STI: Spending Patterns - Methodology

Your Data Building Block for Identifying
Consumer Spending and Price Potentials

STI: Spending Patterns delivers insight on consumers' spending habits on over 600 common goods and services, and the amount they are willing to pay for over 100 products and services. This data can add considerable insight to market research and allow companies to make smarter decisions on site locations, merchandising, and marketing. It also uniquely identifies the spending habits of consumers living in dormitories (group quarters).

Consumer spending patterns are a powerful, yet often overlooked, dataset that businesses can use to assess market potential, geographically identify consumers who are likely to purchase specific products and services, and learn how much consumers are willing to spend on common purchases. Because STI: Spending Patterns is based on the most up-to-date consumer spending data collected from the Bureau of Labor Statistics (BLS), it gives companies the best possible insight in these areas.

The consumption habits and price propensities revealed in STI: Spending Patterns are created using the comprehensive consumer spending data collected every year (and typically released every December) by the BLS in two survey formats conducted in about 48,000 households representing about 120,000 consumers.

Synergos Technologies Inc. takes the tens of thousands of individual surveys and enters the consumers' spending data into models. The raw data is modeled according to several key demographic factors until it is possible to determine the typical spending patterns and price potential of every U.S. household. The data is modeled down to the block level. Data variables include a weekly per capita, an average spending per capita per week, and a consumer price potential by spending category.

The predominant factors used to model the data are income, age, and geographic regions. Other demographic factors are applied to the model, such as marital status and children. But income, age, and region are the three dominate factors that have the greatest impact on determining what consumers currently spend on specific products and services, and what they will be willing to pay for those items in the future.

Overview of the BLS Consumer Expenditure Survey

The Consumer Expenditure Survey (CE) program collects information from the nation's households and families on their buying habits (expenditures) and numerous household characteristics, for example, income, age, education, and presence of children. Data collection is carried out by the U.S. Census Bureau under contract with the BLS. The program consists of two consumer surveys, each with its own questionnaire and sample:

1. The quarterly interview survey

2. The weekly diary survey

The two survey components are designed to collect different types of expenditures. Together they deliver important data that allows data providers to relate the expenditures and incomes of consumers to the characteristics of those consumers.

1. The Quarterly Interview Survey
   
   In the Interview Survey, each consumer unit (household or single residence) is interviewed every three months over five calendar quarters. In the initial interview, information is collected on demographic and family characteristics and on the consumer's inventory of major durable goods. Expenditure information is also collected in this interview, but is used only to prevent duplicate reporting in subsequent interviews. Expenditure information is collected in the second through the fifth interviews using standardized questionnaires. Income and employment information is collected in the second and fifth interviews. In the fifth interview, a supplemental section is administered in order to account for changes in assets and liabilities over a one-year period.
   
   The Interview Survey, which includes hundreds of detailed questions, is designed to obtain data on the types of expenditures respondents can recall for a period of three months or longer. These include relatively large expenditures, such as property, automobiles, and major durable goods, and expenditures that occur on a regular basis, such as rent and utilities. Each consumer is interviewed once per quarter for five consecutive quarters.

2. The Weekly Diary Survey
   
   In the Diary Survey, respondents are asked to keep track of all the purchases they make each day for two one-week periods. Participants receive each weekly diary during two separate visits by Census Bureau interviewers. Respondents are asked to report all expenses (except overnight travel) that they incur during the survey week.
   
   The Diary Survey is designed to obtain data on frequently purchased smaller items, including food and beverages, both at home and in food establishments, housekeeping supplies, tobacco, nonprescription drugs, and personal care products and services. Each consumer records expenditures in a diary.

Because the two survey components are designed to capture different types of expenditures, integrating their data combines the important features of both. The integrated data provides a complete accounting of consumer expenditures and income.

Consumer Price Potential — Unique Feature of STI: Spending Patterns

Unlike any other consumer spending data product available today, STI: Spending Patterns gives marketers critical insight into consumers' spending patterns and how much they have the propensity to pay for products and services in the future. With one product, market researchers can learn not only consumers' current spending patterns, but also how much they have the propensity to spend on the items they purchase.

For example, say the average expenditure of the average household in the U.S. on music CDs is $10. Say this figure was calculated based on a total U.S. expenditure of $70,000 for CDs by the 7,000 consumers interviewed by the BLS. However, all of the CDs bought were purchased by only 10% of the 7,000 households interviewed. The means that only 700 consumers bought all $70,000 worth of CDs. And this means that each of the 700 consumers spent an average of $100 on CDs per year. As a result, if this consumer is your current or potential customer, it is smart to know that he or she has the potential to spend $100 on CDs each year.

Price elasticity is also revealed in STI: Spending Patterns. For example, the data will reveal that, say, consumers in a particular geographic region are currently spending $2.90 on a loaf of bread, but are willing to spend $3.50 per loaf. This insight can help companies better understand critical merchandising issues that directly impact profits.

Gaining this enhanced consumer spending potential insight is significant, because it provides the power to help you make smarter decisions about moving into new markets, stocking merchandise, introducing new products in existing markets, determining pricing strategies by geography, and creating highly targeted promotional campaigns.

For more information on the BLS's Consumer Expenditure Survey (CE) program, go to http://www.bls.gov/cex/.

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