[Inside M720] : climate, the X factor of business

It is usually said that climate is the X factor of business because its impact varies greatly depending on the type of climactic contingencies (heat, heavy rains or lack of sunlight) but also on the field of activity.

In terms of climate variation, the period of July/August 2021 in France is the best example of an atypical period.

The graphs below compare the period of July/August over the year 2021 and 2020.

In July/August 2021, temperatures and sunlight dropped compared to the same period in 2020, with almost twice as much rain. In short, the two summer months of 2021 were gloomy.

Such a climactic variation will obviously generate a business impact, so it is only but natural to question such effects through the two following questions:

  • What is the impact on sales?
  • Do these variations have an impact on marketing performance and more particularly on the effectiveness of the activated media?

As a specialist in « Marketing Mix Modeling », Metrics 720 have been able to measure the impact of climactic effects on many business sectors.

As a matter of fact, one of the strengths of « MMM » models lies in their faculty to integrate all types of data that do not bear the same « unit »:

  • Printing, GRP, face number for the measurement of different media
  • The amount of protesters for the impact of a strike
  • Temperatures, rainfall or even sunlight for the impact of climactic variations.

Consequently, we were able to highlight the fact that three sectors were particularly weather-sensitive, as shown in the graph below:

In order to maintain uniformity in our results, we have excluded from the analysis highly weather-sensitive products (drinks, ice cream, salads, etc.) for which we can record strong weather effects that could exceed an impact on sales of more than 15%.

Bearing this point in mind, the essential consumer products sector remains the one that benefits the most from a favorable climate (I.e. high temperature and sunlight) with a gain of more than +5% on sales. We then observe that the E-commerce sector also benefits from this type of climate with an average impact of +2.6%. However, the specialized big box stores retail sector was negatively impacted by favorable weather conditions, with sales falling close to -4% on average.

Beyond direct effects on business, climate can also have an indirect impact by increasing the performance of some specific media. Concerning this point, two media are particularly weather-sensitive: display media and digital media. Indeed, it turns out that favorable weather improves the performance of both aforementioned media by +8.6% and +5.4% respectively.

Climatic effects show an impact on a number of businesses, even if the ripple effect on sales remains marginal by and large (less than +/- 6% on average, weather-sensitive products excluded).

Nevertheless, it is necessary that one takes into consideration certain anomalous climactic episodes to reach a robust measurement of marketing performance. We can quote in particular the snowfall of February 2018 which produced a strong negative impact on many business sectors (-12% to -19% impact on sales depending on the business sectors).

Finally, we have observed that the performance of some media improves under certain weather conditions. It then becomes interesting to take these effects into account when implementing specific communication plans.

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