When it comes to your business, your marketing is everything. If your marketing isn’t bringing in sales, your business isn’t making money. But how do you understand how well your marketing is doing? Marketing Mix Modelling.
Marketing Mix Modelling on the surface, sounds complex, but it’s very simple once you break it down; and once you’ve finished this article in 5-10 minutes and understand what it is as well as some marketing mix modelling techniques, you’ll wonder why you’re not already using it. Let’s begin!
Marketing Mix Modelling: What Is It?
Marketing Mix Modelling is a set of statistical analysis techniques that help marketers and businesses understand what kind of impact their marketing efforts are having on their sales or market share, and also gives them the ability to predict how future tactics will impact ROI going forward.
Essentially, Marketing Mix Modelling (which we’ll henceforth refer to as MMM) is a way of analysing historical data, such as point-of-sale information and internal data streams to quantify how sales are being impact by marketing efforts.
Each marketing effort is graded on its effectives by its contribution to sales, its effectiveness and efficiency and it’s total ROI. Overall, a business will be able to understand overall marketing effectiveness and determine which marketing channels are most effective, determining for the business where their resources should be ideally spent.
The model is created with the sales volume/value as the dependent variable, with each marketing effort being the independent variables. Once data has been collected, the statistical technique of regression analysis is used to define and measure the effectiveness of the companies’ marketing efforts.
The Mix in MMM commonly refers to the mix of the marketing factors, known as the “4 P’s”: Product, Price, Place and Promotion). Using the data, we can understand the best mix of these 4 factors when it comes to marketing.
What Are the Benefits of Using Marketing Mix Modelling?
Often, it’s easy for a medium to large business to spend huge amounts of money on marketing efforts, expecting that with huge investments, incredible returns are sure to follow.
However, it’s unfortunately all too common that when a company does this, only several avenues of marketing are actually found to be effective. Your company for example could be paying tens of thousands on Facebook ads, with almost no return. MMM fills this void of doubt by clearly defining each marketing type’s returns using the data accumulated to this point.
Marketing Mix Modelling: A tool for non-digital spaces
MMM is primarily a tool to measure non-digital ad spaces (with this being one of its limitation in our modern digital age), and is commonly used to measure Print, TV, and Out-of-Home marketing; billboards and the like.
If you’re advertising in physical locations, MMM is an important tool for you to measure how your physical marketing is doing. If you’re interested in directing your marketing finances to avenues that actually make your company money, then you’ll be interested in adopting Marketing Mix Modelling into your marketing feedback loop.
What Limitations Does Marketing Mix Modelling Have?
Using Marketing Mix Model techniques might sound like the perfect way to get your marketing on track and eliminate those pesky marketing avenues that are draining your business dry. However, Marketing Mix Model solutions do come with limitations, and you should be careful on where you’re implementing MMM.
To quote a cliché, the numbers don’t tell the whole story. If you rely on directing your marketing based on recent short-term sales figures, you’re likely to miss out on those more long-term investments that pay off significantly over time.
It’s easy to look at the numbers and make a decision that spending money building a social presence and ad campaigns aren’t worth the spend, particularly when you’re still in the early stages. However, those marketing efforts might be a huge contribution to your bottom line 12 months from now.
If you persistently focus on the short term quick-cash grabs, you’re leaving the long-term slow-burning marketing ROI on the table. Worse, you might imagine your marketing is succeeding, when actually your focus on the short-term is slowly ruining your companies’ brand equity.
The other limitation of Marketing Mix Modelling is its age. This concept was developed before the digital age; before web browsers, search engines, and your PPC campaigns were even thought of.
While Marketing Mix Modelling techniques are still relevant in today’s marketing sphere, they’re simply not designed for the digital arena.
Attribution Modelling: The MMM of the Digital Era
Windsor.ai’s specialty is in attribution modelling, which can be considered a sub-set or natural extension of Marketing Mix Modelling, and gives users looking to implement MMM into their business, strong insights into their digital marketing efforts.
Attribution modelling allows marketing to analyse and understand digital marketing channel’s effectiveness, without having to understand complex statistics techniques, making attribution modelling an easy and effective way to apply the benefits of MMM to your business.
Using attribution modelling, you can use the analytics and digital data that you’re collecting in real-time to understand what marketing channels are bringing you the strongest ROI.
The “7 P’s”: Marketing Mix Modelling for the Online Age
The “4 P’s” were designed for an age where businesses were primarily focused on providing products, and not so much on today’s culture of services and the increasing importance of customer service and support.
These days, there are seven P’s to consider, and they are:
- Physical Evidence (I.e. brand trust; strong website, physical locations, etc)
Using Windsor.ai, you can bring all those marketing data streams to one place and use the power of attribution modelling to keep a close eye on how each channel is performing over time, optimising budgets and increasing your total revenue while decreasing expenditure!