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TOOL BITS
HOUSEHOLD SPENDING: FIND HIDDEN MARKETS
Patty is a new business owner - she has just opened her first video
arcade. In the last issue of the Bulletin, we saw how Patty used radius
requests and demographic profiles to choose her first location. Now,
Patty returns to the Market Research Tools to develop her strategy for
promoting her new business.
Patty turns to the Household Spending tool to learn about consumer
spending on the category that interests her – spending on arcade-style
games. Household Spending reports provide estimates of market potential
for specific products and services, segmented across demographic
variables. These reports group data by categories like age of
householder, household income, household type, and more.
Patty begins her session by logging in and selecting the Household
Spending tool. At the first screen, she selects "Entertainment" as her
product category, and from the product list she selects "Pinball,
electronic video games."
For her geography of interest, she clicks on "Other" to select her
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metropolitan area, and then clicks "Go". As she looks over the report,
she sees some support for her earlier assumptions – and some new
information as well.
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Patty had expected her primary market to be under 25 years old. This
report supports that assumption. In the first category, "Age of
Householder", she sees that householders under 25 years old have a
demographic index of 152. In other words, these households are about
1.5 times more likely to spend on pinball and electronic video games
than all households on average. But those are households headed by a
person under 25. What about families with children? Patty turned to the
category "Household Type" at the bottom of the report. Households made
up of married couples with children show an index of 199 - about twice
the average of all households in the U.S. And the homes headed by a
single parent aren’t far behind, at an index of 171. Clearly the
presence of children in the home correlates to spending on pinball and
video games, as Patty assumed from the start. These families represent
a strong base for Patty’s video arcade business.
But then Patty notices something interesting. In the "Age of
Householder" category, there is another spike in the demographic index,
even higher than the Under 25 bracket. The 45 to 54 Year Old bracket’s
spending index is 164. Patty scans down the page, looking for high
index numbers. Under "Household Income" she sees that households
earning over $100,000 index at 207, or more than twice the U.S. average
in spending on pinball and video games.
A picture begins to form in Patty’s mind; she is imagining her best
prospective customers. She sees several members of a middle class
family, perhaps the father and one or two sons or daughters. Each
enjoys relaxing by playing games in arcades. Do they visit arcades
together? They might – and that’s where Patty finds the "spin" for her
new marketing strategy. She’ll promote a "family night special" at the
arcade, with 2-for-1 game and beverage prices. Once the promotion
brings customers into her arcade, she can study their playing behavior.
She predicts that the kids will head toward certain favorite games and
the parents will choose others, perhaps the vintage games they enjoyed
when they were kids. Patty doesn’t really care – as long as they enjoy
themselves, she is accomplishing what she set out to do. She is creating
happy customers – and loyal customer relationships.
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