The Steps to
“Auto Aftermarket”
An example of how ad spending
estimates in Borrell Associates’
Compass service are derived
The calculations and assumptions used to
develop the estimates shown in Compass
and other Borrell Associates data products
have been under development for more than
30 years. We constantly work to improve
their utility and quality.
What follows is a generalized diagram of
this process – the steps necessary to convert
a body of disparate data into the estimates
you use and depend upon – for a specific
advertiser category:
553 (Auto Parts Retailers).
Sidebar: How are the Borrell Associates ad categories selected?
The central purpose of Borrell Associates’ data products is to measure
locally generated, locally spent marketing dollars. The 100 categories chosen
total – between them – more than 90 percent of local totals in the U.S.
markets we measure. However, Borrell Associates measures all marketing
spending. At a customer’s request, we can include any advertiser category.
Step 1: IRS and D&B Data Link
The IRS compiles and distributes detailed reports covering
the tax filings of U.S. businesses.
• Borrell Associates takes these data and segregates them
by business category (SIC/NAICS).
• The ad spending of the segregated data is compared by
employee size/asset level index.
• The index is compared to D&B employee size/revenue
data at the national level.
In this case, the IRS data combine auto dealers and auto aftermarket.
However, detailed estimates on the former are available from several
secondary sources (NADA, NIADA). It is relatively easy to back the auto
aftermarket total from the sum.
Bonus!
The differences between ad spending by size of business are direct inputs
to our ad spending cycle analysis – the basis for Borrell Associates’ SMB work.
Step 2: Ad Spending Detail
Using the IRS/D&B data produces a total spending estimate
by Employee size cohort. Specific secondary data must be
drawn to provide spending by media choice:
• Several sources are available. AAIA (Auto Aftermarket
Industry Association) estimates have proved valuable,
as have several surveys of small business during the
past 10-12 years.
• Distribution of SIC Group 553 data also depends on
demand for auto aftermarket retail at the county level,
indexed to U.S. averages. Necessary information is
available from a number of sources. A total of at least
three separate sources are used for each SIC group. SIC
Group 553 currently uses four.
• Distributed estimates must also be weighted for “media
absorption” – that is, the indexed use of specific media
at the county level.
Step 2: Ad Spending Detail, continued …
The result of these steps is a spending estimate for each of
the nation’s 24 million business locations – as defined by
Borrell Associates’ principal business data provider, Dun &
Bradstreet.
These individual estimates will be put aside – for now.
They will become useful later in the process.
Finally, the totals from this step will be summed by media
choice to create a national estimate.
Step 3: Consolidation
Until now, the separate employee-size-cohort estimates
for SIC 553 have been summed to create a single combined
estimate, due solely to the storage/computation limitations of
the Microsoft platform.
In the near future, the increased capacity of Borrell
Associates’ new SQL platform will remove the necessity for this
step, allowing separate employee-size-cohort estimates for
every ad category analyzed.
Upgrade
Elimination of this step will make local estimates more accurate, and
provide added information for our clients and their customers.
Step 4: The National Estimates
• The SIC Group 553 estimates become part of a national
estimate of ad spending.
• This estimate, in turn, is compared to a second – separately
drawn – estimate of media receipts. This second estimate
relies on SEC filings and secondary data from a number of
media associations (NAA, RAB, TVB, etc.), as well as D&B
listings.
• If both compilations are sufficiently accurate, the totals for
both should be in rough agreement (within 3 to 5 percent).
• If this threshold is not met, more data analysis is performed
until they do agree.
Basic Assumption
At the national level, marketing receipts equal marketing expenditures.
Advertising is a zero sum game.
Step 5: Distribution
The work through Step 4 has created a national estimate of
ad spending. This estimate must be distributed to each U.S.
county, using a number of demographic variables.
• The estimates are distributed by media choice.
• They are also distributed by SIC group, according to
business counts by county.
Step 6: Replacement
If actual information about a media spending category or
media outlet is known, the calculated estimates are replaced in
this Step by the actual data.
Right now, about 15 percent of calculated estimates are
replaced.
Currently, no SIC Group 553 replacements are made.
Step 7: Recalculation
If replacements are made in Step 6, the U.S. estimates will no
longer foot to the originally calculated national totals (Step 3).
So, estimates not replaced must be indexed and recalculated to
once again achieve that total.
Step 8: Comparison
At this stage, the estimates reflect total marketing
spending directed to a market/county … irrespective of its
origination. The most important part of the process must
divide this total into two parts:
• Ad spending directed to the market from outside its
boundaries, and
• Ad spending originating in and spent in the market
measured.
Important!
Correct identification of the market measured is crucial to accurate
Borrell Associates estimates. The inclusion or exclusion of a county usually
makes the difference between an accurate market picture and one that
does not make sense.
Step 8: Comparison, continued …
• Going back to the original database, which contains more
than 24 million business location listings by location and SIC
group, listings for the market to be measured for SIC Group
553 are extracted.
• Spending by media choice for these listings is calculated.
• The totals are compared to the distributed estimates.
Let’s do the math …
The Math
According to the detailed database (Step 2), a market has
160 auto supply stores, with 340 employees.
These stores spend an estimated $96,200 on ads in “Other
Publications.”
According to the distributed national estimate (Steps 5-7), $90,100 is spent on
ads in “Other Publications” for auto supply stores.
96,200 – 90,100 = 6,100
So
$6,100 is ad spending directed to this market from somewhere else – the next
county or a national ad campaign. It will become the final estimate’s national
total for this SIC Group and media choice.
Expand this simple example by 100 media categories,
3,400 counties, and 27 separate data points for each
listing. That’s 91.8 million records calculated and updated
quarterly. And that’s not all …
Forecasts
Since Borrell Associates data are “per employee” based, we are
able to use the brilliant and detailed forecasts from the Bureau of
Labor Statistics as the foundation for our own work.
BLS data enable Borrell Associates to look ahead to future
employee counts by industry group (SIC/NAICS). When these are
“mapped” to D&B market data, reliable, granular forecasts of
future employee levels – and therefore, ad spending levels – can
be derived.
In closing …
We’ve covered a lot of information here, but these concepts should
stand out:
1. The Borrell Associates model uses an enormous amount of
secondary information.
2. It relies on detailed data from the Federal Government.
3. It is constantly improved and upgraded.
4. It depends on a simple, robust set of assumptions.
Since its introduction in the mid ‘90’s, thousands
of media companies have successfully used these
data to measure and meet their markets.
Please let us know about your specific questions.