Marketing Effectiveness Analytics

For AUTO SERVICES & DEALERS

1

Situation

• Auto Services, Inc. (disguised name) is a major auto-reseller in Europe who markets second hand autos through a chain of dealerships

• ASI’s business is in a highly competitive market. Going into next year, they are seeking to understand what is working and not working in their various marketing initiatives and seek to hold their market position in the face of pressures to reduce marketing expenditures.

• Bottom-Line Analytics took on a comprehensive marketing econometrics model in order to quantify the returns and impact of ASI’s own marketing and the impact that competitor’s marketing has on their performance. This cultminated in a marketing spending optimization exercise that allowed ASI to gain moderate sales with lower marketing investments.

2

Key Insights

• The model developed here is reliable for understanding and predicting media and marketing impacts and effectiveness.

• About 12% of Auto Services’s brand car sales is due to media advertising. This amounts to about a 9.57 return in revenue per pound of media investment.

• Overall auto sales were flat over the past 12 months, at -0.1%. Whereas media investment generated a +8.3% impact, this was countered with a -8.0% impact from competitive media spend. Radio and Digital Media were the major positive drivers for Auto Services sales. The macro-economy also contributed +1.3%.

• Auto Services’s spend has limited upside potential due to high levels of saturation and the counter-impact due to competitor advertising. Stoneacre and Ford of Winsford are the two competitors with the largest negative impact on Auto Services sales.

• Car-People’s best opportunity lies with “optimizing” its current media spend. By optimizing spend and investing more in productive and less in low productive media, sales gains of +2.2% are indicated. This plan calls for large increases in spending behind Radio, SEO and Digital Display.

• Our models have found a significant “synergy dividend” between some offline media, especially Radio and TV, and digital media. This synergy and the coordination of these media campaigns (e.g. radio/TV and digital) are a major upside opportunity.

• Car-People’s sales were also found to be highly sensitive to the economic environment. Careful monitoring of the economy is indicated and business expansion is best when GDP growth is +1 percent or more.

3

Modelling Architecture

We undertook econometric media mix modelling to understand which marketing channels have driven sales and ROI for The Auto Services over the last 3 years. The illustration below shows the various data components that we considered in our modelling of sales units*.

Digital Display (Premium & Network)

The Auto Services TV

Paid Search

SEO: Unique Site Visitors

Radio, Press, Cinema, ITV Spons’

Competitor TV**

Monthly Temp & Precipitation*

CPI: Used Car Price Index*

Gross Domestic Product

Seasonality ***

TCP Car Sales (Oct

2010 – Sept 2013

ManchesterWakefieldSheffield

* not all variables we re included in the modelling** The Car Shop, CarCraft, Available Car, Fords of Winsford & Stoneacre TV Ratings*** Determined through TCP car sales data from Oct 2010 and Sept 2013

4

Model PerformanceR2=97.6%, Holdout R2=89.9%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Oct

-20

10

Dec

-20

10

Feb

-20

11

Ap

r-2

01

1

Jun

-20

11

Au

g-2

01

1

Oct

-20

11

Dec

-20

11

Feb

-20

12

Ap

r-2

01

2

Jun

-20

12

Au

g-2

01

2

Oct

-20

12

Dec

-20

12

Feb

-20

13

Ap

r-2

01

3

Jun

-20

13

Au

g-2

01

3

Model

Actual

The model shows a high level of predictive accuracy

5

Annual Marketing Contributions

86.2%

0.0%

2.9%

0.7%

1.9%

0.9%

1.2%

1.2%

3.0%

0.2%

1.8%

13.8%

Baseline

Display Premium

Display Network

Paid Search

Branded TCP TV GRPs

SEO

Sponsorship (ITV Weather )

Cinema Ad

Radio

Press

GDP Effect

1.4 million in marketing spend generated almost 13.4 million pounds in revenue sales. Total media accounts for about 12% of total sales. Radio, Digital Display and TV were the largest drivers of car sales.

6

Marketing Variance: Drivers of Growth

-5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0%

CompTV_Fords of Winsford

CompTV_Stoneacre

Baseline

SEO

Paid Search Impressions

Display Premium Impressions

Press Spend

CompTV_Available Car

CompTV_Carcraft

Branded TCP TV GRPs

Competitor Brand TV GRPs…

Cinema Ad Spend

Sponsorship (ITV Weather Spend)

GDP Effect

Radio Spend

Display Network Impressions

-4.2%

-3.8%

-1.7%

-0.4%

-0.2%

-0.2%

-0.1%

-0.1%

0.1%

0.9%

1.0%

1.2%

1.2%

1.3%

2.5%

2.5%

Annual Variance Contributiion

Digital Display & Radio were the key growth drivers. Media contributed +8.3% but competitive ad spending had a -8.0% impact.

7

Marketing Contributions by Month

(500)

-

500

1,000

1,500

2,000

Oct-2010 Jan-2011 Apr-2011 Jul-2011 Oct-2011 Jan-2012 Apr-2012 Jul-2012 Oct-2012 Jan-2013 Apr-2013 Jul-2013

Baseline The Car Shop_TV Carcraft_TV Available Car_TV

Fords of Winsford_TV Stoneacre_TV Digital Display Premium Digital Display Network

Digital Paid Search SEO Brand TV Sponsoship

Cinema Radio Press GDP Effect

Gains from recent campaigns negated by competitive media

Base Momentum (Seasonality and cumulative Brand Equity)

8

Total Auto Services Marketing Response

168,000

168,500

169,000

169,500

170,000

170,500

171,000

171,500

172,000

172,500

173,000

£- £1,000,000 £2,000,000 £3,000,000

An

nu

al U

nit

Sal

es

Annual Marketing Spend

Unit Sales Marginal Profit

Current Spend

The dilemma is that incremental spend will not generate much growth. This is due to the countervailing impact of competitive spend; and higher returns can occur by cutting back.

9

Impact of Competitor Media Spend

166,000

168,000

170,000

172,000

174,000

176,000

178,000

180,000

182,000

184,000

186,000

-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%

An

nu

al U

nit

Sal

es

change in competitor spend

Competitive spend impact does not have the same degree of saturation and therefore Auto Services’s spend not sufficient to mitigate its impact.

10

Impact of the Macro-Economy

170,000

172,000

174,000

176,000

178,000

180,000

182,000

184,000

186,000

(1.5) (1.0) (0.5) - 0.5 1.0 1.5 2.0 2.5 3.0

An

nu

al U

nit

Sal

es

GDP Percent Growth Rate

Car sales very sensitive to moves in the economy. A +1.0 percent increase in economic growth generates about a +2% increase in sales.

11

Marketing Synergies

-

1,000

2,000

3,000

4,000

5,000

6,000

Separate Impact Simultaneous Activation

Marketing Synergy

Radio

Digital

Radio and Digital Media are most effective when executed together. There is about a +43% synergy or additional lift due to simultaneous activation.

12

Marketing Synergies

-

1,000

2,000

3,000

4,000

5,000

6,000

Separate Impact Simultaneous Activation

Synergy

TV

Digital

TV and Digital Media are most effective when executed together. There is about a +66% synergy or additional lift due to simultaneous activation.

13

Effectiveness of Marketing Spend by Channel

£0.18

£0.70

£0.86

£1.13

£2.48

£4.34

£4.77

£5.34

£7.72

£- £1.00 £2.00 £3.00 £4.00 £5.00 £6.00 £7.00 £8.00 £9.00

Press

Sponsorship ITV

Paid Search

Branded TV

Radio

Display Premium

Display Network

Cinema

SEO

Return per Pound Spent

Cinema, Digital Display and Sponsorship drive the most sales per unit of spend

14

£0.08 £0.09 £0.10 £0.11 £0.13 £0.14 £0.16 £0.18 £0.20 £0.22 £0.25 £0.28 £0.32 £0.35 £0.40 £0.44 £0.50 £0.56 £0.63 £0.70 £0.79 £0.88

£0.99 £1.11

£1.24 £1.39

£1.56 £1.75

£1.97 £2.20

£2.47 £2.77

£3.10 £3.48

£4.39 £4.48

£4.91 £5.50

£6.17 £6.91

£7.75

£- £2.00 £4.00 £6.00 £8.00 £10.00

Print Ad 14

Radio Ad 6

Sponsorship Ad 5

Branded TV Ad 13

Print Ad 6

Sponsorship Ad 4

Radio Ad 5

Branded TV Ad 11

Sponsorship Ad 3

Sponsorship Ad 1

Print Ad 2

Print Ad 1

Sponsorship Ad 2

Sponsorship Ad 4

Radio Ad 4

Radio Ad 2

Premium Display Ad a Display Ad 3

Premium Display Ad a Display Ad 1

Network Display Ad a Display Ad 1

SEO Event 3

SEO Event 1

Marketing Returns by Ad/Campaign/Event

MROI

15

Effectiveness by Ad, Campaign and Event

41% of the ads run were identified as “low ROI” and wasteful spend.

Discontinuing these ads can save560K GBP’s.

The Marketing Investment Opportunity Matrix

• Based on model “marginal returns”, marketing investment strategy should focus on the opportunity matrix guidelines

Essential InvestmentAggressively Expand

Reallocate Significantly Reduce16

Spending Optimization

Contribution Spend Optimized

Press 286 £241,961 £65,616

Radio 676 £233,578 £383,468

Cinema 516 £21,663 £42,608

Sponsorship ITV 713 £165,000 £38,347

Branded TV 194 £355,341 £170,430

SEO 385 £45,000 £87,772

Paid Search 249 £272,438 £63,059

Display Network 1112 £68,490 £148,700

Display Premium 53 £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

£1,403,471 £1,000,000

The major investment increases should be directed towards radio, digital display & SEO. This plan will generate +2.4% in sales at 1 million spend, even with reduced total spend & discontinuing the low ROI ads.

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