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There’s no doubt that the prime focus of marketing strategies is always customer engagement. No matter how power-packed your brand is or how many hours you’ve spent researching your customers’ needs and issues, connecting the dots and explaining to people how you’re going to transform their lives is what matters. But how to determine whether you’re able to successfully merge your business identity with the potential customers? That’s where the need for marketing mix modeling arises! In this article, we’ll discuss what marketing mix modeling is and the phases involved in it. Let’s start:
Market Mix Modeling (abbreviated as MMM) is a statistical process used for quantifying the effectiveness of various marketing inputs and their impact on sales or overall market share. By understanding the value of each marketing input and its contribution to sales, Market Mix Modeling makes it easy to determine how much you should spend on each input.
Following an approach based on the 4Ps (namely Product, Price, Place, as well as Promotion) of marketing, MMM measures the level of success arising from each of these crucial elements. It creates projections by optimizing the mix to ensure maximum success. Moreover, MMM helps to uncover, understand, and differentiate the factors leading to success by aggregating data.
By seamlessly unveiling and measuring the discrete factors contributing to a particular instance of success, Marketing Mix Modeling enables marketers to:
To initiate your project, it’s imperative to gather the data that will be required in the statistical model. Identify the products that need to be analyzed, the specific timeframe you’ll consider, the time-dimension detailing, and the markets you’ll model. After that, finalize the sales performance metric that should be analyzed – if it’s dollar sales, units, volume, or anything else? Also, collecting marketing tactic spend and brand margin rates can play a key role in calculating marketing return on investment later. Use the following list to finalize the tactics that you want to include in the model:
In this phase, verification of data integrity takes place due to which coordination among the project stakeholders is needed. So, the key stakeholders should actively participate in a data review session for ensuring your Marketing Mix Modeling project matches expectations.
In the second phase, the vendor determines the statistical method after a successful collaboration with the advertiser for ensuring your questions get addressed by the model. During this project phase, brand managers should focus on partnering with the in-house analytics team. Delving deeper into the statistical details as well as specifications is imperative for the in-house analytics team. If the in-house team has any concerns related to these details, you need to be aware of them immediately.
The output of your statistical model should resonate with your intended checklist and seamlessly address the questions listed by you. There will be a host of outputs generated by your project that could measure the impact of each tactic on sales. It’s important to review the proposed outputs by your vendor and ensure they align with your goals before sharing results with a huge audience.
The elementary output of your Marketing Mix Modeling project can be represented by the decomposition of sales through a pie chart. By breaking down the sales volume for each modeled tactic, the pie chart helps to differentiate core marketing tactics from incremental ones. The core marketing tactics involve the tactics that are not in control of the marketers like weather, seasonality, distribution, competitive advertising, etc. On the other hand, the incremental marketing tactics are in complete control of the marketing team. By measuring incrementality campaign-wise for the tactics executed, it lets you understand if a campaign needs to be continued or not. Here’s a pie chart representing the percentage of the total sales for each marketing tactic in 2019 and 2020.
After you perform the decomposition of sales, here are the three metrics that you must consider:
The last phase of your Marketing Mix Modeling project focuses on turning outputs into inputs to ensure effective marketing planning for the future. Once you’ve successfully completed modeling, an optimization/simulation exercise should be performed to gain actionable insights for planning the upcoming marketing campaigns. These exercises replicate the effects that the varying marketing tactics are likely to have on future sales and identify the right combination of tactics for attaining the desired goals. In simple words, it can provide insights to streamline your marketing approach for the future.
Leveraging marketing mix modeling can empower businesses to determine the effectiveness of their marketing campaigns and gain insights for improving their future marketing approach. However, marketing mix modeling may not be ideal for all and that’s where the need for a robust market research platform will arise. Voxco’s market research platform offers best-in-class omnichannel solutions to ideate, manage, and analyze your market research needs.