Performance Marketing Opportunity Audit case study
How this luxury retailer unlocked $30M in additional profit with their performance marketing
How to use performance marketing as a profitability driver for your business
Find out how much growth you can unlock
The Challenge
With $950 million in annual sales, a global luxury multi-brand retailer and its private equity investor faced severe challenges. Obstacles included unpredictable inventory from supply chain disruption, consumer volatility due to interest rates and inflation, and expectations of a global recession. These macroeconomic factors helped widen their annual EBITDA loss significantly.
To thrive, leadership knew it needed to change its performance marketing approach. They understood that the acquisition of new, loyal and profitable customers is critical to their EBITDA growth and that a purely revenue-based optimization will not give them an edge in a competitive environment. However, they were uncertain how much actual profit they can unlock and what this means over the long run. The retailer engaged Crealytics to find out how much potential was hidden in their performance marketing activity and how a profitability- and customer-centric approach would impact their bottom-line.
To thrive, leadership knew it needed to change its performance marketing approach. They understood that the acquisition of new, loyal and profitable customers is critical to their EBITDA growth and that a purely revenue-based optimization will not give them an edge in a competitive environment. However, they were uncertain how much actual profit they can unlock and what this means over the long run. The retailer engaged Crealytics to find out how much potential was hidden in their performance marketing activity and how a profitability- and customer-centric approach would impact their bottom-line.
Steps to Unlock Profitability
Crealytics kicked off its three-week Performance Marketing Due Diligence project which encompasses three main steps:
Face Reality
This phase uncovers the client’s true performance marketing return on investment (ROI). The analysis breaks down the profitability of paid media channels looking at factors including incrementality, eCommerce (contribution) margins, and CLV.
Unlock Potential
Phase two determines how much additional ROI the retailer can unlock with:
- Data activation: Activating returns, margins, and new customer information.
- Operational improvements: Changing its paid media approach, including bid management and audience structure.
- Budget reallocation: Shifting ad budgets across paid media channels and geographic markets.
Propose Actions
Crealytics delivers an actionable plan to implement the uncovered improvements. The action plan includes both “quick wins” as well as strategic recommendations to set up a profitable paid media program over the long-run.
Key Findings
The Due Diligence found that the client’s paid media investment was unprofitable when looking at the first order. Over a two-year period, their investment of around $90 million only yielded a $10.5 million profit. The analysis found that with advanced performance marketing techniques, the retailer could unlock an additional $30.9 million in profit during this time period, an extra booster to their ambitious turnaround plan.
Crealytics broke down their potential in three growth levers:
- First-party data activation: The retailer could increase their two year profit by 89% to around $19.8 million by activating product margins, return rates, customer information, and incorporating incrementality benchmarks
- Operational improvements: With operational channel improvements across Paid Search, Paid Social, and Display the client could boost two year profit by another 42% to $28.2 million
- Budget reallocation: Re-allocating budgets could increase the two year profit by another 47% to $41.4 million
Business Impact
The retailer was able to increase their two-year paid media profit from its current $10.5 million to more than $40 million with Crealytics’ recommendations. The three-week Due Diligence project provided much needed transparency on how the retailer could create value in their performance marketing.
Particularly, it provided clear benefits to the following stakeholders:
- Senior leadership team of the retailer: These C-level executives understood the profit contribution of their paid media investment and how much EBITDA growth to expect when using advanced performance marketing techniques such as first-party data activation.
- Marketing team: the Due Diligence provided the marketing leadership and teams with clear and actionable recommendations on how they can acquire more new, loyal and profitable customers – from a strategic level down to operational channel improvements.
- Private equity investor: The investor and its operating team understood the effectiveness of the performance marketing in their portfolio company and how they can drive sustainable bottom-line impact.
Together with the client, Crealytics delivered an actionable roadmap from short-term “quick wins” to strategic changes the retailer had to make to succeed in a cookieless and AI-based world.
How much potential can you unlock?