Using algorithms to crunch five years worth of sales and other data, the marketing intelligence arm of San Francisco-based digital agency Organic says its new predictive analytics model came within 1 percent of accurately predicting Jeep’s 2008 retail sales.
According to Organic, the model used macroeconomic data, demand history, media plans, and other data to predict Jeep sales in July 2008. The fact that the prediction, which was made in July for the 2008 calendar year, came within 1 percent of the actual figure is a big deal not only because the normal accuracy level for this type of predictive analysis is 10 to 15 percent but also because it happened before the market slide really picked up steam, said the agency.
In an interview, Organic Vice President of Analytics, Media, and Optimization Steve Kerho said the effort proved that measuring “how much activity is happening online for your particular brand’s content is some indication of…what you’re going to sell down the road.”
Kerho said he’s quite sure luck had nothing to do with the outcome. Jeep provided a huge amount of data, beginning with five years of media spend by week by market as well as five years of retail data by week by market and all the commensurate Web activity. “The odds are against it being luck” he said, especially when one considers the high level of volatility in the economy, especially the automotive industry, last year.
The year-long “predictive econometric modeling” project with Jeep helped Organic establish optimization and prediction capabilities that delivered a 15 percent savings and, when implemented, resulted in $17 million in “marketing value” to Jeep, according to an Organic statement.
An Organic spokeswoman declined to disclose specifics on the Jeep campaign. However, she said the digital agency looked online and offline to come up with the optimum marketing spend based and changed the mix based on results.
In the statement, Chrysler Interactive Director Chuck Sullivan said Organic’s modeling transformed Jeep’s approach to evaluating data, changing it “from a rear-view mirror report into a reliable production tool that helped Chrysler control marketing expenditure and return on investment (ROI).
Kerho said it is very complicated to devise models that give fair credit to all the different marketing touch points. The effort to do so for Jeep included so much detail, Organic felt it could “turn it on its head and use it as a forecasting tool.”
Crucial to the project’s success was Jeep’s willingness to divulge an “enormous amount of data that was very proprietary,” Kerho said. He added that Jeep was willing to do this largely because of its longstanding business association with Organic. Jeep and Organic created proprietary algorithms, using custom data from sources that included Jeep dealers, corporate databases, online and offline information, designed to “predict business success based on multiple variables in the sales ecosystem.”
Industrywide, auto sales in the United States dropped 13 percent in July 2008 compared to the same month in 2007. By December 2008, monthly auto sales in the U.S. slide by 36 percent compared to the same month in 2007.
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