A Comprehensive Market Mix Model
Marketers are always interested in measuring the impact of their marketing initiatives. They look to quantify their inputs, so as to measure their contribution to business and to estimate the Return on Investment. This will then be used to improve the impact of inputs by moving money to the more productive initiatives and reduce money to unproductive activities. The quantifying of such inputs however is not an easy task. Marketing is a complex task and customer purchase behavior is affected by a myriad of factors. The kind of complexity is described in the next few paragraphs. Multiple KPI’s with the same inputs The marketers of today, need to measure the impact of their marketing initiatives, across multiple business KPI’s. These KPI’s include lower funnel metrics such as sales & market share, mid funnel metrics such website visits & engagement, and upper funnel metrics such as brand search and ad clicks. They believe lower funnel metrics are accrue immediately but upper funnel metrics convert to sales at a later stage. Thus want to investigate, how one dollar of marketing input, percolates through the sales system, and affect all the KPI’s that are being measured.
Carry over and diminishing returns of media
Media possesses two characteristics that need to be taken into account. The carry over effect is when current advertising results in persistent future sales for a period of time. The diminishing effects are when inordinate increases in advertising inputs do not result in incremental sales and sales tend to stagnate.
Synergistic Effects
The other interesting effects they want to measure are the synergistic effects between marketing inputs i.e. How did my TV campaign, affect sales, website visitors and webinar attendees? And are today’s website visitors and webinar attendees, tomorrow’s customers? Sometimes the effects are instant. Sometimes it is delayed. Some the effects are reciprocal e.g. TV affects sales and increased sales encourages increase in TV input.
Long Term vs Short Term Effects
Media and Promotions may have long term effects and addition to the short term. It is possible that customer induced with an ad make their first purchase, but may continue to purchase repeatedly over time. Most market mix models ignore the long term effects and marketers are then forced to make budgetary and deployment decisions only on the short term effects. But studies have shown that long term effects are often a little more than twice the short term effects.
Deep Dives
It is not enough to know the effects at the highest levels of inputs i.e. TV, Print, Digital etc. but also to know what creative message, genre of channel and duration of a commercial worked. Similarly in digital to know if search worked better than social or social worked better than YouTube.
Optimisation of the Budget
Optimization of the budget is the holy grail of MMM. This is where the rubber hits the road. Using the output of the comprehensive MMM, a given budget and business constraints are used to deploy the inputs in the best possible manner. This results in a lift in sales or any other KPI that is being considered. Optimization not only takes in account, the deployment mix of the budget but also in its scheduling, because some scheduling patterns work better than others. A good optimization takes care of both. For further information, co