2015-04-01 Media Markt - Sales Modelling Presented

Media Markt Sales Modelling
2015-04-01
1
Copyright Nepa All Rights Reserved
Agenda
Scope
Executive summary
Method
Overview of Internal Data and Media Investments
How much should Media Markt invest?
Where should Media Markt invest?
When should Media Markt invest?
Executive summary
Appendix
The purpose of the project is to explain how Media Markts media investments influence sales and visits in stores and online
Effects of internal end external

variables
How have media

investments influenced
Media Markts sales and
visits during the last two
years?
How do internal activities such as sale campaigns effect sales and

visits to Media Markt Stores?
How do external variables such as weather, pay days, competitor
activities etc. affect sales and visits?
What is the ROI of media investments?

Optimization of media
investments
How efficient is media in attracting customers to the stores?

Which media types are most efficient in driving sales?
What is the optimal level of investment?
Media investment effects on

brand
Do media investments drive brand value?

How does a strong brand affect sales and visits?
3
There are several ways for Media Markt to optimize media

activities, focus of this project is How much, Where and When to
invest
How much?
Focus of this study
Total
media
Total
media
budget
budget
Focus of this study is to understand how

increasing/decreasing the media budget,
changing the media mix and optimizing timing
of media investments affect sales.
Who?
How can Media Markt

optimize media
activities in order to
increase
sales/revenues?
Who
target
Who
toto
target
and
andwith
with
what
what
Where?
Media
mix
Media mix
What?
When?
Timing
of media
Content
of
investments
communication
Content
of
Timing
of media
communication
investments
(Products &
Content)
(Products & Content)
Sales modelling can partly give guidance in

who to target and what to communicate.
However, there are other tools that should be
included in order to understand the full picture
of what to communicate and to who.
Note that sales modelling is based on activities
that have previously been conducted. Hence,
total ROI and ROI for the different medias can
possibly be increased through target group
optimization and optimization of content.
4
Agenda
Scope
Executive summary
Method
Executive summary
Appendix
Executive summary
Media investments have a large effect on sales, media investments explain 20% of
all total sales
How much?
Investing 1 SEK in media gives on average 6,3 SEK back in revenues, based on a
18% margin, this gives and ROI of 1,15
Potential to increase media investments and still keep a positive return on
investment
Large potential for Media Markt to increase sales by changing the media mix
Where?
DR tend to drive sales to a great extent. In order to drive sales these medias should
have a significant share of the total budget
Online Search is however the most efficient media of all
When?
Communication in itself is more important than having high share of voice, do not
hesitate on investing when competitors invest
Media Markt are on the right track when it comes to investment timings.
What?
TV has generally lower efficiency in generating sales for Media Markt, compared to
similar cases, but is more important for brand image
Nepa suggests to evaluate content of communication in order to increase ROI for
investments in TV
6
Agenda
Scope
Executive summary
Method
Executive summary
Appendix
Q: Why is there a strong correlation between eating ice cream and

drowning?
Due to
summer!
Due to this type of relations we need

to neutralize effects on sales and
visits that are not related to media
investments. Otherwise we end up
measuring the wrong things like
seasonality or weekday effects.
8 8
When comparing sales and media investments directly, there is a risk

of reaching the wrong conclusions
Media investments/day compared to daily

sales
The reason for this relationship is because you

invest in media when you expect to sell a lot a
self-fulfilling prophecy. To see the effects of
solely the media investments, you have to
neutralize other affecting factors
Factors that affect the level of sales, besides media
investments, are:
Sales
Season
Day of week
Sales
Pay days
Etc.
Media spend
Hence, in order to determine the actual effects of

media investments on sales, as many as possible
of the other factors affecting sales need to be
neutralized
9 9
Agenda
Scope
Executive summary
Method
Executive summary
Appendix
Both sales and media investments have decreased over the last
years
Sales (M SEK)
MSE
K
2012
4,893
2013
-5%
4,693
2014
Share of
sales
2012-2013
2014
Share of
sales
17% 17%
13% 12% 13%
-9%
20122014
15%
14%
4,302
Media (M SEK)
M
2013
162
2014
Share of
spend
2013
2014
Share of
spend
20132014
35%
116
-28%
10%
10%
6%
See appendix for additional descriptive data

14%
16%
7%
12
Agenda
Scope
Executive summary
Method
Executive summary
Appendix
Variables tested for systematic effect on sales

Rain
Summer
vacation
Open stores
Inventory level
Margin
MondayThursday
Internal
competitions
Internal
Leads
Good Friday
Direct Marketing
Ascension Day
Brand
awareness
TV
Consideration
Search
Web-TV
Direct
marketing
Media
investments
Radio
Banners
Print
Outdoor
New Years
External
Easter
1st of May
Weekend
Sales
Online sales
Salary week
Swedish National
Day
Christmas
PR
Customer
Competitor
investment
Factors having a significant impact on sales in Media Markt stores are

neutralized to single out the true effect of media investments
External
effects
Seasonal effects
Areas included in the model:
Variables included in each section:
Seasonal effects
Holiday
Seasonal effect based

on sales/visits during
2012/2013/2014.
Easter holiday
Christmas and New Year

is included in the
seasonal effects
Media
investments
Internal effects
1st of May
Midsummers Eve
Salaries
Week of pay day
Weather
Number of open
stores
Store openings
Inventory levels
Margin
Traditional media
Print
Direct marketing
Television
Outdoor
Online media
Display
Web-TV
Social Media
Rain
Competitor
activities
PR data
15
A robust sales model was developed explaining 93% of the variance

in total sales
Total sales model
Total sales per
week
Actual sales
Estimated sales
Explanatory value of the model (R) = 93%

(max 100%)
Model for ROI calculations

A robust model, that explains 93% of the
variance in total sales, was developed. Hence,
the model predicts sales extremely well.
The model takes into consideration:
Seasonality
External effects
Internal activities
Media investments
16
Summary How much?

How much?
Summary
Total
media
Total
media
budget
budget
Media investments have a large effect on

sales, media investments explain 20% of total
sales
Who?
Who
to target
Who
toand
with what
target and
with what
How can Media Markt

optimize media
increase
sales/revenues?
What?
Content ofof
Timing
communication
media
(Products
& Content)
investment
s
Where?
Media mix
Media
mix
When?
Timing of media
Content
of
investments
communica
tion
(Products &
Content)
The biggest contribution is from traditional

medias such as Direct Marketing, TV and Print.
Radio and Webb-TV have no significant
contribution to sales.
Investing 1 SEK in media gives in average 6,3
SEK back in revenues, based on a 18% margin,
this gives and ROI of 1,15
There is a potential to increase media
investments and still keep a positive return on
investment
17
How
much
?
Media investments have a considerable effect on Media Markts

total sales
Total sales model
Media investments explain 20% of total sales
Chart Title
Sales in billion SEK
The diagram shows how different variables

contribute to Media Markts total sales.
Season, weather, salary, low margin and
holidays have a systematic effect on total sales
for Media Markt, where season contributes the
most to total sales.
Among the variables that affects total sales,
media has the strongest contribution to sales,
standing for 20% of Media Markts total sales.
Variables excluded due to systematic effect on sales: Share of Voice, PR data and Inventory levels
Variables included in base level: Number of open stores
Variables included in seasonal level: Christmas/New year effects
Additional revenue and Return Of Investment is based on a 18% margin on all sales.
18
Media investments explain 20% of all total sales, where the biggest
contribution comes from traditional media
Total Sales model - decomposed
Chart Title
Largest effects come from traditional media

Media investments explain 20% of all total
sales (2 billion SEK).
Seasonal effect such as Christmas and

Summer explain 12% of the total sales.
Media Investments account for approximately 2 billion SEK
(20% of all sales)
The biggest contribution is from traditional

medias such as Direct Marketing, TV and Print.
Radio and Webb-TV have no significant
contribution to sales.
19
How
much
?
Increasing media investments increases sales considerably, with an

average ROI on sales of 6,3
Total sales model
Increasing media investments has a positive

effect on sales
Additional sales per week

in SEK
Media investments have a clear effect on total

sales for Media Markt.
Increasing media investments increases sales
considerably. Average ROI on sales is 6,3, this
means that investing 1 SEK in media gives in
average 6,3 SEK back in revenues.
The ROI figure for revenues is based on
investments being similar to previous two
years.
Level
Level
of
of
2014 per 2013
Media investments
week
20
How
much
?
There is a potential to increase media investments and still keep a

positive return
on investment
Potential to increase investments with positive
Total profit
return
The media investments can be increased to at
least 210 MSEK each year and still give a
positive return on investment.
Profit ROI
Additional sales per week

in SEK
Profit ROI
Level
of
2014
Media investments per
week
The profit ROI curve appears to level out to ROI

=1 around a yearly media spend of 210 000
000 SEK (4 030 000 SEK/week).
Level
of
2013
21
How
much
?
Media investments can be increased by 100 million SEK before a

negative return of investment is reached
Additional Sales
from 2014 years
level
Net media
Investment (year)
Change in profit
from 2014*
Profit ROI*
-15%
20 MSEK
-117,0 MSEK
0,84
-10%
55 MSEK
-78,2 MSEK
1,01
-5%
85 MSEK
-39,8 MSEK
1,10
0%
116 MSEK
0 MSEK
1,15
5%
150 MSEK
38,3 MSEK
1,15
6%
162 MSEK
49,5 MSEK
1,13
10%
210 MSEK
73,7 MSEK
1,00
*Additional profit and Return Of Investment is based on a 18% margin on all

sales.
** Sales during 2014 was 4 302 MSEK
Media budget 2014
Media budget 2013

Possibility to increase media
investments and still maintain a
ROI above 1.
22
Agenda
Scope
Executive summary
Method
Executive summary
Appendix
Summary Where and What?

How much?
Total media
budget
Total
media
budget
Who?
Who
to target
Who
toand
with what
target and
with what
How can Media Markt

optimize media
increase
sales/revenues?
What?
Content ofof
Timing
communication
media
(Products
& Content)
investment
s
Summary
Traditional tactic media like Direct Marketing
and Print tend to drive sales to a great extent.
In order to drive sales these medias should
have a significant share of the total budget.
Where?
Media mix
Media
mix
When?
Timing of media
Content
of
investments
communica
tion
(Products &
Content)
Online Search is however the most effective

media of all.
Media investments have a clear effect on ad
awareness, which in turn affects sales.
However, ad awareness takes time to build,
hence it is important to have a continuous
media strategy in order to build ad inventory.
Among the medias, TV has the strongest
correlation with ad awareness.
TV drives sales less than the traditional tactical
medias, but is more important for brand
image.
24
Where
?
For media mix optimization, the focus is on total sales

Focus is on understanding total sales
Why focus on total sales?

For media mix, optimization focus is on
maximizing sales and profit generated by
media investment on total level for Media
Markt.
Total sales
This variable is in focus since it encompasses

all other variables included in the analysis and
is of most interest for Media Markt.
Store sales
Online sales
Brand
metrics
Effects of different medias will be presented in

later chapters.
25
Where
?
Between 2013-2014, Media Markt has decreased its spend in all

traditional media, while increasing the spend in online medias
Total net media investments
Net media investment
2014
26.9
116 MSEK
21.9
20
2013
7.4
161 MSEK
-28%
19%
20%
32.4
17%
19%
30.8
12.6
9.7
5%
11%
8%
21.8
1%
2.5
5.5
33%
2014
4 302 MSEK
12%
4%
4.4
1.1
Change
23%
53.2
14.3
5.8
Total sales and profit based

on
media investments
Media mix
2013
4 693 MSEK
14%
4%
2%
3%
1.9
0.7
2%
0%
1.7
2.5
1%
2%
2013
2014
Change
-9 %
2013
2014
26
Where
?
However, traditional medias still drive sales to a large extent

Effect on sales (avg additional sales/invested
SEK)
Traditional media still stand strong in driving

sales
Traditional tactic media like Direct Marketing
and Print tend to drive sales to a great extent.
In order to drive sales these medias should
have a significant share of the total budget.
Online Search is however the most effective
media of all.
TV drives sales less than the traditional tactical
medias, but is more important for brand
image.
Non
sig.
Non
sig.
Non
sig.
Higher impact
Profit ROI
Online Displays have clear effect on sales but

the effect increases extensively with the size of
the investment. Here you should go big or not
at all.
27
There is a potential to increase efficiency of media investments

through optimizing the media budget
Effects on total sales vs. total investments
Generated sales 2013-2014
DR Posten has the largest effect on total sales

The diagram indicates that there is potential to
increase efficiency through changing the
media mix.
ROI=1
Comparing TV and DR Posten shows that even

though the higher media investments in TV, DR
Posten generates higher sales. Same goes for
Print when comparing it to DR Posten.
During 2013-2014 DR Posten has driven sales
the most, followed by TV. Slightly lower
efficiency for DR compared to DR Posten.
Total media investments 2013-2014

Size of bubble indicate generated sales for each media
28
Where
?
Increase investments in DR and DR Posten since they are most

efficient in
generating additional profit
DR and DR Posten are the most efficient
in generating additional profit
The diagram shows to what extent different
medias drive additional profit.
Insights for the different medias:
Online search: Has strong but diminishing effect
on sales. Increase investments.
DR/DR posten: Both DR and DR Posten show a
great effect on additional sales. Increase number of
active weeks as well as increase investments.
Outdoor: During weeks with outdoor investments,
sales increase considerably. Continue current
strategy.
TV: Increase number of active weeks, due to
diminishing ROI at higher investment levels
Print: Increase number of active weeks, due to
diminishing ROI at higher investment levels
Display: Decrease number of active weeks, but
increase investments during these weeks.
Each dot shows the average investment level during 2014

sales.
29
Case: For Media Markt, TV has a generally lower effect compared to

Nepas experience from other sales modellings
What?
Nepa suggests to evaluate TV ads

in order to increase efficiency
DELIVERY THROUGH N-VISUALIZE
EXTRA MODULES
BASE MODULE
CAMPAIGN TESTS
1) ADVERTISEMENT
EFFECTS
Ad Awareness
Observation
Sender recall
Message comprehension
Liking
Emotions
2)
BRAND POSITIONING
Benchmark
Determine that the

campaign drives the Telenor brand
in right
direction.
3)
TARGET
GROUP
ANALYSIS
Enables specific analysis of
population, Telenor customers and in
target segment (Moderna Martina)
4) ROI-EVALUATION
Media investments and traffic data

are included in order to calculate ROI.
5) ONLINE EXPOSURE
Evaluate differences between
expoced and not exposed consumers,
The sales modelling is based on previous

content of the communication. Besides
changing the media mix and changing the
budget, ROI on total level and for different
medias can be increased through optimizing
the content.
Compared to other industries and clients, DR
for Media Markt is exceptionally efficient in
generating sales. Also Print shows a strong ROI
compared to other cases.
TV has generally lower efficiency in generating
sales compared to other industries and clients.
Hence, Nepa suggests to evaluate content of
communication in order to increase ROI for
investments in TV.
30
How should Media Markt

optimize the media mix?
31
To analyze the potential in changing the media mix, four different

scenarios were created
S:1
S:2
A
S:2
B
S:3
Media mix that

maximizes additional
profit based on:
Media mix that

profit based on:
Media mix that

profit based on:
Media mix that

profit based on:
Same budget as
during 2014, 116
MSEK.
Increased budget to
same level as during
2013, from 116 MSEK
to 162 MSEK.
Increased budget to
same level as during
2013, from 116 MSEK
to 162 MSEK.
Increased budget to
similar levels as
during 2012, from 116
MSEK to 210 MSEK.
Focus on driving
additional profit
Focus on driving
additional profit
and brand
32
Where
?
S:1
Scenario 1. Based on the same budget as 2014, how do we

maximize sales by optimizing the media mix?
Change in media budget
MSEK
Scenario description
Description:
Media mix that maximizes additional profit based on
same budget as during 2014, 116 MSEK.
Logic for the scenario analysis:

1.
2.
3.
4.
Do not invest in medias channels with ROI below 1

(radio and web TV)
Media channels with relatively low media
investments that show potential stay at same level
as during 2014 (social media).
Moderate increase of media spend for efficient
media channel compared to 2014.
Decrease media investments for certain media
channels in order to allocate investments into media
channels that are more efficient.
33
Scenario 1. Suggested media mix based on same investments as

during 2014

19.8
2014
20
7.2
Scenario
116 MSEK
17%
26.9
9.7
0.0
30.0
17%
6%
14.3
18.9
12.6
8%
0%
0 MSEK
0%
1.7
2014
16%
13%
Consequences on profit*:
+26 MSEK
4%
1%
Suggestion

sales.
(4 444 MSEK)
2%
2%
1.9
1.9
0.0
+142 MSEK
3%
2%
3.8
2.5
Change
26%
Consequences on sales:
12%
11%
14.6
4.4
23%
17%
19%
19.8
21.9
116 MSEK
Consequences on sales and

profit* compared to 2014
Media mix
2014
Suggestion
34
S:1
S:2
A
Scenario 2A. Increased budget to same level as during 2013,

increase from 116 MSEK to 162 MSEK
Description:
MSEK

increased budget to same level as during 2013,
increase from 116 MSEK to 162 MSEK. Focus is only on
driving additional sales and profit.
Increase DR as much as possible (with 50% from the
levels in 2013).

1.
2.
3.
4.

(radio and web TV)
media channel compared to 2013 and 2014.
35
Scenario 2A. Suggested media mix based on same investments as

during 2013
46.2
20
7.2
Scenario
0.0
Change
4%
8%
0%
4.4
8.3
+762 MSEK
(5 064 MSEK)
20%
+137 MSEK
5%
1%
2%
0%
1.7
2014
1%
Suggestion

sales.
29%
4%
2%
1.9
1.9
0.0
19%
12%
11%
32.7
12%
18.9
9.7
23%
17%
14.3
12.6
2.5
46 MSEK
14%
23.1
21.9
116 MSEK
162 MSEK
14%
23.1
26.9
2014

Media mix
2014
Suggestion
36
S:2
A
Maximizing additional profit

is of course important, but
what about media
investments effect on the
brand?
37
Compared to 2013, brand metrics have decreased with 8-9%

throughout the whole funnel, while ad awareness and brand
attributes are hit even harder
The brand funnel
Ad awareness
Awareness
(IM/ToM)
Consideration
Preference
Customer at
(sometimes/often)
Best prices
Changes in brand metrics
Avg 2014
Diff vs avg
2013
47
-23%
55 / 15
-4% / -9%
30
-8%
14
-8%
50 / 19
-4% / -11%
15
Average daily level, not including extreme cases.
-18%
The Media Markt brand has suffered as a

consequence of lower media investments. All
brand metrics have decreased considerably
compared to 2013.
The brand metrics have decreased with 8-9%
while total sales for Media Markt have
decreased with 9% on total level.
Best price has decreased with -18% during
2014 compared to 2013. Note that the average
margin for Media Markt has decreased with,
from -2,8% to -2,1%*.
These dramatic changes in brand perception
and brand salience show the importance of
communication on the home electronics
market.
38
What about the relationship

between media
investments, ad awareness
and sales?
39
Media investments have a clear effect on ad awareness

Effect of media investments on ad awareness
Ad awareness
Increased media investments means higher ad

awareness
There is a clear correlation between total
media investments and ad awareness.
Increased media investments means higher ad
awareness and higher ad inventory.
Investments
7 week average
40
Ad awareness takes time to build, hence it is important to have a

continuous media strategy in order to build ad inventory
Correlation between ad awareness and total
media investments
It takes time to build ad awareness

Higher correlation means that media
investments better explain the level of ad
awareness. The diagram shows that 7 weeks
average media investments explains ad
awareness better compared to not including an
average (0 weeks).
Correlation
This shows the importance of a continuous

media strategy in order to build ad inventory.
Only one weeks media investment is not
enough to change brand perception, naturally
it takes time.
Moving average for ad awareness
41
It is expensive to decrease media investments, but the effects are

not immediate
Ad awareness
Difference
Relatively high
media investments,
although ad
awareness is below
expected level.
It takes time for ad awareness to recover

after a drop in media investments
Despite relatively high investments during
second half of 2014, ad awareness for Media
Markt is lower than expected.
This is likely an effect of generally low levels of
investments during the first half of 2014. This
further emphasis the importance of high and
continuous media investments to maintain
high ad inventory.
But which medias have the strongest
correlation with ad awareness?
Media investments
42
Case: Different media strategies have different effects on behaviour

Age
Week
There is a strong relation between Share of voice and association to

lowest price
SoV vs Perceived lowest prices on the market
High share of voice effects associations to the

brand
As Share of voice (Media Markts share of media
investments in the whole home electronics
category) increase, the share that associate
Media Markt with the lowest price increase.
The strong correlation between associating
Media Markt with lowest price shows the
importance of communication within the
category.
44
Traditional media such as TV, DR and Print have the strongest

relationship with ad awareness, focus on these to drive the brand
Correlation between media spend and ad
awareness
Different medias have different effects on the

brand
The diagram shows to what extent media
investments in different medias correlate with
ad awareness. A high level of correlation shows
that the relation between an investment in a
media channel and ad awareness is strong.
TV has the strongest correlation with ad
awareness followed by DR. DR Posten and Print
have similar level in terms of correlations.
Online investments have a limited effect on
the ad awareness. Hence, increasing the media
investments online does not show a clear
effect on brand perception. In order to drive
the brand, focus on TV, DR and Print.
No moving average
45
Higher ad awareness leads to higher total sales

Ad awareness vs. sales
Clear relation between ad awareness and total

sales
There is a clear relation between ad awareness
and total sales, higher levels of ad awareness
means higher level of sales.
Total sales
One might argue: Which comes first? The

chicken or egg?. However, there is a clear
relationship between ad awareness and sales.
As we have seen, increased media spend leads
to higher ad awareness. High ad awareness in
turn means higher sales.
Ad awareness
Excluding christmas
46
What if we take brand

effects into consideration
when optimizing media mix?
47
Scenario 2B. Based on increased budget, how do we maximize

additional sales and drive the brand by optimizing the media mix?
Description:
MSEK

increased budget to same level as during 2013,
increase from 116 MSEK to 162 MSEK. Focus is on
driving additional sales and brand.
Maintain DR on same as 2013, invest rest in TV and
Print

1.
2.
3.
4.

(radio and web TV)
48
S:2
B
Scenario 2B. Suggested media mix based on an increased budget

to same level as 2013
26.9
2014
116 MSEK
21.9
20
7.2
162 MSEK
12.6
9.7
0.0
Change
46 MSEK
22%
23%
36.2
22%
19%
19%
17%
30.8
4%
12%
11%
21.8
8%
0%
8.3
(4 796 MSEK)
14%
+89 MSEK
5%
1%
2%
0%
1.7
2014
Suggestion
1%
2014

sales.
+494 MSEK
4%
2%
1.9
1.9
0.0
12%
18.9
4.4
2.5
36.2
14.3
Scenario

Media mix
Suggestion
49
S:2
B
S:3
Scenario 3. Based on an increased budget, how do we maximize

sales by optimizing
the media mix?
MSEK
Description:

increased budget to similar levels as during 2012, from
116 MSEK to 210 MSEK.
Increase DR as much as possible (scenario 2A) and
invest rest in TV and Print.

1.
2.
3.
4.
5.

(radio and web TV)
Invest the rest on brand building activities.
50
S:3
Scenario 3. Suggested media mix based on an increased budget
116 MSEK
21.9
24%
23%
49.7
26.9
2014
17%
19%
36.2
46.2
20
17%
7%
14.3
14.3
210 MSEK
0.0
Change
8%
0%
4.4
2.5
94 MSEK
32.7
9.7
(5 391 MSEK)
11%
16%
+196 MSEK
4%
2%
2%
0%
1.7
2014
Suggestion
1%
2014

sales.
+1 089 MSEK
4%
2%
8.3
3.8
1.9
0.0
22%
12%
9%
18.9
12.6
Scenario

Media mix
Suggestion
51
Main focus is naturally to increase

total sales. However, different
medias have different effects on
visits, sales and brand for both
online and brick-and-mortar. How
do the effects differ between
these channels?
52
Media channels have different effects on the parameters included

in the econometric modelling
How do the different media

channels give Media Markt
different effects?
53
Visits that are a consequence of media investments are worth more

compared to other visitors
Media investments effect on sales and visits
Media investments explain to a larger extent
sales (20%) compared to visits (14%).
This implies that visits that are a consequence
of media investment are of higher value
compared to other visits.
In average those who visit Media Markt as a
consequence of the media activities are worth
more compared to other visitors.
VISITS
This is probably due to a combination of these

consumers actually completing a purchase to a
larger extent and also spending more during
their visits.
54
Where
?
Different media channels have different effects on store sales,

online sales and brand building
Stores Sales
Online Sales
Brand driver
Different media serve different purposes for

Media Markt
Different medias have different effect on store
sales, online sales and on the Media Markt
brand.
Sorted by tore sales
Summary of results:
DR, Print and outdoor affect both brickand-mortar sales and the brand to a large
extent
Online search has a stronger effect on
online sales compared to brick-andmortar sales
TV has a considerable brand effect
compared to the other medias
Social media has strongest effect on
online sales
Limited effects of online display, radio
and web-TV on all three variables.
55
The different media channels vary in terms of driving brick-andmortar visits and store sales
Media investments effect on store sales and
visits
Different medias have different effect on store
sales and on store visits
VISITS
TV
BA
NN
ER
WEB TV RADIO DISPLAY
PRINT
DR
DR POST
GOOGLE
SALE
S
SEARCHOUTDOOR
Social media excluded due to insignificant investment

levels
Summary of results:
Print, DR and DR Post all affect both
brick-and-mortar visits as well as sales
Online search and Outdoor both affect
sales, but visits to a lesser extent
TV affects store visits, but affect sales to
a lesser extent than other media
Web-TV, Radio and Display has
comparably smaller affect on both visits
and sales
Where
?
Looking at online, the different medias play a different role in

driving sales and
visits
compared
to brick-and-mortar
Media
investments effect
on online sales and
visits
Different medias have different effect on online
sales and on online visits
VISITS
GOOGLE
TV
DR POST
FACEBOOK
SEARCHSOCIAL MEDIA
BA
NN
ER
PRINT
DR OUTDOOR WEB TV
SALE
S
DISPLAY
Radio excluded due to insignificant investment levels

Summary of results:
Online search and Social Media affect
both online visits as well as sales
Web-TV and Display both affect sales,
but visits to a lesser extent
TV and DR Post affect visits, but have
lesser effect on sales compared to other
media
Print, DR and Outdoor has comparably
smaller affect on both visits and sales
Where
?
Agenda
Scope
Executive summary
Method
Executive summary
Appendix
Summary When?
How much?
Total media
budget
Total
media
budget
Who?
Who
to target
Who
toand
with what
target and
with what
How can Media Markt

optimize media
increase
sales/revenues?
What?
Content ofof
Timing
communication
media
(Products
& Content)
investment
s
Summary
Media investments are more effective during
times of high sales
Where?
Media mix
Media
mix
When?
Timing of media
Content
of
investments
communica
tion
(Products &
Content)
Communication in itself is more important than

having high share of voice, do not hesitate on
investing when competitors invest
In terms of sales, the main sales effects are
during day of investment and four days after
day of investment for all medias
Media Markt are on the right track when in
come to investment timings.
59
Media investments are more effective during times of high sales
When
?
Sales
Trend
1.3
Winter-New Year
(V48-V1)
3
1.0
Winter-Summer (V28V23)
1.3
Late Summer
(V23-31)
6
1.1
Fall (V32048)
Marginal ROI based on 18% profit
60
Communication in itself is more important than having high share

of voice, do not hesitate on investing when competitors invest
Share of voice vs Media investments
Effect of ad awareness on sales
65
139
62
134
- Share of Voice
*Of average media effect
+ Media Investments
- Media Investments
+ Share of Voice
The periods that most extensively drive sales

to Media Markt stores are those where the
industry in total is investing heavily in media.
Share of voice does not drive sales as much

as the contributing effect from the
competitors investments
Hence, do not hesitate to invest during

periods when competitors also are investing
in media, for example during Christmas.
Always better to be in this

area, which indicates that a
continuous strategy is
advisable for Media Markt
61
When
?
During salary week or the week after salary week are the most
effective times to communicate
When
?
SALARY WEEK
SALARY WEEK SALARY
+1
WEEK +>2
SALARY WEEK -1
1.33
1.26
1.15
1.03
Marginal ROI based on 18% profit
62
Media Markt are on the right track when in come to investment

timings
Suggested spend
The suggested investment pattern for 2015 is
quite similar to 2014.
Investments should peak in the late summer
and during Christmas.
Continue to boost investment around salary
weeks.
2014
Suggested for 2015
63
DR followed by TV have the longest burn effects

Burn effects
Day of investment + next day

Next three days
In terms of sales, the main sales effects are

during day of investment and four days after
day of investment for all medias.
Note that brand building effects are not taken
into consideration.
DR has the longest burn effects followed by TV.
Print and Online have the most immediate
effects on sales.
64
Slightly higher efficiency of 12 pages compared to 8 pages

Content quantity in Direct Marketing
12 (or 16) pages in DR will give 10% more
additional sales compared to 8 pages.
Is there a difference between
8 pages and 12 pages in DR?
The difference is apparent in Direct Marketing

through Posten.
Yes, 10% higher efficiency for 12

pages compared to 8 pages
65
Agenda
Scope
Executive summary
Method
Executive summary
Appendix
Executive summary
Media investments have a large effect on sales, media investments explain 20% of
all total sales
How much?
Investing 1 SEK in media gives on average 6,3 SEK back in revenues, based on a
18% margin, this gives and ROI of 1,15
Potential to increase media investments and still keep a positive return on
investment
Large potential for Media Markt to increase sales by changing the media mix
Where?
DR tend to drive sales to a great extent. In order to drive sales these medias should
have a significant share of the total budget
Online Search is however the most efficient media of all
When?
Communication in itself is more important than having high share of voice, do not
hesitate on investing when competitors invest
Media Markt are on the right track when in come to investment timings
What?
TV has generally lower efficiency in generating sales for Media Markt, compared to
similar cases, but is more important for brand image
Nepa suggests to evaluate content of communication in order to increase ROI for
investments in TV
67
Agenda
Scope
Executive summary
Method
Executive summary
Appendix
Media investments are directly related to 20% of sales and 14% of

visits in Media Markts stores
Store Sales decomposition model
Store Visits decomposition model
Media Investments account for approximately 2 billion SEK

(20% of all sales)
Chart Title
Million visits
Chart Title
Media Investments account for approximately 4 million visits

(14% of all visits)
69
For online, media explains nearly 40% of the sales and approx. 15
% of the visits
Online Sales model
Online Visits model
Media Investments account for approximately 180 million SEK

(38% of all sales)
Chart Title
Thousand visits
Sales in SEK
Chart Title
Media Investments account for 3,5 million

visits to Media Markt.se
70
Sales is decreasing offline but increasing heavily online

Sales/visits
Sales
Visits
Conversion
Sales over time

-9%
+60
%
13
%
+8
%
+2
%
+56
%
201
3
In store
sales/week
Stores
Linear (Stores)
Online
Linear (Online)
Online sales/week
201
3
201
3
71
Visits are decreasing by approximately the same rate as sales in

stores, while online sees a little less increase compared to visits
Sales/visits
Sales
Visits
Conversion
Visits over time

-9%
+60
%
13
%
+8
%
+2
%
+56
%
201
3
In store
visits/week
Stores
Linear (Stores)
Online
Linear (Online)
Online
visits/week
201
3
201
3
72
Conversion on both the web and in physical stores is increasing

steadily over the years
Sales/visits
Sales
Visits
Conversion
Conversion over time

-9%
+60
%
13
%
+8
%
+2
%
+56
%
Stores
201
3
201
3
Online:
201
3
73
External effects affect sales heavily and are taken into

consideration for the sales model (slide 1/2)
Payday effects
+20
%
The December effect
Extracurricular day effects
+30
%
Average Month
Paydays affect MediaMarkt sales

significantly. The week after a
payday shows almost 20% higher
sales on average for stores and
+30% for online.
October
Compared to the average month,

sales are twice as high in
December, even though the effect
has decreased every year for the
last three years.
November
Graph shows the 10 days with

highest sales from 2012 to 2013.
All 10 days are in December.
74
External effects affect sales heavily and are taken into

consideration for the sales model (slide 2/2)
Number of open stores
New stores opening
Share of
of products
products in
in stock*
stock
Share
New store
sales
Average
sales
Large variation of open stores

since 2012, with both increases
and decreases in number of
stores.
Sales are very high during the

first 3 days after opening but
drop quite fast and reach a
steady state in less than two
weeks.
Clear correlation between

conversion within the store and
stock levels, where a higher
average stock level is generally
increasing the conversion.
Share of products in stock is not directly considered in the model due to multicollinearity and non systematic
effects.
75
MediaMarkt has decreased its spend in all traditional media while

increasing the spend in online medias
NET MEDIA SPEND 2013 AND 2014
2013
2014
+14
-55% +30
+70
-53% +17
+34
50
32
35
5%
0%
%
5%
%
%
%
%
Please note that this slide is based on the net media data, while the modelling in the upcoming chapter is using
e.g. impressions data and TRP data to distribute the media fully correct over time. For full mapping, please see
appendix.
76
The total media spend of the industry has decreased over time, all
though the share of voice for MediaMarkt keeps on shrinking
GROSS MEDIA SPEND
Media spend industry
MediaMarkt share of voice
The total industry follows a

cyclic pattern where they invest
with most focus in December to
then decrease investments in
the beginning of the year.
In the beginning of 2014,
MediaMarkt lost much of the SoV
when lowering its investments.
* Please note that Q4 2014 is
missing DR investments due to
lack of reported RM data.
Note that this analysis is based on RM data, which is somewhat different to the actual media spend.
77
MediaMarkt and Elgiganten have a similar media strategy, both

2013 and 2014
Media Mix 2013
Media
investments
MediaMarkt(000 000 SEK)Elgiganten
20%
TV
OOH
Print
0%
1%
Interne
t
44%
0%
35%
760
46%
19%
25%
0%
124
8%
22%
190
12%
21%
13%
1%
5%
1647
100%
0%
112
7%
75%
36%
3%
Share of voice
DM
Industry total
Siba
6%
74%
4%
31%
ELON
0%
1%
25%
462
28%
Radio
Netonnet
34%
42%
3%
59%
Media Mix 2014
TV
OOH
Media
investments
MediaMarkt(000 000 SEK)Elgiganten
13%
21%
1%
2%
Print
Radio
Interne
42%
t
241
20%
DM
38%
5%
1%
0%
36%
Share of voice
Netonnet
16%
32%
16%
0%
129
11%
575
48%
10%
ELON
0%
83%
13%
21%
23%
0%
1%
197
17%
Industry total
Siba
2%
16%
1%
1%
50
4%
41%
70%
1191
100%
35%
6%
54%
Note that this analysis is based on RM data, which is somewhat different to the actual media spend. The results from 2014 are
78
missing direct marketing
TV investment strategies have varied a lot over the last two years,
where the last years investments have been lower and to a wider
Change
in media
investment
range
of people
TV strategy over time
strategy
2013
2014
TV4 Film
TV4 Sport
MTG ( TV3,TV6, TV8 & TV10)
TV4 Fakta
TV4 Stockholm
TV4 Riks
Discovery Channel
Kanal 5, Kanal 9 & Kanal 11
appendix.
Kanal 9
Kanal 5
79
The print strategy shifted in 2014, with much less investments in

papers as DN
Change in media investment
strategy
2013
Print strategy over time
2014
Hela stergtland
stgta Correspondenten
Metro Stockholm
Smlandsposten
Bors Tidning
Dagens Nyheter
Upsala Nya Tidning

Norrkpings tidningar
Gteborgs-Posten, GP
MittMedia Gvle
Jnkpings-Posten
e.g. impressions data and TRP data to distribute the media fully correct over time. For full mappning, please see
appendix.
80
The DR strategy is somewhat similar for 2014, even though the

levels are lower
strategy
2013
DR strategy over time
2014
KalmarPosten - Ibladning
Jnkpings- Posten - IBLADNING
Upsala Nya Tidning - IBLADNING
Bors Tidning - IBLADNING

VK - Effekt - IBLADNING
Hela Skne - IBLADNING
appendix.
81
Investments into display have increased considerably in 2014

strategy
2013
Display strategy over time
2014
TV.nu
Tv.nu Mobilt
Accuen Display Aftonbladet Mobil Blocket.se
Dagens Nyheter.se
Widespace AB
Expressen.se
Leeads AB
Aftonbladet.se
appendix.
82
Search is increasing, both looking at impressions and clicks

strategy
2013
Search activity over time
2014
Sum of Impressions
Sum of Clicks
appendix.
83
Outdoor investments have decreased in 2014 compared to 2013

strategy
2013
Outdoor strategy over time
2014
Skvde Nyheter
City Media
GUSO Nrmedia
Billboard Media
XponeraMedia & Event AB
Brand Factory Nordic AB
CLEAR CHANNEL-UTAN FRMEDL. PROV

DS Smith Packaging
JCDecaux Sverige AB
appendix.
84
Social media shows a somewhat discrete pattern, except for the

last weeks of 2014, where the strategy was continuous and growing
strategy
2013
Social media strategy over time
2014
Facebook.com
Facebook Greyaccount (search)
appendix.
85
Strong variance in weekday strategies for different medias

Weekday strategy per media
TV
DR
DR POSTEN
PRINT
RADIO
SOCIALMEDIA
ONLINE WEB TV
ONLINE DISPLAY
86
The current online model is leaving tracked leads out as an isolated

channel of visitors in order to credit the contributions of traditional
media more fair
TV
Prisjakt/Pricerunner/Google/Faceb
ook
Print
DR
Online visits
Online sales
Outdoor
Web
Prisjakt/Pricerunner/Google/Faceb
ook
Visitors coming from tracked
leads are often influenced by
other media first, making it hard
to credit the last touch point for
the whole lead. Because of this,
the leads coming from these
sources were not handled
separately in the modeling.
87
The majority of online tracked leads are coming from Google, even
though Pricerunner and Prisjakt are spiking during a few dates
Share of visitors being tracked
leads
Prisjakt
Facebook
Other visits
Tracked leads over time
Pricerunner
Google
Prisjakt
Pricerunner
Facebook
Google
All web visits
88
No distinct media PR event during 2013-2014 for MediaMarkt

Number of inserts in papers
Positiv
Neutral
Negativ
okt-12
okt-12
okt-12
okt-12
okt-12
Tufft fr Media Markts gare

Media Markt lgger expansion p is
Media Markt blder
Media Markt varslar
Arbetslsa unga blev dreamteam
Media Markts gare fr snkt
okt-12
kreditbetyg
S illa ute r Media Markt /Stngning av

St. Bernstorp
nov-13 Media Markt bjuder p sterotypa knsroller

nov-13 Media Markt i Jnkping krymper
nov-13 Media Markt kreditvrdighet sgas
okt-13
apr-14 Tufft fr Media Markt
89
TV and Print ads are missing, while Online ads seems to still remain
noticed at a low rate
The brand funnel
Brand tracking over time
Avg 2014
Diff vs
2013
47
-23%
55 / 15
-4% /
-9%
Considera
tion
30
-8%
Preferenc
e
14
-8%
50 /
19
-4% /
-11%
15
-18%
Ad
awarenes
s
Awarenes
s (IM/ToM)
Customer at
(sometimes/of
ten)
Best prices
Trend lines
drawn manually
Ad awareness
Seen TV ads
Seen print ads
Seen internet ads
Seen out of home ads
90
The lower presence of ads also affects the IM awareness, where

ToM is most seriously affected
The brand funnel
Avg 2014
Diff vs
2013
47
-23%
55 / 15
-4% /
-9%
Considera
tion
30
-8%
Preferenc
e
14
-8%
50 /
19
-4% /
-11%
15
-18%
Ad
awarenes
s
Awarenes
s (IM/ToM)
Customer at
(sometimes/of
ten)
Best prices
Trend lines
drawn manually
Awareness
Awareness IM
Awareness ToM
91
Consideration has dropped by 8%

The brand funnel
Avg 2014
Diff vs
2013
47
-23%
55 / 15
-4% /
-9%
Considera
tion
30
-8%
Preferenc
e
14
-8%
50 /
19
-4% /
-11%
15
-18%
Ad
awarenes
s
Awarenes
s (IM/ToM)
Customer at
(sometimes/of
ten)
Best prices
Trend lines
drawn manually
Tnkbart mrke - DVD-film
Tnkbart mrke - TV
Tnkbart mrke - datorutrustning
Tnkbart mrke - fotoutrustning
Tnkbart mrke - hushllsmaskiner
Tnkbart mrke - ljudanlggning
Tnkbart mrke - spel
Tnkbart mrke - telefon
92
Preference has also dropped over the last year

The brand funnel
Avg 2014
Diff vs
2013
47
-23%
55 / 15
-4% /
-9%
Considera
tion
30
-8%
Preferenc
e
14
-8%
50 /
19
-4% /
-11%
15
-18%
Ad
awarenes
s
Awarenes
s (IM/ToM)
Customer at
(sometimes/of
ten)
Best prices
Trend lines
drawn manually
Preferens - DVD-film
Preferens - hushllsmaskiner
Preferens - telefon
AVERAGE PREFERENCE
Preferens - datorutrustning
Preferens - ljudanlggning
Preferens - vitvaror
Preferens - fotoutrustning
Preferens - spel
Preferens TV
93
The visits most often statements have dropped over the last year
The brand funnel
Avg 2014
Diff vs
2013
47
-23%
55 / 15
-4% /
-9%
Considera
tion
30
-8%
Preferenc
e
14
-8%
50 /
19
-4% /
-11%
15
-18%
Ad
awarenes
s
Awarenes
s (IM/ToM)
Customer at
(sometimes/of
ten)
Best prices
Trend lines
drawn manually
Visits sometimes
Visits most often
Visited homepage
94
The perceived best prices attribute has dropped heavily over the
last year
The brand funnel
Avg 2014
Diff vs
2013
47
-23%
55 / 15
-4% /
-9%
Considera
tion
30
-8%
Preferenc
e
14
-8%
50 /
19
-4% /
-11%
15
-18%
Ad
awarenes
s
Awarenes
s (IM/ToM)
Customer at
(sometimes/of
ten)
Best prices
Trend lines
drawn manually
Best prices (mest prisvrd)
95
Overview of media investments for Media Markt 2014 vs 2013

TV
41%
14%
10%
Leeads AB
Expres s en.s e
Aftonbladet.s e
Wides pace AB
Other
DR
DISPLAY
WEBB TV
SK
OUTDOOR
DM
Display
18%
17%
PRINT
3%
4%
4%
67%
8%
12%
23%
201
4
23%
49%
8%
11%
9%
Aftonbladet.s e
Blocket.s e
Leeads AB
53%
POS TEN
( ADR,ODR,Uppsl,Adress,Fstg)
REKLAMS VEPET/POS TEN
Hela S kne - IBLADNING
6%
22%
33%
66%
TV4 Riks
Kanal 5, Kanal 9 & Kanal 11
Kanal 5
Print
0%
1%
2%
5%
3%
4%
5% 6%
7%
Gteborgs-Posten, GP
Norrkpings tidningar
Jnkpings-Posten
stgta Correspondenten
Other
DM
32%
5%
1% 6%
5%
19%
26%
POS TEN
( ADR,ODR,Uppsl,Adress,Fstg)
TV
9% 8%
71%
Gteborgs-Posten, GP - IBLADNING
Display
RADIO
Print
1%
2%
2%
11%
17%
Sociala medier
17%
13%
33%
201
3 20%
TV
60%
10%
10%
41%
12%
28%
5%
4%
TV4 Riks
Dagens Nyheter
Kanal 5
TV4 S tockholm
Hela stergtland
Other
Gteborgs-Posten, GP
96
Both Elgiganten and MediaMarkt have been lowering their

investments in TV from 2013 to 2014
strategy
2013
TRP in A 25-59 over time
2014
El-giganten ab
Mediamarkt
97
Media Investments and Brand tracking over time

Brand tracking over time (Moving average 9 weeks)
WEBB TV
DISPLAY
SK
Sociala medier
RADIO
PRINT
OUTDOOR
DR POSTEN
DR
TV
Knnedom ToM
AVERAGE
CONSIDERATION
AVERAGE
PREFERENCE
Mest prisvrd
Lgst priser
SoV
98
Media Investments and Brand tracking over time

WEBB TV
DISPLAY
SK
Sociala medier
RADIO
PRINT
OUTDOOR
DR POSTEN
DR
TV
Knnedom ToM
AVERAGE
CONSIDERATION
AVERAGE
PREFERENCE
Mest prisvrd
SoV
99

Reklamerinran Hjlpt
SoV
100
Compared to Elgiganten, Media market has a lower share of OOH,

especially in the summer and around christmas
Share of media investments every month
Share of media investments every month
Media Markt
Sum of
Sum of
Sum of
Sum of
Sum of
Sum of
Cinema
Internet
Radio
Print
OOH
TV
Sum of
Sum of
Sum of
Sum of
Sum of
Sum of
Cinema
Internet
Radio
Print
OOH
TV
Elgiganten
101
Profit margin
Average profit margin over time
102
Average receipt
Average reciept over time
103
The role of SoV

WEBB TV
Negative
effect due
to low share
of voice
Positive
effect due
to large
share of
voice
DISPLAY
SK
Sociala medier
RADIO
PRINT
OUTDOOR
DR POSTEN
DR
TV
Reklamerinran Hjlpt
SoV
104
Almost all brand tracking variables have a positive effect of media

investments
WEBB TV
DISPLAY
SK
Sociala medier
RADIO
PRINT
OUTDOOR
DR POSTEN
DR
TV
Reklamerinran Hjlpt
Knnedom ToM
AVERAGE
CONSIDERATION
AVERAGE
PREFERENCE
Mest prisvrd
Lgst priser
SoV
105
The important ToM variable is clearly affected by media

investments
WEBB TV
DISPLAY
SK
Sociala medier
RADIO
PRINT
OUTDOOR
DR POSTEN
DR
TV
Knnedom ToM
106

2015-04-01 Media Markt - Sales Modelling Presented

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2015-04-01 Media Markt - Sales Modelling Presented

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Media Markt Sales Modelling

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Effects of internal end external

How have media

How do internal activities such as sale campaigns effect sales and

What is the ROI of media investments?

How efficient is media in attracting customers to the stores?

Media investment effects on

Do media investments drive brand value?

There are several ways for Media Markt to optimize media

Focus of this study is to understand how

How can Media Markt

(Products & Content)

Sales modelling can partly give guidance in

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Q: Why is there a strong correlation between eating ice cream and

Due to this type of relations we need

When comparing sales and media investments directly, there is a risk

Media investments/day compared to daily

The reason for this relationship is because you

Hence, in order to determine the actual effects of

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See appendix for additional descriptive data

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Variables tested for systematic effect on sales

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Factors having a significant impact on sales in Media Markt stores are

Areas included in the model:

Variables included in each section:

Seasonal effect based

Christmas and New Year

A robust sales model was developed explaining 93% of the variance

Explanatory value of the model (R) = 93%

Model for ROI calculations

Summary How much?

Media investments have a large effect on

How can Media Markt

The biggest contribution is from traditional

Media investments have a considerable effect on Media Markts

Media investments explain 20% of total sales

The diagram shows how different variables

Largest effects come from traditional media

Sales in billion SEK

Seasonal effect such as Christmas and

The biggest contribution is from traditional

Increasing media investments increases sales considerably, with an

Increasing media investments has a positive

Additional sales per week

Media investments have a clear effect on total

There is a potential to increase media investments and still keep a

Additional sales per week

The profit ROI curve appears to level out to ROI

Media investments can be increased by 100 million SEK before a

*Additional profit and Return Of Investment is based on a 18% margin on all

Media budget 2014

Media budget 2013

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Summary Where and What?

How can Media Markt

Online Search is however the most effective