Integrating Brand Equity in MMM for a Long-term Ad Effectiveness Measurement
16 Pages Posted: 16 Dec 2022
Date Written: November 23, 2022
Abstract
Marketing mix modeling (MMM) is a powerful tool for marketers when optimizing their advertising mix and promotional tactics. However, the current MMM primarily focuses on campaigns’ direct short-term effects. That means marketers try to link, e.g., ad spend to immediate sales and ignore indirect long-term effects. This ignorance bears the risk of underestimating the full effects of brand advertising and may lead to short-sighted advertising strategies. This paper proposes the incorporation of brand equity, i.e., mindset metrics that reflect how consumers think and feel about a brand, into MMM. We distinguish between consumer-based and sales-based approaches to capturing brand equity. In an empirical case study, we compare the relative importance of two ad channels on sales and brand equity in multiplicative regression models. The model with the incorporated mindset metrics delivers superior model fit and diagnosticity compared to simpler models focusing solely on direct sales. In our example, when ignoring the long-term perspective, we are misled into thinking that only one of the two analyzed channels affects sales. This finding highlights the need for incorporating brand equity into MMM.
Keywords: ad effectiveness, marketing mix modeling, long-term effect, brand equity
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