Spatial Demand Modeling

Spatial demand modeling is an analytical framework that estimates the geographic distribution of consumer demand for a specific product category, service type, or brand. It answers the fundamental question: how much potential revenue exists in each area, and how much of that potential is already captured by existing supply?

Models begin with demand potential—the total consumer spending available in a category within each geographic unit. This is estimated from census population counts, household income data, and per-capita expenditure rates published by consumer spending surveys. Analysts then account for supply: existing stores, service providers, or competitors that absorb portions of that demand. Gravity models or spatial interaction models distribute demand from population origins to supply destinations based on distance, attractiveness, and competition. The residual—demand potential minus captured demand—represents unmet demand or growth opportunity.

Retailers use spatial demand models to size markets and prioritize expansion territories. Healthcare networks model demand for specific specialties to plan new clinic openings. Restaurant chains estimate the revenue opportunity in areas with high daytime employment but limited dining options. Government agencies model demand for public services to allocate budgets geographically. Spatial demand modeling is the quantitative engine behind market sizing and expansion planning, translating demographic and economic data into dollar-denominated opportunity maps that drive strategic investment decisions.