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Purchasing Power Index

Explanation

In simple terms the general purchasing power can be described as the sum of all net incomes per region. It is the most important index for the relative income differentials of the residential population between different areas and, as such, is an important indicator for the consumer potential.

Who needs Purchasing Power Indices?

The purchasing power provides a good indicator in the calculation of regional potential for all companies who sell directly or indirectly to the end-consumer. The sales of higher value durable and non-durable consumer goods as well as of travel and services, real estate, the utilisation of leisure products and activities, the purchase of new vehicles etc. are all directly dependent on the level of the purchasing power or the available income amongst the population.

Possible uses in your marketing activities: 

• Focussing the activities on rewarding target areas
• Addressing the most powerful buying sectors with appropriate marketing activities
• Targeted planning of advertising campaigns
• Assessment of the performance of the sales team
• Establishment of field-force regions

 

Examples for use of a GIS

Advantages:

• Show user-friendly results at a glance
• Make income differentials obvious
• Determine worthwhile target groups for individual measures
• Reduce expenditure in terms of time and money by indicating the correct focus.

Definition and Methods

Purchasing power = sum of all net incomes per region
Basis: official income tax statistics (earned and unearned income figures)
Amplified by: directly paid state benefits (e.g. unemployment benefit, child benefit, pension)
Validated by: economic information from economic research institutes

Identifier: e.g. official district identity number, postcode or region identity number
Description: e.g. official name of district or region
Population: Population of the area and number of residents expressed as figure per
thousand of population of region, Purchasing power in € per resident, Purchasing Power as an index and expressed as figures per thousand of population and year
Households: Number of households