A Comprehensive Market Mix Model
Marketers are always interested in measuring the impact of theirmarketing initiatives. They look to quantify their inputs, so as tomeasure their contribution to business and to estimate the Returnon Investment. This will then be used to improve the impact ofinputs by moving money to the more productive initiatives andreduce money to unproductive activities.The quantifying of such inputs however is not an easy task.Marketing is a complex task and customer purchase behaviour isaffected by a myriad of factors. The kind of complexity isdescribed in the next few paragraphs.Multiple KPI’s with the same inputsThe marketers of today, need to measure the impact of theirmarketing initiatives, across multiple business KPI’s. These KPI’sinclude lower funnel metrics such as sales & market share, midfunnel metrics such website visits & engagement, and upper funnelmetrics such as brand search and ad clicks. They believe lowerfunnel metrics are accrue immediately but upper funnel metricsconvert to sales at a later stage. Thus want to investigate, how onedollar of marketing input, percolates through the sales system, andaffect all the KPI’s that are being measured.
Carry over and diminishing returns of media
Media possesses two characteristics that need to be taken intoaccount. The carry over effect is when current advertising resultsin persistent future sales for a period of time. The diminishingeffects are when inordinate increases in advertising inputs do notresult in incremental sales and sales tend to stagnate.
Synergistic Effects
The other interesting effects they want to measure are thesynergistic effects between marketing inputs i.e. How did my TVcampaign, 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. TVaffects 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 tothe short term. It is possible that customer induced with an admake their first purchase, but may continue to purchase repeatedlyover time. Most market mix models ignore the long term effectsand marketers are then forced to make budgetary and deploymentdecisions only on the short term effects. But studies have shownthat long term effects are often a little more than twice the shortterm effects.
Deep Dives
It is not enough to know the effects at the highest levels of inputsi.e. TV, Print, Digital etc. but also to know what creative message,genre of channel and duration of a commercial worked. Similarly indigital to know if search worked better than social or social workedbetter than YouTube.
Optimisation of the Budget
Optimisation of the budget is the holy grail of MMM. This is wherethe rubber hits the road. Using the output of the comprehensiveMMM, a given budget and business constraints are used to deploythe inputs in the best possible manner. This results in a lift in salesor any other KPI that is being considered. Optimisation not onlytakes in account, the deployment mix of the budget but also in itsscheduling, because some scheduling patterns work better thanothers. A good optimisation takes care of both.For further information, co