How to Increase your Return on Investment Through Marketing Mix Modeling?
To recover from the COVID-19 crisis, all brands have been reviewing their Marketing budgets and their allocation alongside the different Marketing Channels. Marketers today are asking the following question: What media channel are best to invest in? Which one will bring the highest Return on Investment?
The best way to answer this question is to know how to measure the effectiveness of these channels. Naturally, that measurement relies on calculating their ROI to optimize Marketing Spends. Here, the contribution of Marketing Mix Modeling becomes crucial. But first, what is Marketing Mix Modeling?
1. Marketing Mix Modeling
The main idea behind MMM (Marketing Mix Modeling) is measuring the effectiveness of a Marketing activity through various Marketing Channels and external factors. These channels include:
- Online variants (Facebook, Search, Clicks, Website traffic, Twitter, etc.)
- Offline variants (Radio, TV, Out of Home, Magazines, Press, Billboards, Telemarketing, etc.)
The first step in identifying the best channels to invest in is the measurement of these channels’ contribution to sales volume, revenue, or brand’s growth. Once this measurement is done, we can compute the contribution of every channel. We can also run Optimization Simulations using What-if-Scenarios based on the invested budget, or the chosen Target. This will allow us to run a predictive analysis of the future performance of the brand based on the measurement results.
2. Increasing Return On Investment
Once the analysis is done, the modeler can establish the relationship between all the variables. Additionally, the analysis reveals the contribution of each channel and marketing activity on the sales. These figures and their values are the key to starting the Marketing Mix Modeling simulations.
Once key stakeholders review, it is time to understand how to allocate these budgets. The last step here is to use Marketing Mix Modeling to allocate these budgets to the channels. The marketing channels with the highest Return on Investment are determined based on the calculation of the analysis and modeling phases.
Today, running optimization analysis is key for Marketers and Strategic Planners to ensure the growth of their brands. Marketing Mix Modeling can empower organizations to generate more sales and revenue, while understanding most of their spending and investments. In an era of numbers and insights, decision-making needs tends to be increasingly data-driven. The best approach for that would be measuring the effectiveness of each one of your marketing activities. The right insights will help you not only survive turbulent times but emerge stronger from them.
To help navigate marketing during COVID-19, we prepared a comprehensive breakdown of what the MMM industry’s top experts advised their companies. Feel free to download our latest white paper “Marketing Mix Modeling in the Wake of a Pandemic – Insights from Industry Experts”.