Canadian retailer facing profit pressure from parent company

Challenge

The client was a large national department store chain with several billion in domestic sales. It used multiple media vehicles to drive traffic and sales, including broadcast(TV, print, and radio), catalog, direct mail, and sponsorships/events. Media spending typically topped $100 MM across 10 or more specific vehicles. Price discounts were also a frequently used marketing lever. In order to deliver more profit to their corporate parent, the client needed to increase media and promotion productivity at current budget levels.

Solution

Marketing Analytics ran sales models and formal marketing optimizations covering 300 product lines from 45 divisions. The models linked sales to a wide range of drivers and drew from sources such as store-level POS databases, media agencies, and the client’s merchandising and finance departments.

According to the mix models, discounts and combined categories of print media delivered the largest incremental sales contributions. The optimization showed 7% profit growth from reallocating the current media budget and holding discounts at historic levels. There was potential for even greater improvement if the client changed both media mix and discount programs for maximum profit. Importantly, limits on number and size of changes were applied in consultation with the client to ensure the new plan was both executable and business-justified. In the optimized media allocation, most types of TV advertising were reduced while Print and Radio vehicles split 50/50 between increased vs. decreased spending.

The client has repeated this exercise annually for several years, and the optimized plan has become the starting point in their business planning process.