How to maximize impact through marketing mix modeling

As a substantial portion of the Chief Marketing Officers’ (CMO) budgets is allocated to paid media, regularly reassessing your marketing mix can yield significant returns on investment.

What is marketing mix modeling (MMM)?

Marketing mix modeling (MMM) is an analytical approach that empowers marketers to enhance media efficiency and measure the influence of marketing and brand investments. The primary objective of MMM is to assess the additional impact generated by marketing endeavors and utilize these insights for strategic marketing decisions.

Marketing executives employ MMM as a comprehensive tool to assess, confirm, and boost the efficacy of marketing expenditures. MMM not only aids in optimizing future marketing strategies but also offers insights for adjusting allocations in ongoing campaigns.

1. Elevate key findings

The purpose of marketing mix modeling (MMM) is to accurately assess the effectiveness of advertising and promotional activities across various channels, considering external factors beyond a brand's influence.

The results from MMM are utilized in three distinct manners:

1. It demonstrates the cumulative effect of marketing expenditures on the business.
2. It estimates the impact of changes in marketing budgets on the overall contribution of marketing to the business's financial plan.
3. It recommends adjustments in current marketing investments to boost performance.

Marketing mix models dig comprehensively into a plethora of queries, necessitating a diverse range of input data. As these models yield more nuanced findings, their scope often expands. Identifying and prioritizing the insights most likely to be acted upon by your department can lead to initial successes that validate further investment and pinpoint areas for enhancing marketing efficiency.

After determining your key insights, ensure that your data collection is sufficiently detailed to address your top questions – for instance, categorizing impressions by geographical location or campaign type. Subsequently, formulate a flexible strategy for future insight objectives.

In evaluating MMM, commence with the query, “Is it actionable?” The response to this question is crucial to guarantee that your mix produces precise, high-caliber data that can guide subsequent iterations of the model. This includes adjusting marketing tactics, altering frequency, or modifying the channel mix.

2. Establish confidence in the framework

Consider your marketing mix model as a well-founded recommendation rather than a strict directive.

Marketing mix modeling is vital for enhancing resource distribution and boosting marketing's return on investment. To fully benefit from MMM, brands need to have faith in the model's accuracy, enabling them to implement its suggestions confidently. Leaders who place greater trust in their MMM are more inclined to view the insights from marketing analytics as critical to their organization's prosperity.

Leaders in marketing operations cultivate trust in MMM across the enterprise through three strategies:

1. Establish partnerships with the finance department. Finance departments often perceive marketing budgets as more intricate and fluctuating compared to other expense areas. This can lead to a misconception that marketing does not manage its budget as diligently. Recognizing this bias aids in proactive collaboration with finance. It's essential to involve at least one finance team member in MMM projects with the authority to concur on primary measurement goals, expense categories, and financial outcome evaluation methods.
2. Foster trust within the marketing team. MMM findings frequently prompt adjustments in spending across various channels, regions, or significant campaigns. This necessitates agreement and coordination among numerous internal stakeholders and agency collaborators. Effective CMOs avoid framing this as a competition by concentrating on creating a more robust marketing strategy. They enhance transparency by regularly sharing findings, emphasizing new insights, and recognizing the diversity in measurement techniques.
3. Increase confidence among other top executives. The strategy to win over executive trust should be personalized to each executive, potentially involving several arguments based on their understanding of marketing's role. Ideally, you wouldn't need to defend the importance of marketing to senior leaders but rather concentrate on its unique contribution to boosting sales, enhancing brand value, and garnering customer insights.

3. Blueprint and refine

Implement scenario planning to refine marketing strategies continually.

Marketing mix models, primarily used to quantify the incremental effects of all included marketing activities, offer more than just measurement. At their heart, these models are predictive tools. They go beyond merely tracking outcomes; they serve as advisors, guiding future marketing endeavors. CMOs invest significant effort in leveraging MMM forecasts to enhance forthcoming marketing strategies and even modify budgets for ongoing campaigns.

Simulation tools and interfaces enable marketers and decision-makers to envisage future scenarios and evaluate different investment approaches. These include variations in geographical focus, product emphasis, channel mix, execution strategies, or overall marketing expenditure. Such planning instruments consider marketing elasticities and each marketing activity's unique response curve. For instance, a uniform change in marketing investment might yield distinctly different effects in different channels, like paid search compared to display advertising.

The granularity of planning support provided by these tools is increasingly sophisticated, proving especially beneficial for brands engaging in diverse promotions through non-digital channels, like weekly newspaper inserts. This level of detail in reporting also assists in quantifying halo effects, where promoting one product inadvertently boosts sales of another non-promoted item.

Steps to take at a glance

For CMOs aiming to enhance marketing efficiency and outcomes using marketing mix modeling, it is advisable to:

• Prioritize the insights that are pivotal to their comprehensive measurement approach.
• Cultivate confidence in marketing mix models by implementing a targeted, meticulously crafted testing process that corroborates the model's forecasts.
• Employ scenario planning, coupled with simulation and optimization resources, to develop more effective marketing strategies.
• Continuously update and refine the marketing mix model with new data to ensure ongoing relevance and accuracy.
• Collaborate closely with finance and other departments to align MMM insights with broader organizational goals and strategies.
• Regularly review and adjust marketing budgets based on MMM outcomes to optimize resource allocation.
• Communicate the benefits and findings of MMM across the organization to foster a culture of data-driven decision-making.