Media Econometrics from a Used Car Dealership example
Project Objectives and Analysis Scope Project Objectives 1. Can we evaluate the effectiveness of multi-channel marketing in terms of units sold and return on investment? 2. Can we provide insights in to future investment allocations across media that will drive unit sales? Analysis Scope Identify and quantify the incremental impact of marketing on car sales across all sites? Determine the ROI of each marketing investment - online and offline. Identify any synergies between key media channels. Optimise media spending across channels to increase sales.
Used Car Sales & Seasonality Dec 2010 Dec 2011 Dec 2012 Jan 2011 Jan 2012 Jan 2013 Mar 2011 Mar 2012 Mar 2013 Aug 2012 Aug 2011 Aug 2013 Seasonally recurring patterns are evident from the sales data. Sales plummet in December of each year, only to rise again in January. March and August see an uplift in used sales due to new car registration plate changes.
Modelling architecture We undertook econometric media mix modelling to understand which marketing channels have driven sales and ROI for Brand X over the last 3 years. The illustration below shows the various data components that we included in our modelling of sales units*. Digital Display (Premium & Network) Branded TV Paid Search SEO: Unique Site Visitors Radio, Press, Cinema, ITV Sponsorship Competitor TV Gross Domestic Product (GDP) Seasonality Car Sales (Oct 2010 Sept 2013 All sites
Model Performance & Accuracy Model R2 - This indicates a very high level of accuracy to the actual sales data. Forecast R2 - This indicates accuracy of the forecast validation test. Mean Absolute Percentage Error = 4.2% The average % variance between actual sales and modelled. Our modeled sales maps and predicts actual brand X sales very well.
Annual Marketing Contributions 1.4 million in marketing spend generated almost 17 million pounds in total revenue*. Total marketing accounts for about 12% of total unit sales. Radio, Digital Network Display and TV were the largest drivers of car sales. Baseline Sales Total Marketing Contribution* Average selling price is 9,600
Incremental Marketing Contributions by Month Gains from recent campaigns negated by competitive media. Baseline Momentum (Seasonality and cumulative Brand Equity) Comp 1 TV Comp 3 TV Comp 2 TV Comp 4 TV Comp 5 TV
Marketing Spend Efficiency (ROI Per 1 Spent)* Cinema, Digital Display and Sponsorship drive the most sales per 1 spent. Press activity has been the least efficient and made a loss. Branded TV
Brand X Marketing Response The dilemma is that incremental spend will not generate much more growth. This is due to the countervailing impact of competitive spend. Current TCP Spend, 1,440,798 Light Saturation Limited upside potential Based on an average selling price of 9,600
Full Marketing Spend Optimisation Sales Contribution Spend Sept 12 - Sept 13) Optimised Press 33 241,961 96,784 Radio 434 233,578 607,303 Cinema 165 21,663 56,324 Sponsorship ITV 165 165,000 66,000 Branded TV 272 355,341 146,780 SEO 126 61,200 159,120 Paid Search 100 287,662 108,975 Display Network 411 74,393 193,422 Display Premium - 0 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Press Radio Cinema Sponsorship ITV Branded TV SEO Paid Search Display Network Display Premium 1,440,798 The major investment increases should be directed towards radio, digital network display & SEO. This plan will generate +1.6% increase in sales at constant spend. 1,440,798 This plan will generate +1.6% increase in sales at constant spend.* * Assuming constant GDP Growth of 0.4% YoY
Quantifying the potential gains from Optimisation 1.6% gain in annual sales* = 232 more units = 2,224,821 Add Revenue * Average annual cars sold is 14,549 presuming a constant GDP Growth rate of 0.4%
Marketing Synergies: Radio and Digital Media* - 1,000 2,000 3,000 4,000 5,000 6,000 Separate Impact Simultaneous Activation UnitsSales Extra 43% lift in sales Digital Radio Digital Radio Radio and Digital Media are most effective when executed together. There is about a +43% synergy or additional lift due to simultaneous activation. * Digital includes SEO, Display network banners & Paid Search Marketing Synergy
Key Insights and Suggestions Much of Brand Xs media and marketing spend is neutralised by competitor spending. The result is that there is only a small upside due to increased marketing investment. Brand Xs best opportunity for growth lies in getting more out of its current investment by spending more on more productive media and less on unproductive forms. Moving marketing plans towards more integrated and coordinated execution does show substantial upside. Due to the synergies between TV, Radio and Digital Media, there are significant opportunities to drive growth through more integrated execution of these media.
Michael Wolfe CEO Bottom Line Analytics Global E: [email protected] M: 770.485.0270 www.bottomlineanalytics.com Masood Akhtar Partner, Analytics (EMEA) Bottom Line Analytics Global E: [email protected] M: +44 7970 789 663 www.bottomlineanalytics.com