Does your business depend only on one marketing strategy or do you use several coupled marketing strategies at once?
When you’ll search about marketing strategies you’ll find out that there are hundreds of marketing strategies, and to sustain in the market every brand has to focus on several marketing strategies at once.
You can research any single brand, even startups are promoting themselves through various channels and with various tactics such as SMM, Omnichannel, Storytelling, Email Marketing, Advertising, SEO, Traditional Advertising, Native Advertising, and much more.
The aforementioned names are just some common names everyone knows but there is a big bunch of marketing strategies that are used by any business. If you want to know more about marketing strategies, you can visit our blog, “Marketing Made Simple”, we’ve enlisted more than 41 marketing strategies on that blog.
Having so many marketing strategies to work on creates confusion and we can’t determine which is the best suitable for the brand. Even if we are successful in implementing many marketing strategies, it’s not easier to measure the impact of each marketing strategy on the success of the campaign.
Marketing Mix Modeling (MMM) provides you the ability to measure the impact of all your marketing channels with statistical analysis. This analysis will give you an opportunity to allocate your limited marketing budget to a wide range of marketing activities, and you’ll have a clear image of how and where to invest your marketing budget.
Let’s explore more about Marketing Mix Modeling (MMM)!
What is Marketing Mix Modeling?
The goal of all the marketing strategies is to distribute the product or service and get higher sales and returns from that product. There are several marketing inputs that impact sales or ROI.
Marketing Mix Modeling (MMM) helps us in understanding those marketing inputs and their effectiveness in terms of return on investment and gives us an idea of how much to invest in each marketing input.
This way we can optimize the investment in each marketing channel to improve the return on investments from each marketing channel.
In simple words, Marketing Mix Modeling (MMM) is the process of performing statistical analysis on different marketing channels and measuring many factors of those channels such as effectiveness, efficiency, and returns to optimize the marketing campaigns and marketing budgets for getting a higher return on investments (ROI).
So, what are the factors that need to be considered in marketing mix modeling?
Let’s get to know about those important factors of MMM in each channel;
4Ps of Marketing Mix Modeling (MMM)
Edmund Jerome McCarthy first proposed the concept of marketing mix modeling in the 1960s. He introduced the 4Ps of Marketing Mix Modeling (MMM). These Ps are fundamental parts of marketing theory. Understanding these 4 important factors and executing the marketing campaigns according to them can ensure the success of your marketing campaign;
- Product: tangible items or intangible services designed for specific target audiences to solve their problems and fulfill their needs. It can be brand, services, or packaging.
- Price: Amount of the product or service (offer price), discount, credit policy.
- Place: Platform from where the company sells its products and services (channel), Market, and Distribution.
- Promotion: Marketing and Communication Strategies used to promote the products such as Advertising, Publicity & Public Relations, Storytelling, Sonic Branding, sales promotions, etc.
Understanding these marketing mix elements will help you in developing your own marketing mix to promote your products or services with higher effectiveness in return with a higher return on investments.
The accuracy of your marketing mix model will determine the success and failure of your product or service. Many marketers are including more Ps in the marketing theory such as packaging, positioning, people, physical evidence, processes, etc. You can also have a look at them also for getting a better statistical analysis.
Other than the above-mentioned variables there are more variables and concepts that affect the marketing mix model, it’s time to discuss those concepts of marketing mix modeling;
Some Key Marketing Mix Modelling Elements & Terms
In MMM, we analyze the marketing tactics and find out which marketing tactics are giving more ROI, after analyzing we shift the money from low ROI providing tactics to high ROI providing tactics and optimize the marketing budget. Following key marketing terms will help you in understanding the marketing strategies and proper analyses of them;
Base Sales and Incremental Sales
You need to differentiate your sales into the base and incremental to proper analysis of your MMM metrics.
Base sales are the outcome of brand equity and the reputation your brand has built for years. These are the result of brand and consumer loyalty that you’ve gained in the market. Loyal consumers promote the business without any external push, so this happens naturally. Base sales are constant for a long period of time until there are some changes in economic and environmental variables because these are the result of brand equity and awareness.
In simple words, the natural demands of your products or services in the marketing without any advertising are considered base sales.
On the other hand, Incremental Sales are those results you get directly through marketing tactics and advertising. MMM analyses incremental sales and then optimizes the campaigns according to these sales.
Incremental sales are generated through various means such as print advertisements, TV advertisements, digital spending on digital marketing, promotions, inbound marketing, content marketing, social media marketing, etc.
Some of the Important Base Variables are;
- Price: Base Price ( Undiscounted Price), Average sales price (Discounted Price)
- Distributions: Assortment (No. of Stock Keeping Units in a store or market), velocity (the rate at which the product is moving), number of stores and locations at which the product is available.
- Seasonality & Holidays: If you want to know more about seasonality and holidays then you can read our blogs on “Seasonal Marketing”, and “Holiday Marketing”.
- Macroeconomic Variables: such as inflation, GDP, unemployment rate, purchase power, growth rate, consumer sentiment, etc.
Some of the important incremental variables are;
- Above the Line (ATL): These are non-targeted and have a wide reach. The objective of ATL activities is to build brand awareness and familiarity and help in brand building. Examples of ATL are radio advertising, television advertising, print advertisements in magazines and newspapers, product placements in cinemas and theatres or billboards, etc.
- Below the Line (BTL): It is very specific, memorable, and targeted. BTL is focused on conversions than brand awareness. It is also called a direct marketing strategy. Examples of BTL are discounts, SMM, sales promotions, in-store marketing, email marketing campaigns, events, conferences, etc.
- Through the Line (TTL): TTL is very much effective as it uses the integration of both marketing tactics ATL and BTL for better results and provides 360 marketing solutions for everything from brand building to conversions. It uses the sum of all the marketing tactics of above the line (ATL) and below the line (BTL).
Behavioral Metrics
Behavioral metrics include several touchpoints of several stages, repurchase rates, and other behavioral metrics. These provide deeper insights into customers.
Budget Optimization
As the MMM analysis is done for the purpose of optimization of marketing strategies. Budget optimization is the technique of optimizing future marketing spending to maximize the effectiveness and ROI of the strategies.
MMM provides us with a report about the effectiveness of the channels of marketing. Budget optimization helps us in shifting the money from low ROI channels to high ROI channels. This way we don’t need an extra budget for better results.
Cannibalization Effect
It’s always said, big fishes eat small fishes in the sea, and the same happens in the field of marketing. If a brand is having more than one product in the same category, then both products would negatively impact the sales of each other. This negative impact of the products on other products is called the cannibalization effect.
It’s also an important marketing mix element that needs to be considered while performing analysis.
Competition
If you want to stand like an authority in the market, you need to outsmart your competitors. The best way to do this is to follow what they’re doing for their users and provide so much better products, services, and consumer experiences to the users.
Always consider both of your competitors whether it’s direct or indirect. Direct competitors are the brands and businesses that have the same products and offerings. Indirect competitors don’t offer the same products and services but are an alternative to the main product.
Contribution Charts
Contribution charts show the percentage of sales achieved through each marketing input or tactic. After defining the contributions of each marketing enough you can easily compare the effectiveness of each marketing input.
Deep Dives
Deep analyses represent the analysis on deep levels such as genre, language, methods, creatives, channels, budget spending, etc. It helps in budget optimization and shifting the investment from one input to another input.
Diminishing Returns and Decay Effect
Let’s understand it with an example, you are running an advertisement for your business, it’ll work well sometimes, but if you’ll start running only a similar campaign again and again without any optimization or changes, the sales will start diminishing and after a while will become constant, that’s called diminishing returns.
So, keep optimizing your Marketing Mix Modelling Campaigns over time.
The decay effect is also called a carry-over effect. In this effect, past advertisements impact the present sales of a brand. As something from the past is being carried to the present, so it’s called the carry-over effect.
Discounts
Discounts also affect sales, so the impact of discounts on sales should be measured while performing an analysis.
Distribution
Distribution plays an important role in MMM. As all the focus of MMM is on optimizing the effectiveness of marketing inputs and ad spending, what if the distribution of the products or services isn’t done well?
So, you also need to optimize your distribution systems as well. Distributions of resources to each marketing channel or stock-keeping units to the stores and locations should be proper and effective.
Halo Effect
The Halo effect shows the awareness, strength, popularity, and loyalty of the brands among their target audiences. This is the result of the previous positive and memorable experiences consumers have with the brand. You can build such experiences with your consumers with the help of “Empathy in Marketing”. So, measure the halo effect also into the marketing mix modeling.
Market Trends
What’s trending in marketing is on everyone’s tongue! Understanding market and marketing trends will help in understanding the demand for the products or services your consumers have.
Media Activity
What’s being shown on media channels also impacts the sales of any brand. As media reports change consumer sentiments, consumer sentiments are a big factor in the sales of any brand. So, focus on what’s being shown in the media currently.
Multi-linear Regression
Let’s first discuss what linear regression is!
It’s a type of analysis in MMM showing the relationship between dependent variables and independent variables (predictors). The relationship is linear when it’s being defined between one dependent and independent variable but when it’s defined with multiple independent variables it’s called multi-linear regression techniques.
Dependent variables can be anything that is dependent on predictors such as sales or market share. There are so many independent variables from traditional and digital mediums such as SMM, Advertising, PPC, distribution, price, TV spending, print advertising in newspapers and magazines, website visitors, outdoor campaign spends, and all types of campaigns (ATL, BTL, and TTL), etc.
As we can see there’re many independent variables, so it’s called multi-linear regression. It’s the core principle in Marketing Mix Modeling.
Defining the relationship and performing multi-linear regression can help you in determining the effectiveness of the tactics and optimizing the marketing strategies.
Seasonality & Holidays
Seasonality and holidays impart a big role in the ROI and sales of any brand. Sales are increasing these days because of the offers, sentiments, or environment. The sales of products and services differ in every season and during holidays because people wait for them to come, to enjoy quality time with family and to get a decent discount on the products and services they want.
Measure your seasonality and holiday marketing key performance metrics (KPIs) to empower Marketing Mix Modelling, and if you want to know more about what seasonal and holiday marketing strategies are then you can visit the blogs on “Seasonal Marketing” and “Holiday Marketing”.
Social Metrics
Social media channels impart a big role in the growth of any platform and you can easily find and target your target audiences on more than one social media channel. You can use social media channels as social listening tools and can get to know about the consumer’s sentiments toward your brand. Social media platforms are a better option for brand awareness as well as conversions.
You can measure the social metrics with the followers and engagement data such as comments, views, subscriptions, tagging, brand mentioning, referring, etc.
We’ve so many key marketing mix modeling elements and terms now. So, are you fully aware of what you need to research in the marketing mix? It’s basically a marketing strategy in which you first measure the performance of every marketing strategy and then optimize those marketing strategies.
It wouldn’t be unjust to say marketing mix modeling is an optimization model more than a marketing strategy.
Let’s discuss how you can use it for your brand!
How to implement Marketing Mix Modelling in your Brand?
If you don’t have a step-by-step process of any marketing strategy, then the chances of getting results are pretty low. To resolve this problem, we’re describing here the step-by-step process of performing marketing mix modeling in your brand;
Establish Goals
Establishing goals will help you in identifying the problems in the path to achieving the goals and solutions to those problems.
As we’re saying again and again that the aim of marketing mix modeling is to recognize the effectiveness of the channels and optimize them for increased ROI and results. Then to get the mentioned outcomes we need a systematic approach and knowledge of all the marketing efforts.
Determine the goals you want to achieve from the current marketing mix modeling campaign.
Identify and Collect the Data
Identify the types of data you need to collect for MMM. You’ll still have some of your users’ data that you use for research purposes and for designing your products and services.
Now, it’s time to identify the types of data you need from your marketing channels and collect data from each marketing channel.
As you’ve already listed the goals you want to achieve through a particular MMM campaign, you need to ask questions yourself about what you’ll need to achieve your goals, and what type of data you’ll need for that.
Collect consistent, clean, and refined data about all the marketing channels and your target consumers.
Examine and Analyse the Data
Examining and analyzing the data is the most crucial step in marketing mix modeling. So, do you have any idea on how to examine and analyze the data with the discussions so far that we’ve had?
I think you know deep down what metrics we should analyze the data. As we’re talking about the effectiveness, efficiency, and the best median return on investments from the channels.
So these are the 3 most important factors on which you need to analyze the data
- Effectiveness
- Efficiency
- Return on Investments
Measure Your Marketing Channel Distribution
After analyzing the data you need to track marketing spending on each channel and build charts, tables, and spreadsheets to put all the data in a nutshell and for better understanding.
It’s easier to understand the charts and tables rather than the random numbers. Building charts will help you in getting a quick overview of your marketing channel distribution whenever you’re in need.
Optimize the Marketing Channels
As you have the data regarding the marketing channel distributions, and you’ve built the linear-regression curves between sales and predictors (Independent Variables).
You can easily optimize the marketing efforts with the help of shifting the marketing spend from lower ROI mediums to higher ROI mediums.
On the basis of multi-linear regression and distribution charts, you can predict how much you’ll get after optimizing a particular strategy, and which optimization would be the best fit for your brand.
So, ready for experimenting with marketing strategies and optimizing them?
Now, let’s see some of the key benefits you can get through Marketing Mix Modelling;
Benefits of Marketing Mix Modelling
Marketing mix modeling doesn’t analyze 1-on-1 data, and user experience and also lacks real-time data, but still, there’re many benefits it provides to your brand. Some of the most talked about benefits of marketing mix modeling is;
- Helps in understanding the effectiveness, efficiency, and return on investments from each marketing channel.
- Effective Budget Allocation to the different marketing strategies and channels
- Better and effective execution of advertising campaigns
- Avoid Saturation
- Sales Trend Forecasting
- Optimized Marketing Efforts
- Increased ROI on the same ad spend
As you can see there are so many benefits of marketing mix modeling. Are you ready to incorporate this marketing strategy into your brand?
Let’s conclude this blog here!
Wrapping Up
Marketing mix modeling focuses on optimizing marketing efforts and precisely allocating budgets by removing the guesswork with the help of statistical data.
Accuracy in your marketing campaigns will give you time to show creativity and room for experiments in your marketing efforts. Marketing mix modeling lowers the risk associated with products, service launches, and market expansions. Understanding market and market environments along with numerical and statistical expertise will help you in developing a holistic, accurate, and perfect marketing mix model.
Let us know in the comment section how are you going to incorporate it into your brand for the long-term sustainable growth of your company.
Some brands develop their marketing mix model with the help of their in-house marketing team with the help of their research and analytics departments, others connect with external marketing companies for an efficient and successful marketing mix model for their business.
If you’re also looking for such a team of professionals then you can also connect with the DigiAvtar Team for a decent discussion, we can assure you, we’ll suggest you the best marketing model for your business. DigiAvtar is a digital marketing agency situated in Gurgaon, Haryana (India), operated by a team of experienced marketing professionals.
If you want to read more about marketing, then you pay a visit to our blog section!