Marketing Mix Modeling
Organizations today are in need of marketing accountability through ROI-centric marketing management so that they’re not wasting funds.
Proving the ROI of marketing activities is one of the the biggest challenges that marketers have. In fact, 40 percent of marketers still say that it’s their number one obstacle. This means that marketers are aware that they are missing out on critical information if they cannot measure the effectiveness of their marketing techniques.
The Answer: Marketing Mix Modeling
This is a scientific and statistical analysis of marketing and sales data, and it’s undertaken to determine the effectiveness of the marketing variables. As such, Marketing Mix Modeling (MMM) is both an art and a science, and here’s why.
The marketing mix consists of the 4P’s. Product, Price, Promotion, and Place Managing these variables effectively so that you can optimize your expenditure on marketing is the art.
The science is creating effective models that can predict future outcomes based on present trends and past performance. You can then leverage the predictions to enable informed decision making, and appropriately allocate funds to the different marketing activities across various channels that ultimately define your company’s marketing mix.
How Does MMM Work?
MMM enables marketers to analyze historical data and present trends and their impact on specific marketing campaigns across various channels. This helps marketers make informed decisions concerning budget planning and allocation, as well as effectively measure performance. In short, it enables you to evaluate the impact of your marketing activities, better understand the return on investment of those activities and whether or not they benefit the company.
Furthermore, incorporating MMM helps management test the effectiveness of their marketing campaigns, determine alternative options, and optimize strategies that deliver meaningful results.
But for an MMM strategy to be effective, it needs to go through the following stages:
This involves analyzing past data including sales, past campaigns, trends, and their drivers. It also entails evaluating the marginal returns from each marketing activity, in addition to the micro and macro factors and their return on investment.
This stage involves predicting and estimating your marketing activities’ effectiveness and ROI. Here, MMM helps in forecasting the conversion and sales from these promotional campaigns as well as further enabling budget allocation to optimize ROI.
This stage involves tracking the effectiveness of the different marketing variables by re-working the marketing activities or simulating spend scenarios.
What CPG Sectors Benefit From MMM?
MMM can be applied across a broad range of CPG sectors including but not limited to food and beverage, health and beauty, nutritionals, household goods, and many more.
This strategy especially benefits the retail and consumer packaged goods industry by improving the ROI across various marketing channels. With MMM, you can optimize spend by eliminating deficiencies while driving sales by setting better trade promotions in addition to helping devise effective pricing strategies.
In the food and beverage sector, marketing mix modeling helps enhance profitability by identifying the impact of competitive advertising, while determining which factors cause the halo effect and then helping prevent cannibalization. As such, this tool has a myriad of benefits that will help any organizations to reap growth and profitability.
These are some of the ways MMM proves to be the better approach when compared to other test marketing techniques:
Leveraging insights to boost marketing effectiveness
Using MMM, marketing professionals benefit from data-driven insights to generate profitable results. The traditional methods of campaign performance evaluation are time-consuming and expensive but MMM is different. It is an advanced analytics tool that enables management to quickly gather insights while simultaneously enabling strategic decision making.
A complete picture
MMM offers organizations a 360-degree perspective of the effectiveness of their marketing strategies while also helping them calculate their marketing ROI. It goes into detail to analyze the internal as well as the external factors affecting their online and offline marketing channels. As such, it is the most accurate method of measuring marketing mix variables because it factors in the past, current, and future attribution of your variables.
Combining digital attribution with customer insights
By using digital attribution, MMM assists in optimizing marketing efforts while measuring the increase in profitability by taking on specific campaigns. When measuring the return on investment from their marketing campaigns, businesses need to understand that every KPI (Key Performance Indicator) also has smaller levels that vary in intensity as well. Therefore, to derive better insights that will drive marketing campaigns, it is imperative that you bring together customer insights and digital attributions.
Facilitating change management in the company
To enhance their profitability, companies must look forward and embrace newer and better processes and techniques so that they can unearth their hidden potential. Today’s digital and fast-paced world requires that marketers look for quick insights which can facilitate strategic decision making for essential processes such as budget allocation. As such, organizations will gain an integrated platform through MMM that offers data-driven facts through digital attribution to enable a sustainable competitive advantage for the company.
When Leveraging MMM Goes Wrong
MMM is both an art and a science. Nevertheless, marketers can hinder the success of this tool by only looking for data that is perfect and expecting a model which is strong and flawless.
Instead, they should look for data that comes from reliable sources without expecting perfection as that will skew the results. Marketers should look for MMM solutions that offer them actionable, accurate, and relevant insights. TABS Analytics is a leading international analytical consulting and marketing research firm with over two decades of experience in providing state-of-the-art marketing mix modeling solutions, simulation, and optimization.
By working with TABS Analytics, you unlock critical data that you can use to optimize your expenditure while simultaneously expanding your reach. Learn more about how TABS Analytics can help your business by scheduling a consultation with us.