Business Objective
Our client is an American specialty wine retailer having 200+ stores across the US. As the wine retail market has become competitive due to shrinking consumption, the marketing team faces the challenge of allocating budget amongst various channels in the most optimal method.
A comprehensive solution framework was developed to help the client understand the contribution of various marketing channels in driving incremental sales and new customer acquisition, quantify marketing effectiveness (ROI) for all 20+ media channels across 30+ markets, simulate various marketing spend allocation scenarios, make optimal spend decisions aided by robust models that also had full transparency.
Challenges
- Market behavior was very different due to regulatory restrictions on product offerings, pricing and promotion tactics and response to marketing stimulus is hence varied
- Multiple models (90+) had to be developed across Markets and Categories (Wine, Spirits & Beer) to address market diversity
- Inconsistencies in media data as it was sourced from multiple external partners which resulted in challenges in reconciliation (~1000+ spreadsheets had to be processed)
- Effect of new store launch related marketing spends had to be factored in.
Solution MethodologyÂ
- Data from multiple sources were acquired, cleaned, standardized, and consolidated
- Persistence effects of advertising were incorporated with relevant ad-stock and decay transformations
- Multivariate time series models were developed using core marketing variables, and other relevant factors (macro-economic indicators, new store impacts, seasonal factors)
- The impact of traditional, digital media and new customer activities (e.g. wine tasting sessions) on incremental sales were quantified to measure ROI for each activity
- A web-based tool to help managers simulate marketing spend scenarios and compare the corresponding ROI was developed
- A semi-automated process to refresh the models every quarter was put in place
- Finally, a quarterly executive summary report providing insights on the QoQ & YoY change in the impact of the marketing activities and their corresponding reasons was also put in place
Business Impact
- USD 14MM in incremental annual sales contributions and USD 3.6MM in annual gross margin contributions due to reallocation of spends across more efficient marketing channels
- 32% gain in overall marketing efficiency driven by 1% increase in media spend
- Entire marketing spend planning process was transformed to be more data and analytics driven
