How to Increase ROI Using Marketing Mix Model (MMM)

How to Increase ROI Using Marketing Mix Model (MMM)

How would it be if we were to tell you with near-certainty how much money to invest in every marketing action? This, in turn, will help your business determine the optimal degree of investment in each marketing channel.

What is every Chief Marketing Officer’s (CMO) dream? He/she would love to have an unlimited budget, for marketing. But if wishes were horses, well…..

In reality, every CMO has a limited budget, which they are then supposedly required to use judiciously across their chosen marketing channels.

In retail, for example, only about 10 percent of revenue is used for marketing.

We at Express Analytics believe that a limited budget should not limit the knowledge on how best to allocate this money.

Calculated planning by way of Marketing Mix Modeling (MMM) can help marketers overcome budget blues by finding the most-effective mix of marketing variables to get the best return on investment (ROI).

A simplified explanation is that marketing mix models take an analytical approach, utilizing historical sales data and company data to find out the impact of marketing activities on sales.

Table of Contents

1. Sell More For Less
2. Reduce Cost Per Acquisition
3. Marketing Mix Models (MMM) With Extra Zing
4. Results Of MMM Analysis
5. MMM Example

MMM model uses statistical and analytical tools to quantify the impact of marketing decisions of the past and predict the future. The idea is to use the models to optimize the marketing mix and get the best out of your limited marketing budget.

Sell More for Less with Marketing Mix Modeling 

For optimization, you need to first find out the saturation point of your preferred marketing channels. That is a must in order to optimize your media spend across the channels for maximum and increase ROI using the marketing mix model (MMM).

For this, we use your enterprise data and variables to develop an algorithm-based model to forecast your sales.

Our predictive modeling allows for maximizing sales for a laid-down budget. All of which will ultimately tell the marketer in you how to precisely budget for all your marketing channels, and so sell more with less.

Effectively Reduce Cost Per Acquisition

CPA is a marketing metric that measures the total cost of a customer’s movements that lead to a conversion. Conversion could mean one or all of the following: a click, a sign-up, a sale, or a download.

Obviously, the lower your CPA, the better use of your marketing budget. Our regression models help you cut down your CPA by as much as 30 percent by identifying channels that are more effective than others, and re-routing budgets to them.

Our Marketing Mix Models (MMM) Come With That Extra Zing

Who does not love extras? Express Analytics’ use of the latest ridge-regression and evolutionary algorithms give our Marketing Mix Models that extra edge.

At its core, the models use the regression method for studying the effect of one or more independent variables like price or advertising cost on a dependent variable such as sales.

The analysis is then used to extract key information to help your marketing effort. These could be to simulate marketing scenarios using what-if analysis, for example.

Our MMM models help your marketing teams hit the bull’s eye by maximizing the accuracy of the marketing spend. Marketing managers can use this report to reallocate their marketing budgets. They can see the impact on sales within a few weeks.

How We Apply The Results of MMM Analysis

The marketing mix model is used to understand in a scientific way the impact of marketing campaigns, and the contribution of each element in it to the overall plan. What gets measured gets managed, after all.

Here’s how we use the outcomes specifically:

1. Budget optimization
2. Increase effectiveness of ad campaigns
3. Zeroing in on product cost
4. Finding out the best distribution model to deliver the product
5. To help in better sales trend forecasting

If you have complete information on the spending of every marketing activity, that will help you calculate the ROI. Based on that, a marketer can determine the most and least effective marketing measures.

What is the Marketing Mix Modeling (MMM) Example?

Here’s an example: A footwear brand marketer wants to understand the contribution of each media channel to his company’s sales.

MMM can be used to run a test on many points in time, based on historic sales data and advertising spend for each channel gathered over several years.

To sum it up, marketing drives sales, so if you are able to optimize your marketing efforts using Marketing Mix Modeling, it’s bound to have a positive impact on your sales by increasing ROI.