How PC City Increased Total Revenue by 6% with Same Media ... · How PC City Increased its Total...

How PC City Increased its Total Revenue by 6% With the same Media Expenditure Understanding the complete marketing ROI for PC City Google/PC City/DSG International Spain, October 2010

Source: Google/PC City/DSG International, How PC City Increased its Total Revenue by 6% With the same Media Expenditure, Spain, October 2010

Agenda

1 Background, Objectives, and Methodology

2 The Offline World

3 The Online World

4 Marketing ROI

5 Understanding Digital

6 Summary and Conclusions

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Marketing: Background, Objectives, and Methodology


PC City is an chain of computer superstores and e-commerce operation that operates across Europe. As part of the the DSGi group PC City (& PC World) it has stores and e-commerce operations across UK, Spain, Portugal, Italy, Greece and Sweden.

The business in Spain started via the acquisition of Ei System and today operates 32 stores across the country.

The business started its e-commerce operation over 5 years ago and has used both online and offline media to drive traffic to its site PcCity.es.

Online advertising historically has been deployed at low levels with Catalogues and TV having been the dominant historical media (~95% of PC city media expenditure).

Background

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•  To understand and quantify the effectiveness of PC City’s marketing and media spend in driving business outcomes

•  This across both online and offline businesses •  To understand the role of Pc City’s paid and owned media (website) in driving sales

•  To optimise the marketing and media mix to generate greater revenue from the same level of investment

Objectives

Methodology

•  Using Pc City’s internal and proprietary data (May 2007 – Feb 2010) •  Sales volumes and revenues (split by channel (online vs offline) •  Pricing •  Website data (visitors, conversions) •  Marketing and Media costs

And data from a variety of other internal & external sources (including search volume data from Google.es) Multiple econometric models (multiplicative logarithmic time series) were constructed to understand total Marketing ROI by media channel and inform future optimal media resource allocation

Research Objectives and Methodology

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94%

Understanding the PC City business

Offline sales

Online sales 4%

2% Reserved Online, collected Offline

Pc City owns and operates 32 stores across Spain

Although only Laptops, Netbooks and Desktops were analyzed as part of this work these 3 lines of business represent approx 85% of Pc City revenue

Business Split Online/offline - Revenue Business Split Online/offline - Units

96%

Offline sales

Online sales 3%

1% Reserved Online, collected Offline

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Marketing: The Offline World What are the drivers of offline sales?


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Base Sales 42%

Seasonality 8%

Regular price 12% Price promotion 2%

TV Advertising 5%

Catalogues 15%

Press 3%

Radio & OOH 1%

Other drivers 1%

11% of offline conversions driven by

Pc City web traffic

11% of Pc City’s offline in-store sales comes as a result of visits to it’s website www.pccity.es.

Offline Sales

volumes

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es (u

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Understanding the drivers of offline sales

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Base Sales

Seasonality Regular price

Price promotion

TV Advertising Catalogues Press

Radio & OOH Other Web traffic to

pccity.es

42%

12%

8%

2% 5%

15%

11%

3% 1% 1%

Understanding the drivers of offline sales

62% of PC City sales are non marketing drivers

38% of PcCity sales are influenced by Marketing

Offline Sales

volumes

The Website is responsible for 11% of offline revenue –

which is nearly 1/3 of all sales driven by marketing

Catalogues and the internet are the biggest drivers of offline sales.

Base sales volume includes influence from existing store network, employee workforce, existing infrastructure

distribution, seasonality, underlying consumer

demand etc..

The Website is responsible for 11% of offline revenue – which is nearly 1/3 of all sales driven by marketing

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Marketing: The Online World What are the drivers of online sales?


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10%

Base 32%

Base 32%

Web traffic to pccity.es 25%

Price promotion 23%

TV Advertising 3%

TV Advertising 3%

Press 3%

Press 3%

Catalogues 4% Seasonality 10%

Seasonality 10%

Incremental online sales are driven by predominantly by price and underlying demand.

Graphic quantifies the

drivers of incremental

sales volumes – i.e. sales above

the modelled norm

Understanding the drivers of incremental online sales

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Understanding the drivers of total sales 16% of the PC City Business is driven by the Web. 10% coming via research online but purchase offline, a further 4% via ecommerce and 2% reserved online.

16% business driven by

online

10% Via Online to Store

6% Via Online

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Marketing: Marketing ROI

How to optimise media spend to return


Due to the natural variance in both spend and sales levels over the analysis period (May 2007 – Feb 2010) the models are able to plot response curves for each of the different media cannels

Understanding the effectiveness of marketing spend

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- 50,000.00 100,000.00 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00

Wee

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s (U

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Weekly Media Spend €

From understanding historical sales response to media spend it is possible to understand the ROI of each channel

Additionally understanding the responsiveness of each media in driving sales it is possible to define an optimal marketing mix

Media X

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4,300

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- 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Wee

kly

Sale

s (U

nits

)


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- 50,000 100,000 150,000 200,000 250,000 300,000 350,000

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Sale

s (U

nits

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Increase spend in

4,100

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4,700

4,800

- 100,000 200,000 300,000 400,000 500,000 600,000

Wee

kly

Sale

s (U

nits

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Historical spend

Optimal spend

Historical spend

Optimal spend

Optimal spend

Historical spend

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- 10,000 20,000 30,000 40,000 50,000

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s (U

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Historical spend

Optimal spend

An Optimal mix for PC City would mean reducing investments in TV and up-weighting investment in other media channels.

Note that the optimal recommendation takes into account the natural constraints (i.e. the available inventory) of each media.

Absolute values not shown due to client confidentiality – ticks represent and indicator of ‘000 Absolute values not shown due to client confidentiality – ticks represent and indicator of ‘000

Absolute values not shown due to client confidentiality – ticks represent and indicator of ‘000 Absolute values not shown due to client confidentiality – ticks represent and indicator of ‘0,000

catalogues

TV

Paid search

Press

Increase spend in

Increase spend in Decrease spend in


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€1.40

Paid Search 9%

Catalogues 42%

Outdoor 3%

Press 3%

TV 43%

Paid Search

1%

Catalogue 32%

Outdoor 1%

Press 2%

TV 64%

6% increase in revenue

Last year 23 Aug – 11 Oct 2009 (8 weeks) Optimal Mix for 24th Aug – 12 Oct 2010 (8 weeks)

Aggregate Marketing ROI

Aggregate Marketing ROI €1.10

With the same budget a more optimal mix delivers an 6% revenue

Understanding of ROI of display within the media mix was compromised by a lack of data relating to Display investments over the period analysed.

Using the optimal media mix

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15,000

17,000

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25,000

27,000

29,000

31,000

33,000

35,000

Uni

ts (S

ales

)

Total Campaign Investment

Historical BTS Investment

Optimal Mix

Historical Mix

Opportunity = 6%

Total Campaign Marketing Response Curves The optimal media mix represents a 6% increase in sales


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Online ROI €4.68

The ROI of each media is based upon the media investment and return .

Paid search is the most cost efficient media in the mix, more than 10x the closest competing media

€0.7

€1.28

€1.12

€0.94

€1.36

€1.50

€31.80

Offline ROI €27.14

1€ invested in paid search delivers €4.68 in revenue online and €27.14 in

revenue offline.

Some very low level cross channel ROI evident across

press & catalogues.


Return on investment per media

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Assuming all other media investments are held at the current level, it is possible to understand the effectiveness of incremental media spend on sales

Further €10k in Delivers … additional Units sold

TV 9

Press 67

Catalogues 13

Paid Search 131

Increases in Paid search investment will deliver the greatest return



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Marketing: Understanding Digital


Increasing position of Paid search has a noticeable effect on both online and offline revenue

Average position

% increase in online sales

% increase in offline sales

Generic search terms across Laptops, Notebooks and Desktop

1.0 2% 9%

1.7 1.7% 7%

3.5 - -

3.5

Average Position Generic Keywords

3.1

Average Position Brand Keywords

Average Cost per Click

Historical Paid search metrics for PC city

Paid search position and revenue

€0.17

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Drivers of Branded search queries In addition to driving web traffic and ultimately sales, Generic Paid Search impressions also drive 4% of branded query volume

Base Online Queries 78%

Seasonality 15%

Paid Search Impressions

4%

Catalogues 2%

TV 1%

Press <1%

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Marketing: Summary & Conclusions


Summary and conclusions

1 16% of PC City’s business is driven by the web

2 Each Euro invested in Paid search delivers €27.48 in revenue offline and €4.68 online

3 By shifting the media mix Pc City could increase total revenue by 6% with the same media expenditure

4 By changing average page position of paid search would increase online sales by 2% and offline sales by 9%

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