by Jim Lenskold
Marketers interested in measuring effectiveness and ROI need to understand if marketing mix modeling can work for them and how to get the most from it. Modeling measurements are often considered a bit complex and mysterious by marketers – many of whom did their best to survive any required statistics courses. Marketing mix modeling (MMM) has long been a reliable measurement for consumer package goods (CPG) companies and is now proving to be a great planning and measurement tool that increases profits in many diverse B2B and B2C industries. The challenge is that marketers are missing opportunities to fully benefit from marketing mix models as part of a comprehensive measurement and management process.
Marketing managers need to understand if marketing mix modeling will work in their environments and what to expect from the outputs. For companies already using marketing mix modeling, they need to assess its value in driving marketing decisions and determine if they are truly tapping into its full potential.
Modeling of marketing effectiveness is dependent on good historical data capturing, at a minimum, your marketing activities and sales performance. The quality of the data and the level of detail drive the accuracy of the modeling. There is a significant difference in having data on a weekly basis vs. monthly. We won’t get into the technical requirements for modeling but will establish that companies without quality data are not good candidates for marketing mix modeling.
There are additional considerations once data availability is confirmed.
What you should expect from a high quality marketing mix model in terms of both benefits and gaps:
For far too many marketing organizations the first question is, sadly enough, are you driving any decisions with your modeling outputs. Too often, marketing mix model results are used for reporting and justifying marketing investments already made with little or no change in decisions going forward.
The modeled output, in the format of reports, simulation tools, or optimization tools, should support your decisions to re-allocate budget and achieve greater returns. It is important to recognize that the model delivers insight and does not generate “the answer” in terms of how to invest your marketing.
You need to consider the following in your decision process:
Once you understand how to use marketing mix modeling more effectively to better support your decisions, you can then go further to draw even greater insight. These opportunities generally come as you incorporate measurement objectives into your marketing plan, and as you integrate multiple measurement methodologies together to accelerate and deeper your insight into improving marketing effectiveness.
Here are a few suggestions to get more from your MMM:
The best way to maximize and manage marketing ROI is to prioritize your measurement objectives based on supporting the most critical strategic and tactical decisions and having the greatest impact on profit performance. Companies that have good data and are not using modeling need to consider marketing mix modeling or other forms of regression or time-series analyses. Create a measurement plan that leverages the strengths of different measurement methodologies and provides the marketing organization with reliable intelligence they can act upon. There are always more information needs than can be actually measured so be smart in where limited resources are prioritized.