[PDF] Measuring the Returns from Above the Line Media - Retail Alchemy

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Measuring the Returns from Above the Line Media

A Case Study

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Background to the study

A large, well known

retailer, having experienced a prolonged period of sales decline, wanted to understand the performance of its marketing mix and how this might be further optimised to help alleviate some of the decline seen so far The retailer in particular was keen to understand the performance of its Direct Mail program vs other media channels, having historically invested most of its budget within this area Of particular interest was the role in more traditional channels (TV, Radio etc) in promoting long term brand health over the more short term, direct impact of activity such as Direct Mail Additionally, the retailer wanted to understand the true

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through digital being driven by other media channels Finally, the retailer was keen to understand exactly what its projected total annual media spend would deliver so that it could set the right budget to return sales to growth going forward www.retailalchemy.co.uk A statistical process that uses various data sources to assess the level of mutual correlation between a dependent (KPI) variable and multiple explanatory variables͟͞Dependent VariableExplanatory variables

SeasonalityPriceCompetitorsMarketing

Example equation:

Economy

Seasonality

Our methodology: the basics

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Key insights: measuring Short Term Channel ROIs

£- £10.0 £20.0 £30.0 £40.0 £50.0 £60.0 TVRadioVODOOHPrintSocialDisplayPPCAffiliatesDirect Mail ROI Campaign 1Campaign 2Campaign 3Campaign 4Campaign 5Campaign 6Campaign 7 Our analysis found that ROIs vary dramatically from channel to channel with most Digital Channels performing strongly whilst Direct

Mail performs poorly

Whilst ROI is obviously impacted by the disparity in spend between channels, the results indicate that the retailer was over invested in Direct Mail and dramatically under invested in channels such as

Social, Display, Affiliates and PPC

Traditional channels such as TV, Radio, Print and OOH meanwhile also prove to play a role in delivering profitable sales growth, albeit at slightly lower rates of return

ROI by media channel

www.retailalchemy.co.uk Key insights: measuring the long termimpact of media channels on brand health We were thus able to estimate both the short and long term ROIs of the retailers media channels providing a much more comprehensive view of channel performance The key takeaway here for the Retailer was that although short term ROIs from TV were on the lower, TV was proved to be as effective as many of the other channels once the long term impact had been factored in Media impact on Purchase IntentLong&ShortTermROIs: TV By modelling purchase Intent over a 3 year period and controlling for the influence of outside factors such as those of other operators in the transport industry and the economy, we have been able to detect an increase in Purchase Intent levels from the latest media campaign

Correspondingly by

using historic Purchase Intent and sales data we have been able to detect a positive correlation between movements in

PI and movements in sales for the retailer

- 0.5 1.0 1.5 2.0 2.5

05/06/201705/07/201705/08/2017

Incremental Increase in PI

TVBrand DisplaySocial

£- £0.5 £1.0 £1.5 £2.0 £2.5 £3.0 £3.5 £4.0 £4.5 £5.0 Campaign 1Campaign 2Campaign 3Campaign 4Campaign 5Campaign 6Campaign 7

Short TermLong Term

www.retailalchemy.co.uk Key insights: assessing the true levelofincrementalityfromDigital

By constructing an auxiliary model of various digital channels that explained variances in click through rates as a function

of spend on other media channels (as well as

environmental factors) we were able to determine the true level of incremental sales driven by each channel

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toother channels, digital channels themselves are, nonetheless delivering high levels of incremental sales Sales

Auxiliary Digital Model

65.3%
1.4% 6.8% 19.1% 2.2% 5.3%

NaturalOOHPressDisplayCinemaTrainline TVSocialTV

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Key insights: assessing optimum spend per channel

One often overlooked relationship in marketing is the relationship between

ROI and spend

In general terms, the more that is spend on a media channel then the lower the ROI that will result as the marginal revenue gain associated with attracting more and more customers drops until it fails to outweigh the cost of doing so By analysing this relationship for each media channel, we were not only able to explain the pattern found in historical ROIs, but also determine the

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deliver an ROI that made sense given the retailers margin

Relationship between ROI and Spend

£0.00

£1.00

£2.00

£3.00

£4.00

£5.00

£6.00

£7.00

£8.00

£9.00

£0£200,000£400,000£600,000£800,000£1,000,000£1,200,000 ROI Spend

ROILog. (ROI)

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Key insights: budget allocation

Indeed, by plugging in the observed relationships between ROI and spend into our media optimiser, we were able to help the re

tailer determine the optimum channel splits for given levels of spend

Using the same method, we were also able to help the retailer determine the amount of money, by channel, that would need to b

e spent to arrest the decline forecast for the year ahead

Optimal channel splits: planned 2020 budget

£- £2.00 £4.00 £6.00 £8.00 £10.00 £12.00 £14.00 £16.00 £18.00

TVRadioVODOOHPrintSocialDisplayPPCAffiliateDirect

Mail ROI

OrginalOptimised

£0

£500

£1,000

£1,500

£2,000

£2,500

20162017201820192020 Predicted

Annual sales £m

£10.9

£9.1

£6.1

£7.9

£11.5

£- £2.0 £4.0 £6.0 £8.0 £10.0 £12.0 £14.0

20162017201820192020 Required

Budget

AnnualSalesForecasts

Budget required to abate decline for 2020

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Key insights: laydownvssaturation

By comparing the extent to which the effect of spend in a channel would be felt in subsequent off-air weeks (called the adstock) against the level of saturation present from week to week when on air, we were able to help the retailer assess the optimum weekly laydown strategy for each media channel From the opposite chart, its clear that ROIs could be improved for channels

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over a greater number of campaign weeks Conversely, for channels such as TV and Display ROI could be improved by simply condensing weeks on air and upping the weekly weights

Saturation rates vs media laydown strategy

0.0% 10.0% 20.0% 30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

Adstock

Average On Air Saturation Rate

IncreaseMaintainReduce

Drip Burst

Weekly weight adjustment

Laydown Strategy

TV

Display

Social

PPC Radio Print OOH VOD

Affiliate

DirectMail

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Key insights: maximum annualspend

Whilst our previous analysis around budget optimisation has focused on improving efficiency by altering channel spend as well as determining the budget needed to abate decline, another area of interest was what budget would need to be spent in order to deliver maximum profitability By running various optimal budget scenarios through our budget simulator, we were able to help the retailer determine that over 2 times their current annual budget could be spent to deliver additional sales growth without damaging profitability

Optimal budget allocation curve

£105.0 £110.0 £115.0 £120.0 £125.0 £130.0 £135.0 £140.0 £145.0 £150.0

£3.3 £6.6 £9.9 £13.2 £16.5 £19.8 £23.1 £26.4 £29.7 £33.0 £36.3 £39.6

Annual Profit £m

Annual Budget £m

Optimal budget

Thank You!

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