Marketing mix modeling (MMM) is basically a scientific and statistical analysis on sales and marketing data to determine the impact of the marketing variables. We could say that marketing mix modeling is both an art as well as a science. You ask why? Let’s break this down for you. Firstly, the marketing mix includes the four Ps: Product, Price, Promotion, and Place, and managing these variables in order to optimize your marketing spend is an art in itself. Secondly, modeling is the scientific part of the process as it is based on statistical models that help predict future outcomes based on past performance and present trends. This forecast can be leveraged to drive informed decision making, allocate funds to various marketing activities across different channels which ultimately define your organization’s marketing mix. There’s much more to MMM than what meets the eye.
How does Marketing Mix Modeling Work?
Marketing mix modeling helps marketers analyze past data and present trends and their impact on individual marketing campaigns across different channels, thereby helping them to make decisions regarding budget planning, fund allocation, and measure performance. It helps measure the impact of the marketing activities, thereby measuring its return on investment (ROI) and its benefit to the organization. Wondering why organizations should adopt MMM and integrate it with their performance measurement strategy? Because marketing mix modeling assists the management in testing the impact of marketing campaigns, determining alternative options and channel medium, optimizing strategies, and delivering effective results. There are three stages for an MMM strategy to be effective, which are as follows-
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- The pre-planning stage of marketing mix modeling includes analysis of historical data such as sales, trends, past campaigns, and its drivers. This also entails analyzing the marginal return on each marketing activity, macro and micro factors, and its return on investment.
- The Planning stage is all about forecasting and estimating the marketing effectiveness and ROI of marketing activities. In this stage, Marketing mix modeling assists in predicting the sales and conversion from these promotional campaigns and further enables budget allocation in order to optimize the ROI.
- The final stage in the marketing mix modeling workflow includes tracking the effectiveness of all the marketing variables, simulating spend scenarios, and re-working the marketing activities, if required.
Industries that can Reap the Benefits of MMM
The marketing mix modeling technique can be applied to several industries including but not limited to retail and consumer packaged goods (CPG), food and beverage, telecommunications and IT, and Healthcare industry. Let’s see how the MMM technique is beneficial in two of the following industries. In the retail and CPG industry, the marketing mix modeling helps improve the ROI across different marketing channels, optimize spend by eliminating inefficiencies, drive sales by setting better trade promotions and help in devising an effective pricing strategy. In the food and beverage industry, MMM helps drive profitability by identifying the impact of competitive advertising, determine the factors that create the halo effect, and help prevent cannibalization. Thus, MMM has multifold benefits that any organization can reap to drive profitability and growth.
How can Marketers go Wrong while Leveraging MMM?
As mentioned above, marketing mix modeling is an art and science put together. However, marketers can hamper the success of this technique by seeking data that is perfect and rooting for a model that is flawless and strong. Instead, they should aim for reliable data from reliable sources without making a fuss about perfection and look for marketing mix modeling solutions that offer actionable, accurate, and relevant insights.
At Quantzig, we offer a wide range of marketing analytics solutions that help the clients in devising strategies based on granular insights enabling informed decision making and driving profitability. Request for a free proposal to know more.