Optimize Your Marketing ROI With Marketing Mix Modeling

Over 25% of CMO budgets go toward paid media. Making the most of these marketing and brand investments requires a plan.

Download: CMO’s Guide to Marketing Mix Modeling

Use this guide to maximize the impact of your marketing mix model.

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Understand the challenges and opportunities of marketing mix optimization

Marketing mix modeling (MMM) is a journey that can lead to significant returns on media investments — but models require consistent reevaluation to deliver their expected benefits.

Download and use this guide to understand: 

  • How to develop a marketing mix model that meets your current needs

  • How to validate the model’s predictions to yourself and the business

  • How to use MMM to generate better marketing plans

Three ways to maximize impact through marketing mix modeling

Ease challenges and uncertainty around marketing’s growing complexity by developing an effective, comprehensive MMM that enables better decisions.

Rank the outputs that will bring the most value from your marketing mix model

MMM is designed to measure the impact of advertising and promotions across channels while controlling for external factors outside a brand’s control. The outputs from MMM are used in three ways:

  1. As a scorekeeper, to show the overall incremental impact of marketing investments on the business

  2. As a forecaster, to predict the outcome that raising or lowering marketing budgets will have on marketing’s contribution to the overall budget

  3. As a coach, to suggest shifts to current marketing investments that improve performance

Marketing mix models go deep, providing answers to a wide range of questions — and these questions require a wide variety of input data. 

As findings get more detailed, a model’s scope will tend to increase. Knowing and ranking the insights your department is most likely to act on can secure early wins that justify further investment and identify opportunities to improve marketing spend. 

Once you’ve prioritized your most critical insights, be sure your data requests allow for enough specific detail to answer your prioritized questions — for example, sorting impressions by geography or campaign type. Then, create a modifiable roadmap of future insight objectives. 

When reviewing MMM, start with the question, “Is it actionable?” The answer will help ensure your mix yields the specific, high-quality data that can inform future model iterations — such as adjustments to marketing activities, shifts in frequency or changes to the channel mix.

Treat your marketing mix model as a credible suggestion, not as a mandate

Marketing mix modeling is a key tool to optimize resource allocation and improve the overall return on marketing. But because MMM typically provides the most holistic view of marketing activities, its findings often challenge conventional wisdom. This can lead to reservations about the model itself, diminishing the benefits of MMM.

To get value from MMM investments, brands must be confident in the model produced so they can decisively act on its recommendations. Marketing leaders surveyed in the 2022 Gartner Marketing Data and Analytics Survey reinforce that — when trusted — MMM delivers results. Marketing leaders with higher trust in their MMM were more likely to describe insights delivered by marketing analytics as “essential to our organization’s success.”

Marketing operations leaders build enterprisewide trust in MMM in three ways:

  1. Secure agreements with finance. Finance often views marketing budgets as being more complex and variable than other cost centers. That can fuel a preconception that marketing is less rigorous in accounting for its budget. Awareness of this bias can help you work proactively with finance. You will want at least one colleague from finance assigned to MMM projects with the authority to agree on key measurement objectives, cost categories and how financial returns will be measured.

  2. Build trust within marketing. MMM results are often used to adjust spend across channels, geographies or large campaigns. This requires coordination and buy-in from multiple internal stakeholders and agency partners, which can be challenging when the insights expose vulnerabilities, such as underperforming channels. Successful CMOs minimize a “winner vs. loser” mentality by staying focused on developing a stronger overall marketing plan. They also double down on transparency by socializing findings regularly, highlighting new insights and acknowledging differences in measurement approaches.

  3. Build confidence with other senior leaders. A survey in August of 2021 revealed 59% of CMOs felt increased pressure from the CEO and 45% felt more urgency from the CFO to prove the value of marketing. Although MMM can address that concern, getting other senior leaders to buy in can be a limiting factor. The approach to gaining executive trust should be tailored to the individual executive and can consist of multiple arguments depending on their frame of reference for marketing. Ideally, you won’t need to justify the value of marketing to senior leadership and can instead focus on marketing’s unique role in increasing sales, growing brand equity and generating customer insights.

Finally, a key element in trust-building lies in the quality of the model itself. Poor quality marketing mix models are likely to misattribute marketing’s impact and lead to suboptimal investment. It’s critical to validate models before endorsing their use by:

  • Reviewing specific model diagnostics

  • Testing model predictions

  • Conducting in-market field tests

  • Balancing the desire for extreme model accuracy with the need to apply the model’s recommendations to improve business performance

Engage in scenario planning to optimize marketing plans over time

Since marketing mix models attempt to quantify the incremental impact of all included marketing activities, they are sometimes used solely for that purpose. But at its core, the marketing mix is a predictive model. Far more than a scorekeeper, it’s a coach that provides guidance on future marketing activities. Successful CMOs spend considerable time evaluating how to use MMM predictions to optimize future marketing plans and even adjust spending on in-flight campaigns.

As CMOs face increased uncertainty, effective scenario planning is critical. Simulation interfaces or tools allow marketers and other stakeholders to game out different future states and test investment strategies by geography, product, channel mix, channel execution or level of marketing spend. These planning tools account for marketing elasticities, and the fact that each marketing activity is on a different part of a unique response curve — for example, the same change in marketing spend — can have noticeably different impacts across marketing activities, such as paid search versus display.

The level of supported planning guidance is getting more detailed and can be particularly valuable for brands that do a variety of promotions in nondigital channels, such as weekly newspaper inserts. This level of reporting can also help quantify halo effects where the promotion of one item also increases sales of a second, unpromoted item.

Beyond adjusting marketing levers, scenarios can also modify external factors. Many scenario planning tools use an optimization engine that reveals the optimal future marketing spend based on marketplace dynamics and budget constraints. For example, an automotive manufacturer could forecast how a competitor’s hypothesized increase in advertising spend or a drop in gasoline prices will affect marketing performance — and then assemble a plan for the factors that are most important to monitor to ensure the delivery of planned marketing outcomes.

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Marketing mix modeling (MMM) is a data-driven solution that helps marketers improve media performance and quantify the impact of marketing and brand investments.The goal of MMM is to determine the incremental impact associated with marketing activities and use those findings to answer strategic marketing questions.

Marketing leaders use MMM as a predictive model to holistically quantify, validate and improve the performance of marketing investments. MMM also provides guidance on how to optimize future marketing plans and even adjust spending on in-flight campaigns. As CMOs face increased uncertainty, MMM enables them to test different future states and investment strategies by geography, product, channel mix, channel execution or level of marketing spend. 

CMOs looking to optimize marketing investments and performance through MMM should:

  • Rank the insights most critical to their overall measurement strategy.

  • Build trust in marketing mix models through a focused, well-designed testing protocol that validates predictions.

  • Use scenario planning, simulation and optimization tools to generate higher-performing marketing plans.

Most forms of MMM use aggregate (not user-level) data. Therefore, MMM can consider a wide range of channels and external influences, including:

  • Digital media, such as social media and banner ads

  • Traditional media, such as broadcast television, out-of-home and radio

  • Company factors that can impact conversions such as inventory levels, staffing or changes to geographic footprint

  • Market forces, including relative price, competitive media spending and share of voice

  • External factors, such as weather, seasonality or economic conditions (e.g., inflation, interest rates, consumer confidence)

Drive stronger performance on your mission-critical priorities.