases are used to create counts of expected consumers and percentages of expected consumers. The a following the five-digit product code denotes an adult base (population 18+); the h denotes a household base.
First, determine whether to use Market Potential counts of expected consumers, the index, or a percentage. Use count figures when you need to know the estimate of market size (demand) for an area. Use the index when you want to quickly compare relative demand to national trends. Use percentages for an estimate of the market share in an area.
Time periods may vary by item. In general, Market Potential items refer to consumption over a 12-month period. If the reference period is something other than 12 months, it will be noted in the variable description.
To start using Market Potential data you can map the data, using the Above and Below map style in ArcGIS Online . This map theme provides allows you to visualize data compared to U.S. averages, allowing the data to breathe within upper and lower breaks that define where high and low values reside.
Next steps
In this tutorial, you learned about the basics of Market Potential data, how to interpret the data, and the significant impact it has on businesses. Additional data tutorials in two series are available. Click the links below for continued data exploration, learning, and ways to access the data.
Learn more
Data methodologies
Market Potential data estimates are developed from survey data from MRI-Simmons and Tapestry Segmentation to provide the expected number of consumers and a Market Potential Index (MPI) for thousands of items. Represented as point-in-time estimates as of July 1, the data is available for Esri’s standard geographic areas and for any user-defined polygon such as a ring or drive time.
Frequently asked questions
Use the data reference page to help answer additional questions about Esri Demographics.
Helpful links:
Connect with us
If you have a topic you would like covered in a data tutorial to help you better understand U.S. data, send us an e-mail with your topic idea.