MARKET MIX MODELLING (MAXIMISE RETURN OF INVESTMENT)

ANNI HAMER

Owner of Flying Fox Creative

The world of today and all of the modern resources businesses now have at their disposal to market themselves, it is very rare to seeing businesses not promoting themselves on multiple channels. Social Media, PPC online ads, and email marketing are just scratching the surface of what channels there are to promote a business online. It makes sense that the more online channels a business implements the better the return of investment will be. However, it can sometimes get complicated when it comes to determining the impact of each marketing channel. 

Market Mix Modelling (MMM) can help you determine how to get the most “bang for your buck” when it comes to using multiple online resources when promoting your business. For the next few minutes I will break down MMM and how it works and discuss how you can use it to get results for your own business.  

What is Market Mix Modelling? 

 

It’s probably easier to start with an example. Let’s use an eCommerce site to start with. For instance, if you have an online shop selling t-shirts and you’ve invested heavily in your marketing using AdWords, email marketing, social media and video ads. It goes without saying that you will meticulously monitor how each one of those channels is preforming. The more data you can gather will make it easy to determine which marketing channels have the biggest effect on your sales and what impact each one has on the overall Return on Investment (ROI)  

If you have already done this kind of analysis on your own business, then you have been using MMM even though you may not have known that is what you have been doing. It’s a simple principle that monitoring your marketing channels in order to optimise your investment to increase your overall investment.  

An online based business now has a huge advantage over their offline counterparts. This is mainly due to the fact there are so many marketing tools to use to promote a business that has part or all of their businesses online. For example, when using Google’s AdWords, you know EXACTLY how much you are spending per click, and it’s easy to work out what you spend for your Return on Investment.  Online businesses have a massive advantage over traditional brick-and-mortar companies. Let’s break that down further, imagine you have spent £10 on AdWords and get £100 back in sales for that particular investment. Now imagine you have spent £60 on Facebook ads and from that you have £70 in sales back from that. It’s a no-brainer to see you should be pouring that Facebook ad money into AdWords. This example is a stripped-down version of an overall strategy, because why would you only be using 2 online marketing channels when there are TONS of channels out there to invest in.  

When put into practice, MMM not only measures Return on Investment, but also the effectiveness, efficiency, and plenty of other key elements of you overall marketing strategy.  

What key terms of MMM do you need to know? 

  1. Multi-Linear Regression

This type if MMM analysis determines the relationship between independent and dependent variables. Let’s say you are going to use your gross sales as a dependent variable, if you are implementing a diverse marketing strategy to get those results those are your independent variables.. A core part of MMM is this type of analysis 

  1. Base and Incremental Sales

Base sales is what you could expect to sell of your product without implementing any additional marketing channels. Once you have established your brand, you could pull back your marketing strategy and get the same results. Incremental Sales are those that you get as a direct result of Multi-Channel Marketing. These are the results you need to keep your eye on. 

  1. Distribution

This term refers to how much you are allocating to each marketing channel. The goal of this type of analysis is to maximise the impact on your sales each channel brings. Optimising distribution is a main principle of MMM.  

  1. Diminishing Returns and Decay Effect

You may have heard of the term diminishing returns. In advertising, it refers the shelf-life of an ad.  There becomes a point where an ad loses effectiveness and needs to be replaced with a new advertising strategy. 

Let’s go back to our earlier example to give you an idea of what this implies. Say you are getting £100 in sales for every £10 you are spending with AdWordsYou could scale that number infinitely just by increasing how much you spend on this particular marketing channel. However, there’s only so much you can scale up a campaign before the numbers start to decline. This is where things can get really complex in MMM 

Decay Effect is related to diminishing return. The decay effect is when an ad campaign naturally reaches the end of its life, because for whatever reason the advertising strategy has lost effectiveness. In order to stay on top of the game you will have to shift your strategy in order to keep up with the fickle hearts of consumers.  

  1. Deep Dive Analysis

Finally, a deep dive analysis is looking closely at your marketing campaigns to determine which are most effective. In practice, that means analysing their copy, designs, distribution channels, and pretty much every other thing you can think of. When you get to the budget optimization or distribution segment of MMM, the data you get from your deep dive analyses are probably the most valuable assets you have in your marketing strategy.   

Conclusion 

 

Monitoring your marketing spending is the very essence of MMM. In order for MMM to be effective the date will need to be corelated into visual representations of that data. That means you need to put that data together, using charts, tables, or whatever you prefer to use to represent the data. Spreadsheets are our preferred method to analyse this data.  

It doesn’t matter what way you choose to analyse your data, as long as you can get a good, quick overview and can easily detriment what adjustments you need to make to maximise your Return on Investment 

Measuring the effect each marketing channel has on your conversions and sales can be complicated. However, one of the greatest things about online marketing is there are a lot of tools to keep track of all your data. this makes it easier to determine how much you spend on each marketing channel. 

Anni Hamer

Anni Hamer

Head Vixen

Take a 5'3ft bundle of creative enthusiasm, and stir it up with a passion for affordable design with a pinch of glitter; you stumble upon her, an art-directing, designing, blogging, coding, WordPressing fairy.

She has over 20 years of experience in Web Design and creating using the Adobe Suite. Recently, she graduated from UCLAN School of Computing, Engineering and Physical Sciences where she obtained a degree in Computing Science. Graduating with Merit, she studied such subjects such as: Advanced Web Development, Databases, Rapid Application Development, c++ and UX Design.

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