In this article, we will explain what Marketing Mix Modeling is and what you need to know in order to implement it.
What is Marketing Mix Modeling
Marketing Mix Modeling analyzes historical data to show you which marketing efforts are driving sales most effectively. Also, MMM helps you understand what worked and what didn't in your past campaigns, and based on this you can plan future campaigns with a higher chance of success.
Using statistical models, MMM analyzes all the different marketing channels a company uses, such as advertising, social media, promotions, or even offline media channels, and measures the influence of each marketing channel on sales.
What you can do with MMM
- Measure Effectiveness of Your Marketing Efforts: MMM allows businesses to see which marketing channels are driving the most sales and providing the best return on investment (ROI). As a result, you can quickly determine where your money is being best spent and adjust your strategies.
- Predict Future Results: MMM can forecast the impact of future marketing campaigns based on past data, helping other parts of the business to plan accordingly.
- Pricing Analysis: If you adjust the price of your product or service, MMM can help predict how the market might react. For example, you can find out if a lower price attracts more customers, or if it decreases the perceived value of your product.
- Align Marketing Strategies Across Teams: MMM provides a common framework for evaluating marketing channels for all the departments of the business, so that different teams within an organization can collaborate more effectively on campaigns and budget distribution.
- Adjust Marketing Strategies for Seasonality: MMM shows the impacts of seasonality on your target outcomes, so you can adjust your marketing efforts to meet goals during different times of the year.
How MMM works
MMM involves statistical analysis to highlight the relationship between sales or conversions and ad spend. It uses historical data, typically the latest data of 2-3 years, from both marketing and non-marketing sources.
Unlike other metrics that focus on user-level data like ad impressions or clicks, MMM provides a bigger picture of how marketing influences sales performance, so that you can plan long-term.
What you need to implement MMM
Before implementing MMM, it’s important to gather historical sales and marketing data. This includes:
- Sales Data: Historical sales figures, revenue, market share, etc.
- Media Channel Data: Spending data for various channels, both digital and offline.
- Competitor Data: Marketing activities of competitors and industry benchmarks.
- Macroeconomic Data: Economic indicators like GDP growth and unemployment rates.
- Consumer Data: Demographics, interests, behaviors, and more.
It’s important that the data should be prepared and transformed into a consistent format as it is crucial for accurate MMM modeling.
Adapting to the Future with Marketing Mix Models
Marketing Mix Models have been utilized for many years and are now experiencing a resurgence in the industry. The primary factors for this renewed interest include:
- Privacy-conscious and signal-resilient - A significant advantage of MMMs is their ability to mitigate signal loss. Unlike multi-touch attribution, which heavily depends on online signals, MMMs operate using aggregated data (such as campaign-level data) rather than individual user data.
- Comprehensive - MMMs are the preferred measurement solution for comprehensive, cross-channel sales analysis. They evaluate sales outcomes across all marketing channels in a single analysis. MMMs consider the effects of marketing investments (both online and offline) and non-marketing investments (such as pricing trends, promotions, seasonality, or distribution) on outcomes.
- Adaptable - MMMs are versatile models that can be tailored to different business types (e.g., gaming, digital native, pure e-commerce, etc.) and business KPIs (e.g., revenue, units sold, website activity, etc.).
If you have questions about the benefits of MMM for your business or don’t know whether your business is ready to implement it, feel free to contact us via chat for a discussion.