Marketing Mix Modeling (MMM)- Concepts and Model Interpretation

Abstract

Marketing mix modeling has existed for decades now. Everyone has been using it, some tapped its potential with enormous success while others are yet to see its true potential. Rapidly changing marketing environment, consumer dynamics and multi touch points have made it even more complex to get it right for any industry and product. The biggest challenge in the process of any marketing mix optimization is measuring real-time cross effects and cross channel impact on business. The intent of this paper is to introduce marketing managers, consultants, analysts, strategists, and researchers to an analytics application to optimize the allocation of a firm’s marketing budget in such a way that provides the maximum likelihood of generating higher ROI. MMM uses advanced econometrics and marketing science to objectively measure the relative efficacy and effectiveness of an entire set of marketing and advertising investments, competitive steal, or initiatives to produce sales and growth in both short and long term. In this paper we discuss the methodologies used to perform such analysis, how to overcome major challenges, and the benefits that can be derived from the analysis. We also discuss opportunities for improvement in media mix models that can produce agile granular measurement for better strategy.

Keywords: Marketing mix, MMM, econometrics, higher ROI, budget allocation, agile measurement, strategy, marketing returns, marketing response

JEL Classification: C1, M3, C2, C3, C4,C5