Borrell Associates, Inc: Local Interactive & Online Advertising Research and Consulting

DMRs: Our Brave New World

September 6th, 2012 by Kip Cassino

More than two decades have passed since the first online ads appeared on AOL, CompuServe and Prodigy. People have gone from logging on to computer bulletin boards to surfing the Internet to riding the information superhighway to going online to “becoming interactive.” It’s now a mature medium, holding the largest share of many ad budgets. And it’s certainly no longer “new media.”

But one big thing has been missing. Unlike other media, digital is without its own geographic trading area. Television has its Designated Marketing Area (DMA®), defined by the radius of a broadcast signal. Cable companies have franchise regions, defined by the farthest reaches of its cable lines. Radio has its Arbitron markets. Direct Mail has ZIP Codes. And newspapers, yellow pages and magazines have their Metropolitan Statistical Areas (MSAs) and Core Business Statistical Areas (CBSAs), which typically track the outer boundaries of where their circulation trucks travel.

Digital media? Nothing. Digital media managers have had to toil within the confines of other media’s geographies much the way many of them have been forced to wedge their digital strategies into a traditional media business model. Those geographies, however, don’t have much to do with how consumers behave while engaging with digital media.

Enter Digital Marketing Regions, or DMRs. With deep knowledge of online marketing activity at the local level – and a lot of help from the industry – we have segmented the nation into 513 unique DMRs. Each defines a separate, integral local online advertising market. Click here to view the interactive DMR market map.

How DMRs Were Created

The development of a useful online marketing geography has been a goal at Borrell Associates for several years. Several attempts were made using secondary data from national surveys. Some used online spending as a base. Others relied on ownership of computing devices. All failed because of the sparse sample size available in rural areas. It became apparent that two very different approaches to modeling geographic boundaries for local online marketing had to be considered:

One based on inward focus toward a central point. Imagine businesses several miles outside the core trying to lure consumers to their shops.
One that maps the boundaries of outward flow for local online marketing efforts.

The questions were: What defined the central point, and what metric might define the boundaries for the outward flow? A breakthrough came two years ago. Work on a special customer project revealed that, in many user-defined markets, the local online advertising expenditures within a group of surrounding counties came close to equaling that of an area’s “core” or central county.

This relationship makes sense. If done correctly, local online marketing specifically targets potential customers likely to make the trip to the advertiser. Determining the range of this marketing effort can be difficult. It must take into account the density of the surrounding population, the number of competitors in the market, travel patterns to and from work, and usage of various digital devices. Our estimates, which look at the “import” of ad spending from surrounding areas as well as the “export” of ad spending to nearby markets, have allowed the development of defined regions that describe the reach of locally generated, locally spent online marketing efforts.

The idea of using county-level local online ad spending estimates to define a local digital advertising geography was extensively tested, including the submission of market definitions and data to several clients for feedback. After several market adjustments, we settled on a set of four rules to define DMRs. They are:

Each DMR must have a central or core county. The amount of local online ad spending in this county decides the size of the DMR.
The local online spending for each county adjoining the central county is subtracted from the “core” total, until the remaining total approaches zero, or until the area is blocked from further growth by a larger neighbor.
Negative totals are not allowed.
All counties in a DMR must be contiguous.

Using these rules, a computer program was developed to automatically map the nation into a county-level local online advertising geography. After several trial runs over the summer and feedback from local media managers, a total of 513 DMRs were identified.

The DMRs share interesting characteristics. Most are far smaller than television market areas. Many are bounded by a river or a mountain range, indicating that physical proximity is not simply a matter of distance – easy access is also part of the equation. DMRs get larger in sparsely populated areas (New England and the southwest, for example). This is simply because there is a greater distance between core counties in these areas. It’s also an indicator that shoppers in these rural areas must travel farther to shop than their urban cousins – behavior supported by other research.

Indeed, the distance consumers are willing to drive to make certain purchases – to visit a shopping mall or buy a car, for example – is pivotal to the physical size of DMRs. These geographies become larger as the ratio of local online ad spending in the “core” county to any surrounding county grows. As this ratio shrinks, so does the size of the DMR.

To further explore the DMR concept, we offer details on three of these regions: a heavily populated eastern market, a smaller southern market, and a rural western market.

DMR No. 80: Providence, RI

The Providence DMR consists of five counties in Rhode Island (Providence, Kent, Newport, Washington, and Bristol). At its core is the city of Providence, a bustling town at the head of Narragansett Bay that’s also part of the greater Boston commuting area. The Providence DMR’s total local online ad spending is projected to reach $55.2 million this year.

The area is 20 miles wide by 55 miles long – but the population is relatively high (1.06 million, an average of 965 people per square mile). There are several shopping malls within easy driving distance of any adult living within the DMR boundaries, including Providence Place Mall, Warwick Mall and Emerald Square Mall. Providence ranks 80^th among DMRs in terms of the amount spent by local businesses on digital advertising.

DMR No. 353: Havelock-New Bern, NC

This southern DMR consists of three counties in coastal North Carolina (Jones, Craven, and Pamlico). At its center is the quaint waterfront town of New Bern, situated at the confluence of the Trent and Neuse Rivers and where author Nicholas Sparks set his novel-turned-movie, “The Notebook.” The region is a quiet coastal plain community of crape myrtles and Southern history, dissected by U.S. Route 17 and benefiting from the flow of southbound travelers headed to the Carolina shores and beyond. The region’s total local online ad spending is projected to reach $5.6 million this year. Much of it comes from New Bern’s hotels, restaurants, antique shops, B&Bs and specialty shops.

The Havelock-New Bern DMR consists of about 1,350 square miles, much of it corn and tobacco fields. Its population is 127,900, or about 95 people per square mile, even though most of its residents live in Craven County. Driving distances to malls and other shopping averages roughly 20 percent longer than the same trip in more heavily populated regions like Providence.

DMR No. 77: Tucson, AZ

This southwestern region stretches from New Mexico to the edge of California – over 10,800 square miles – most of it desert. It consists of three Arizona counties (Pima, Cochise and Santa Cruz) as well Hidalgo County, New Mexico. Tucson’s major industry is land development, and it is home to both the University of Arizona and the airplane graveyard, where both military and civilian owners of airplanes bring them to be stored for later use. Local online ad spending here is forecast to reach $58.7 million this year.

The Tucson DMR’s population is more than 1.2 million – about 112 people per square mile. But this average is deceiving. Four out of five people live in Pima County, in and around Tucson. Less than 200,000 live in the rest of the region – less than 20 people per square mile. This minority is used to driving 50 miles or more to go to a movie, buy a book, or shop for clothes or a car – a 70 percent increase over the average U.S. household. Tucson ranks 77^th among DMRs for local online ad spending.

We hope you will take the time to examine Borrell’s new media geography, and that you will consider utilizing its power to help craft more accurate and efficient marketing efforts. We’d love to hear your comments and criticisms to help strengthen this market tool over the coming months and years. Please send feedback to info@borrellassociates.com, or call us at 1-757-221-6641.

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Posted in Geographies, local advertising, Marketing, Media | 1 Comment »

Mapping a Digital Future

August 3rd, 2012 by Kip Cassino

Maps have always been important. Fifteenth century mariners couldn’t have gone around the Cape of Good Hope or made it to the new world without them. How can you plan for something when you aren’t aware of its existence? In fact, if Christopher Columbus hadn’t had a map that showed India a lot closer to Spain than it really is, the people who were here already wouldn’t be called Indians.

Maps split big geographies into pieces we can understand and work with. Instead of looking at all the roads in a state, we can focus on the roads around us. Our ability to understand where we are and how to get where we want to go is enhanced. Marketing maps are equally valuable. If you run a TV station, you’re unlikely to send sales people outside your DMA – the area that defines your signal coverage. For newspapers, the NDM (Newspaper Designated Market) has long served the same purpose. Other media have maps of their own. Postal routes and sectional centers are important to direct mailers. Cable MSOs need to see where the wire has been laid.

In fact, as of right now there’s only one major media choice with no map – no marketing geography – of its own: digital media, where more marketers make their money every day. Until now, digital marketers have seen their plans shoehorned into the brown wingtips of legacy media geographies, some too big, some too small, none just right.

At Borrell, we’ve been delving into this issue for more than five years. And this year, we’ve come up with a viable solution.

In a few weeks, you will see the unveiling of our DMR (Digital Marketing Region) geography – the first effort to define a marketing map specifically designed for new media. We’d put a trademark after the name like Nielsen does with DMA™, but we have no delusions of controlling or restricting usage of the name. We want everyone using it – and giving us feedback on how it might be improved.

A DMR’s footprint is based on the boundaries of local online marketing spending. There are three key benefits of using this new geography:

Sales people can be allocated to specific areas where locally spent digital advertising is most prevalent. Coverage and closed sales can improve.
Market share can rise, as marketing efforts are compared to better-defined territories.
Benchmarking becomes more relevant, as sales organizations will be able to compare their performance with others in similar-size digital regions.

We haven’t developed DMRs in a vacuum. Other media companies have provided feedback as we’ve assembled the new shoe. It won’t end there, either. After the initial release of our DMR, we hope to get a lot of critique from digital marketers. Some may want counties added to a region. Others may want some removed. We look forward to this exchange of ideas. They will only make the geography stronger and more useful.

After all, given the share new media holds of total marketing budgets, isn’t it high time we had our own maps?

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Tags: Digital geography, Digital Map, DMR
Posted in Geographies, local advertising, Media, Projections | 1 Comment »

Planning for Change

March 26th, 2012 by Kip Cassino

It seems passé to say that the marketing world is changing rapidly, but it is. And faster than ever. A lot faster.

According to entomologists, it took nature 4.3 billion years to create the unprepossessing earwig. This is important only because some other scientists tell us today’s computing devices – the one in your pocket, under your arm, or at your desk – have about the same intelligence as an earwig.

Here’s where it gets interesting. The first semiconductor devices – “chips” with more than one circuit imprinted upon them – appeared 42 years ago. If we compare the evolution rate of the chip to that of the earwig, we get a ratio of 0.0000000097:1. That is, for every year it took to evolve the bug, it took a ninety seven hundred billionth of a year to evolve its electronic intelligence partner. If this rate continues, we’ll see chips as intelligent as we are within a decade, by 2023.

What would a world where devices are as smart as we are look like? It is impossible to envision any more than our great-grandparents could foresee the impact of plastics, automobiles, or airplanes. We are chained to the attitudes and realities of our past. Psychologists tell us that less than 1 person in 10,000 can foresee a future that’s very different than the present. Here are some examples:

In the 1850s a renowned scientist predicted that human travel by rail would prove impossible because no one could survive speeds greater than that of a fast horse.
In 1927 a prominent economist predicted that, if telephone connections continued to grow at then-current rates, by 1948 one in three Americans would be employed as a switchboard operator.
In 1950, the president of IBM predicted that five computers would be sufficient to service all computing needs of North America.

Track record aside, we have to make the effort to foresee the future. Our grandparents had nearly a century to create their future. We may have less than 12 years – and parts of the future will come sooner than that. Think of how quickly the world has turned already. In the early 1990s we used acoustic modems to access AOL at a BAUD rate of 300 bps from computers that ran DOS and sported 10-megabyte hard drives. A few years later, the future of the Web as an advertising medium was still the subject of debate. Today, we have watched online disrupt newspapers, magazines, the Postal Service, book publishing and the record industry. Mobile devices promise to eliminate demand for cameras, end landline phone communication, and change the way people shop. What will next year (and the year after that) add to the list?

Here are suggestions to help your company anticipate the future:

Determine the parts of your business model that make your organization successful.
Evaluate each according to its vulnerability to change. Use scale where 1 indicates “least vulnerable” and 5 indicates “least vulnerable.” Don’t wear blinders. Don’t limit yourself to changes that have happened already. Imagine changes that have yet to occur but which seem logical based on your experience.
Estimate how your organization would be affected if the business model elements you rated “1” were swept away by future change. That’s right. Base your future survival plan on changes to the elements you think have little or no vulnerability. After all, it’s not the anticipated changes that hurt.
Engage the best minds to help you create a plan to react to and survive the change you’ve identified.
Repeat this exercise. Re-evaluate your scores often. When you can’t think of anything new to add, ask others to help.

When you’re done, if you’ve done a good job, you will have developed a survival plan. Of course, you’ll never really be done. But you will have a good idea of what the future is likely to bring.

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