Vaseline Market Mix Modelling Analysis

1. Vaseline Market Mix Modelling Analysis Case Study July 2011

2. Vaseline case study objectives Identify key media drivers of sales. Measure response to media activity in Regional vs. Metro areas Generate predictive models enabling insight into budget allocation across channels and regions. Measure impact of Vaseline price and distribution. Identify competitive impact: Price/Distribution Advertising

3. Project Scope Product: Vaseline Hand and Body Range Key Metric: Total Vaseline baseline sales in Woolworths Time Period: 2008 through to end of 2010 Interval: Weekly Number of Periods:148 Geography: Sydney, NNSW, SNSW, Melbourne, Regional VIC, Brisbane, Regional QLD, Tasmania

4. Key findings summary The study found a re-alignment of TV market investment using the same 2010 TV budget could increase annual TV generated sales by 38%. And improve ROI by 43% The model recommends 40% share of total TV budget should be allocated to regional markets to achieve this outcome TV flighting patterns in regional are optimal with continuous lower weights

5. Regression modelling involves relating changes in KPI to changes that are happening in the market place at the same time. Repeating this over time allows us to build certain assumptions about how specific forces interact with KPIs. Revenue $1000 inc. sales $500 inc. sales Still $1000 inc. sales Invest. Sales $ Investment $ $1500 Invest. ROI $0.66 $1000 Invest. ROI $1 $500 Invest. ROI $1

6. Media Investment Summary 2008 – 2010 Eastern Regional Aus

7. Of the markets modelled in this analysis, regional markets contribute 41.7% of sales however they receive only16.5% of the TV advertising budget. The regional markets account for 36% of the test population 1.5% Regional = 42%

8. Variables Tested These variables help explain over 80% of Woolworths sales variation. a a a a a a a a a a a a

9. Model vs. Actual Model is highly accurate: Sales 90.7% Sales $ NSW, VIC, QLD & TAS

10. Base vs. Incremental Sales Concept • Incremental brand sales reflect the short term sales of the brand in response to advertising and promotions. • Base brand sales reflects the long-term equity of the brand, seasonality, brand awareness, and other external influences (CPI). • As Vaseline is a mature brand, the base comprises a relatively high proportion of baseline sales (94%). This suggests that the product is not very sensitive to the short term impact of advertising. However, without consistent advertising it is likely base sales would begin to decline long term. • Magnum Base sales = Approx. 92.5% • Bushells Base sales = Approx. 93%

11. Total sales: Base and incremental Advertising = Base = Competition = Outlier = 2008 2009 2010

12. TV drives the majority (67%) of advertising generated sales 2008 2009 2010

13. Base sales are relatively consistent across each region. Competitive advertising has a stronger positive halo on Vaseline sales in regional areas suggesting those consumers respond to the creation of category awareness.

14. Adstock refers to the true value of media investment at any given time. How is it calculated? + = Actual investment in given period Carry over from previous period Adstock

15. TV generated sales decline at approximately 54% and decay appears to happen faster in regional areas.

16. Over the period of the study regional areas deliver 38% of advertising generate sales for only 16% of budget and hence better ROI compared to metro areas. Melbourne and Sydney have a greater capacity to generate high volume sales but require large levels of spend

17. Adstock investment in regional areas during trial was less than optimal = Average Weekly Adstocks

18. Adstock investment in regional areas should be increased to maximise total advertising generated sales. = Average Weekly Adstocks

19. Optimum allocation to Regional TV is 41% of total TV budget

20. Using 2010 TV, the model suggests that annual TV generated sales could be increased by 38% by adopting a more continuous flighting pattern and improving spend allocation by region. ROI would improve by 43% 41% annual increase

21. Due to higher decay in regional areas, a continuous flighting pattern may be more appropriate. Whereas in Sydney where advertising decay is lower, a large burst followed by shorter ones is most efficient. Investment Investment Sales Sales Week Number Week Number Investment Investment Sales Sales Week Number Week Number

22. Melbourne may also benefit from shorter more concentrated bursts of activity resulting from higher point of diminishing returns compared to Brisbane and regional areas. Investment Investment Sales Sales Week Number Week Number Investment Investment Sales Sales Week Number Week Number

23. OOH performed well in Sydney and Melbourne with ROI higher than TV. We could not find a contribution from this media in Brisbane which may be a result of placement.

24. From an ROI perspective Radio performed strongest out of all media over the period. However this is based on limited data and deserves to be tested more thoroughly. (Creative may have been one off promotional offer?) Best estimate only using 5 data points

25. Both magazines and digital returned ROI’s comparable to TV with digital being slightly more efficacious.

26. Overall Radio achieved the strongest ROI but this is based on limited data points. Total media return on investment is $0.08 (only accounting for WW sales). Regional TV achieved the next best ROI after Radio.

27. Overall Radio achieved the strongest ROI but this is based on limited data points. Total media return on investment is $0.08 (NB WW sales only). Regional TV achieved the next best ROI after Radio. Potential ROI from optimised TV investment is $0.10

28. Competitive advertising intensifies around the Spring and Winter periods and competitive spend increased by 58% in 2010, primarily driven by Aveeno and Dove. Vaseline = Competition = Sales ($ ‘000) Competitive Spend ($ ‘000)

29. Nivea advertising tends to have a positive halo onto Vaseline sales whereas Dove has a significant negative impact. All in all, Vaseline lost approximately 0.51% of sales to competitive advertising over the modelling period. Approx – 0.51% of sales Approx - 1.79% of sales Approx + 1.31% of sales

30. Dove 375ml price promotions have the greatest overall impact on Vaseline sales with the most significant effect being in Sydney, where for each dollar reduction in Dove 375ml price, Vaseline loses approx. $1052 weekly sales.

31. Summary & Recommendations

32. Key Insights • Vaseline has a relatively high base volume of sales (94%) indicating that the brand is not particularly sensitive to the short term influence of advertising. • Consequently short term ROI on media investment is quite low (although this analysis only looks at WW sales). • TV drives the majority of advertising generated sales (67%) but also receives the greatest proportion of the budget (79%). • Regional TV outperforms Metro TV at lower levels of spend in terms of driving higher sales dollar for dollar (and hence better ROI). However at higher levels of spend, Metro TV will generate higher volume sales. • TV generated sales also decline at a slower rate in metro areas. • At lower levels of spend, smaller media outperform TV in driving sales dollar for dollar. • Vaseline is affected by seasonality, specifically temperature, rainfall and sunshine. Over the modelling period, we identified that Vaseline sales naturally over-index during March, Winter and the beginning of Spring. • Dove advertising and price promotions have a consistent negative impact on Vaseline sales indicating that this brand is a strong competitive threat to Vaseline. • Nivea price promotion also damages Vaseline sales however Nivea advertising has a positive halo onto Vaseline sales. • Over the three year period, Vaseline lost approximately 0.51% of sales to competitive advertising in NSW, QLD, VIC and Tasmania.

33. Recommendations • Investment should be increased in regional TV areas to take advantage of better returns at lower levels of spend compared to metro TV. • Sydney and Melbourne may benefit from a revised TV flighting schedule focusing on one large burst of advertising followed by a number of smaller bursts to take advantage of lower decay and higher points of diminishing returns. • Our modelling suggests Brisbane and regional areas will respond most effectively to a continuous TV flighting pattern with lower weightings. • Our proposed market weighting and flighting patterns may improve TV generated sales by 38%. • If a continuous flighting pattern is not adopted, advertising bursts should be focused around March, Winter and Spring to gain synergy with seasonality. • Vaseline could maximize reach and effectiveness by diversifying advertising tools. • To maximise overall advertising generated sales, increased investment in OOH, Radio and Digital should be considered. • If Dove continues to increase advertising pressure (increase of 630% in 2010) Vaseline may also need to increase overall advertising budget to help reduce negative impact.