used car dealership econometrics case study_bla global 2014

14
Media Econometrics from a Used Car Dealership example

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Snippets from a light automotive client Media Mix Model. Interestingly there was very limited opportunity for growth, except for through integrated media execution.

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Page 1: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

Media Econometrics from a Used Car Dealership

example

Page 2: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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.

Page 3: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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.

Page 4: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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

Page 5: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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.

Page 6: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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

Page 7: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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

Page 8: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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

Page 9: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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

Page 10: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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

Page 11: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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%

Page 12: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

Marketing Synergies: Radio and Digital Media*

-

1,000

2,000

3,000

4,000

5,000

6,000

Separate Impact Simultaneous Activation

Un

its

Sale

s

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

Page 13: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

Key Insights and Suggestions

Much of Brand X’s 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 X’s 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.

Page 14: Used Car Dealership Econometrics case study_BLA GLOBAL 2014

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