why your business should consider market mix modeling
In today’s digital age, marketing has become more important than ever. With an emphasis on data and analytics, marketers and advertisers are realizing what customers are truly interested in and why.
While every business is different, MMM is a tool that considers both controllable and uncontrollable variables to determine the best route for marketing budgets in order to maximize sales.
Many Fortune 500 companies utilize marketing mix modeling solutions, such as P&G, AT&T, Kraft, Coca-Cola, and Pepsi. Yet, even smaller organizations have the opportunity to identify potential new areas of investment or even cut the budget in certain areas to maximize their marketing efforts. Here are three benefits of marketing mix modeling.
In today’s marketplace, marketing mix modeling is coupled with other tools, such as artificial intelligence (AI) and machine learning (ML). This marketing strategy provides a larger view into what the future of an organization’s marketing efforts looks like.
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what is cross market mix modeling?
Marketing mix modeling is a marketing analytics strategy that can help your brand maximize on return and get a deeper understanding of how your business actually functions. Let’s look into the benefits that this strategy can provide for your brand.
Marketing mix modeling is a statistical marketing method that attempts to determine the effectiveness of marketing campaigns and initiatives by taking apart data and attributing contributions to different marketing tactics and factors to better predict future success.
Put another way, marketing mix modeling looks at different pre-determined factors and the data that has been gathered from marketing campaigns to see which factors have had the biggest impact on return and which factors have contributed the most to success.
Once this data has been collected and organized, the marketing mix modeling system will use the past and historical data to predict or forecast future marketing and sales success.
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Diagnostic capability. Traditional marketing mix modeling is not inherently a diagnostic tool, but a set of analyses available for manipulation and study. Companies cannot expect the system to dictate what needs to be done, or what parts of the overall strategy are driving the marketing programs success or failure. Instead, it merely correlates initiatives and results.
Lack of Data. What kind of historical data do you have access to? Modeling of marketing effectiveness will only work if a company has good data to work with. Data quality and data detail directly dictate the accuracy of your modeling endeavors.
Restricted Resources. Developing an effective modeling system will require direct and indirect costs. Budgets must be prepared for the monetary costs involved in creating/utilizing a sophisticated modeling system. T
Ignoring External Factors. Will your data demonstrate other key factors that influence sales activity? These can include competitor marketing, economic trends, environmental conditions, changes in company operations, and customer contacts.
key metrics market mix modeling helps you focus on
Base Sales is what marketers get if they do not do any advertisement. It is sales due to brand equity built over the years.
Incremental Sales Sales generated by marketing activities like TV advertisement, print advertisement, and digital spends, promotions etc. Total incremental sales is split into sales from each input to calculate contribution to total sales.
Contribution Charts Contribution charts are the easiest way to represent sales due to each marketing input. Contribution from each marketing input is product of its beta coefficient and input value.
Proving the ROI of Marketing Initiatives Marketing mix modeling allows marketers to really prove the ROI of their initiatives. By relating data insights back to the factors in each campaign that provided success, it can help brands understand the full impact of their efforts.
Accounting for Negative Impacts Just as marketing mix modeling allows brands to see the positive impacts that their efforts have created, it can also be used to see negative impacts on different marketing factors. That helps brands know which areas of the business need work and where serious corrections need to take place.
top reasons why market mix modeling is important to your business
MMM assists marketers in optimizing future spends and maximizing effectiveness. Using MMM approach, it is established that which mediums are working better than the other ones.
MMM results can be used further to perform deep dive analysis. Deep Dives can be used to assess the effectiveness of each campaign by understanding which campaigns or creatives work better than the other ones. It can be used to do a copy analysis of creatives by genre, language, channel etc.
Insights from Deep Dives are considered for Budget optimization. Money is shifted from low performing channels or genres to high performing channels/genres to increase overall sales or market share.
As mentioned earlier, Market Mix Modeling uses the principle of Multi-Linear Regression. The dependent variable could be Sales or Market Share. The independent variables usually used are Distribution, price, TV spends, outdoor campaigns spends, newspaper and magazine spends, below the line promotional spends, and Consumer promotions information etc.
MMM helps in the ascertaining the effectiveness of each marketing input in terms of Return on Investment. In other words, a marketing input with higher return on Investment (ROI) is more effective as a medium than a marketing input with a lower ROI.
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our team of professional marketers can help businesses understand why having and integrated media strategy is so important for sustainable business growth. Our data and technology methods help brands expand online by taking advantage of a wide range of marketing automation and data analytics solutions
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