The Modeling System That Powers 30%+ Revenue Growth

**Luke Austin** (0:00)
The four models, Spinny Power Model, Forecasts New Customer Revenue and Given Any Level of Spend, Brit, Retention Model Forecasts, Returning Customer Revenue from Every Past Cohort, Event Effect Model Distributes Revenue Accurately Across Days with Marketing Events, and the Creative Demand Model ensures the ad account has enough creative fuel to sustain the plan. Together, these form the model system that are connected to produce a daily P&L level forecast where we have every dollar, every day, mapped out, and can execute against it to make that forecast a reality.

**SPEAKER_2** (0:33)
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**Luke Austin** (1:15)
Hey everyone, welcome to our Canon series. This is part two of a series that we've been going through since walking through CTC's Methodology Canon across the core dimensions of how we approach forecasting, modeling, measurement, creative strategy, meta advertising, Google advertising, email strategy and on down the line. So this is part two where we're focusing on modeling and how we approach modeling that sits at the center of our operating system. It's coming after part one, which is around forecasting and our approach to that, which is a good place to start. But I'm going to dive into the canon methodology around modeling and why this is so crucial and central to how we do things at CTC. So there are four proprietary models that power CTC forecasting and planning system. Each model answers a specific question about the future of the business and together they produce the daily P&L forecast that drives every operational decision. So four models powering will be covered in the forecasting section, which is 3.1% forecast accuracy across over 3 billion in GMB managed for us, producing over 30% revenue growth, over 40% contribution margin growth across our data set as well, with the goal of being daily precision, every dollar, every day, accounted for and with a target that allows us to execute against the forecast and make it a reality. So before we dive into each model, it's important to understand how they work together. These four models form a connected system where each output feeds the next. The spinning power model answers the first question. Given a high level of spin, how efficiently will that spin convert into new customer revenue? It produces a spin to efficiency degradation curve that tells the profit engineer, the operator sitting at the intersection of the system exactly how many new customer dollars to expect any budget level. Those new customers then flow into the retention model. For every cohort of new customers acquired in a given month, the retention models predict how much revenue they will bring back in each subsequent month. This output forms a complete picture of what the returning customer revenue built from the bottom up is cohort by cohort.
The third model is the event effect model which adds daily precision. So on any given day, a marketing event, a sale, a product drop, a VIP campaign shifts to the natural pattern of revenue. The event effect model learns these shifts from historical data and then applies them to future event days in the marketing calendar. It does this without breaking monthly budget targets. Event days run harder, surrounding days compress proportionally. The month always reconciles to what the monthly target is, set again by the spending power model and the retention model. Then finally, the creative demand model ensures the ad account has enough fuel to execute the plan. Based on the brand's current ad portfolio health and the plan spend level, it calculates exactly how many new ads need to be produced each month. This closes the loop, the business plan determines the spend, the spend determines the creative demand, and the creative enables that spend. So the four models, spinning power model, forecast new customer revenue given any level of spend, retention model forecast, returning customer revenue from every past cohort, event effect model distributes revenue accurately across days with marketing events, and the creative demand model ensures the ad account has enough creative fuel to sustain the plan. Together, these form the model system that are connected to produce a daily P&L level forecast, where we have every dollar, every day mapped out and can execute against it to make that forecast a reality, because as we know, forecasting is as much an exercise in execution as it is in planning. So we're going to deep dive into each one of these models to give some more context into what goes into building the models and how critical they are to a system that's producing predictable profit. So the first model to deep dive into the spending power model.