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Zeta-Auto Marketing
Optimization Analysis
North American Dealerships
Agenda
• Destination & Purpose
• Executive Insights Summary
• Situation: Marketing Investment Trends
• Model Architecture
• Decomposing Marketing Effects
• Marketing Variance Analysis: Drivers of Gains & Declines
• Marketing Sensitivity Analysis, Diminishing Returns and Key Investment Thresholds
• Marketing Returns & Investment Opportunities
• Marketing Spending Optimization
• Model Validation
Destination & Purpose
• Our destination is to build valid and
predictive econometric models of Zeta-
Auto’s core business lines for the explicit
purpose of measuring marketing ROI and
effectiveness and provide direct guidance
to Zeta-Auto to significantly improve it’s
marketing investment productivity and
returns.
Executive Summary &
Insights• For the past 3 years, Zeta-Auto’s business has been adversely affected by
recessionary pressures and was a key factor driving a decline in marketing investment in 2012 and 2013
• Certainly, our econometric model found a direct and negative effect on Zeta-Auto due to the economic slowdown. However, our findings reveal that cutting marketing investment actually played a greater role in driving the company’s sales decline and exacerbated the pain. The underlying belief that marketing is primarily an expense, without considering its benefits, is a key factor that led to this unnecessary weakness in business performance.
• Together, key operational, media and consumer incentives drove incremental revenue for Zeta-Auto equal to 37% of total revenues. Furthermore, from our analysis, $125 million in advertising investment was found to return $1.9 billon in sales revenue for a $15.2 return per dollar investment. Contrary to popular myth, marketing is found to be an investment with a significant return.
• For the past year, the overall business strategy for Zeta-Auto was to invest more and rely more on financial/price incentives to customers rather than investing more in equity building advertising. While more dollars flowed into finance incentives, our modeling showed that Zeta-Auto actually got less out of this program than the prior year. Thus, relying on price incentives to cushion from the effects of a recessionary business climate is not always found to be effective.
Executive Summary &
Insights• Despite the weak business performance for Zeta-Auto, the data reveal numerous
opportunities to increase efficiencies and execution. Some of these opportunities are
found by examining where investment thresholds and diminishing returns set in.
– For example, Zeta-Auto does not need to offer consumer loans at less then 4
percent
– Dealer inventories do not need to exceed 40,000 on a daily basis
– TV advertising does not need to exceed $30 million due to diminishing returns
• When looking at marketing effects and returns for individual Zeta-Auto models, our
model reveals that the greatest opportunities are found in the SUV and E Series
models. When optimizing media spend, we likewise suggest moving more
investment into these models and, even at constant total spending, we project this
reallocation can generate +4% gain in sales.
• This same optimization scenario likewise points to greater investment in
Digital/Online & Outdoor media, constant spend in print advertising and cutbacks
across other media channels, with a reduction also indicated for investment in
financial incentives.
Total Zeta-Auto Marketing
Investments
123.9
$143.0 $142.0
$125.1
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
2010 2011 2012 2013
Incentives
OOH
Digital-Online
Magazine
Newspaper
TV
A weaker economic climate has led Zeta-Auto to significantly reduce marketing investments in
2013.
77
Zeta-Auto Enterprise Marketing Optimization
Model Architecture
5 Zeta-Auto
Models
Jan 00 – Oct 02
Five predictive models were
developed across each of Zeta-
Auto’s current brands. The data
period covers almost three years of
dealer sales information . The
drivers of each model cover all
media, seasonal and a host of
relevant operational drivers, plus the
external economy.
Short-Term TV
Short-Term Newspaper
Dealer Inventories
Vehicle
Pricing
Seasonality
Short-Term Magazines
Short-Term Outdoor
Advertising Long-Term Effect
Consumer Finance Incentives
Macro-Economy
Zeta-Auto
Enterprise
Model
Competitive Media
Competitive Incentives
North America
Dealerships
Monthly Sales
Online-Digital Media
Total Zeta-Auto Brand Incremental Sales
Decomposition
63.0%
8.2%
0.7%2.0%
3.8%
1.9%
3.1%
2.8%
5.0%
9.6%
37.0%
Base
DealerAvailability/Stocks
Halo TV
TV
Newspapers
Magazines
Digital/Online
Customer incentives, media and operational drivers make up about 37% of Zeta-Auto’s
North American enterprise revenues. A $125 million spend on media & incentives
generates $1.9 billion in revenue, where each dollar spent returns $15.2 in sales revenue.
Incremental Sales Decomposition by Zeta-Auto
Model
The SX Series & SUV have the highest proportion of marketing-driven incremental sales.
(20,000)
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Model E Model M Model SX SUV Roadster
Dealer Availability/Stocks
TV
Halo Media
Newspapers
Magazines
Incentives +
Digital-Online
OOH
Long-Term Media
Baseline
Macro Economy
Competitive
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
Ma
r.1
1
Ap
r.11
Ma
y.1
1
Jun
.11
Jul.11
Au
g.1
1
Se
p.1
1
Oct.
11
Nov.1
1
Dec.1
1
Jan
.12
Fe
b.1
2
Ma
r.1
2
Ap
r.12
Ma
y.1
2
Jun
.12
Jul.12
Au
g.1
2
Se
p.1
2
Oct.
12
Nov.1
2
Dec.1
2
Jan
.13
Fe
b.1
3
Ma
r.1
3
Ap
r.13
Ma
y.1
3
Jun
.13
Jul.13
Au
g.1
3
Se
p.1
3
Oct.
13
Nov.1
3
Dec.1
3
Base Momentum Dealer Availability/Stocks Halo TV
TV Newspapers Digital/Online
Magazines OOH Lon g Term TV
Incentives+ Compt.Media Macro-Economy
Volume
Total Zeta-Auto Decomposition of Dealer Sales by
MonthLower marketing productivity and an increasing negative impact from the macro-
economy are major challenges for Zeta-Auto at present.
Total Zeta-Auto Marketing Variance
-6.1%
-5.4%
-4.9%
-2.1%
-1.7%
-1.1%
0.2%
0.4%
1.4%
2.1%
2.2%
3.4%
-8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0%
Long Term TV
Newspapers
Macro-Economy
OOH
Magazines
Incentives+
Compt.Media
TV
Dealer Availability/Stocks
Halo TV
Digital/Online Media
Baseline Momentum
Annual % Variance
Annual % Variance
Overall sales declined -11.6%. Reduction in spending on media has generated more decline
in sales than the weak economy. Also, despite more investment in incentives, Zeta-Auto getting
less for it.
Zeta-Auto Marketing Variance by Model
1.1%
-2.3%
-7.6%
4.8%
-6.4%
-10.0% -5.0% 0.0% 5.0% 10.0% 15.0%
E Series
M Series
SX Series
SUV
Roadster
Base
TV
Halo TV
Digital/Online
Newspapers
Magazines
OOH
Long-Term Media
Incentives+
Competitive
Macroecon
The SUV and E Series stand out as the only brands with year-over-year gains. For both of
These, digital media played a major role
Dealer Availability & Zeta-Auto Sales
200,000
250,000
300,000
350,000
400,000
450,000
500,000
550,000
- 20,000 40,000 60,000 80,000 100,000
An
nu
ali
zed
S
ale
s
Avg. Daily Vehicle Stocks
Dealer inventories generate virtually no benefit beyond the average level of about
40,000 units.
Consumer Finance Rates and Zeta-Auto
Annual Sales
200,000
250,000
300,000
350,000
400,000
450,000
500,000
550,000
2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
An
nu
ali
zed
S
ale
s
Avg. Consumer Finance Rate
A significant threshold in impact is reached at a borrowing rate of about 4 percent.
TV Ad Spend and Zeta-Auto Annual Sales
430,000
440,000
450,000
460,000
470,000
480,000
490,000
500,000
510,000
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0
An
nu
ali
ze
d S
ale
s
Ne
t M
arg
ina
l R
etu
rns
Annual TV Spend $MM
Net Marginal Returns
Sales
Diminishing returns set in for TV advertising at about a $30 million level of investment
Net Returns per Dollar by Model
E Series
M Series
SX Series
SUV
Roadster
0
50
100
150
200
250
300
350
400328
301
212199
358
204
280
E Series
M Series
SX Series
SUV
Roadster
Outdoor & magazine ads for the SUV plus TV, newspaper and outdoor advertising for the
Zeta-Auto roadster generate high returns per investment.
Marketing Opportunity Matrix
E Series
M Series
SX Series
SUV
Roadster
TV
Newspaper
Magazines Media
Digital/Online MEdia
OOH Media
Incentives
$-
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
-10.00% -8.00% -6.00% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00%
RO
I p
er
Do
llar
Sp
en
t
Total Growth Impact
Marketing Investment Opportunity MatrixHi Priority Investment
Partially Reallocate Spend
Increase Investment
Significantly Reduce Spend
The SUV’s, E Series Model, Digital Media & OOH Media should be highest priority
marketing investments
Marketing Spending Optimization by Media
Marketing Contribution Current Spend $MM Optimal Spend $MM
Incentives 5,986 $25.0 $18.8
OOH 12,502 $25.0 $41.2
Digital/Online 6,000 $11.5 $14.8
Magazine 2,504 $13.5 $4.0
Newspaper 16,897 $18.8 $18.8
TV 12,192 $31.3 $27.5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Incentives
OOH
Digital/Online
Magazine
Newspaper
TV
$125.0 $125.0
The Zeta-Auto SUV’s show the most tactics with the highest efficiencies and contributions
and show the most promising upside opportunities. In addition, there are strong efficiencies on a
number of Zeta-Auto Roadster tactics.
Marketing Spending Optimization by Model
Marketing Contribution Current Spend $MM Optimal Spend $MM
Roadster 9,435 $12.5 $11.0
SUV 33,887 $48.8 $56.3
SX Series 8,582 $10.0 $8.0
M Series 5,776 $18.8 $12.5
E Series 20,944 $35.0 $37.3
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Roadster
SUV
SX Series
M Series
E Series
$125.0 $125.0
Marketing spend optimization finds a +4% lift in sales at constant spend, with the emphasis
indicating higher investment in SUV & E Series models.
Model Validation: Actual v. Model Predicted
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000Jan-1
1
Mar-
11
May-1
1
Jul-11
Sep
-11
Nov-1
1
Jan-1
2
Mar-
12
May-1
2
Jul-12
Sep
-12
Nov-1
2
Jan-1
3
Mar-
13
May-1
3
Jul-13
Sep
-13
Actual
Model
R2 =97.2%, Holdout R2 = 99.8%, MAPE = +/- 2.3%