What is Market Mix Modelling (MMM)?

'Half the money I spend on advertising is wasted; the trouble is I don’t know which half.'

-John Wanamaker, Father of modern advertising and a pioneer in marketing.

Market mix modelling (MMM) adds accountability to the spending and decision making in marketing. It uses various types of statistical models to model the relationship between the different categories of spending and their impact on the sales and revenue. Thus, it helps to optimise the marketing spend in the future.

But the question is, why as a data analyst do you need to know about MMM? As you have seen in the introductory module, one of the applications of data analytics in e-commerce is to decide the right marketing content and channel that provide the highest return on investment (RoI) for the marketing spends. Here, as a data analyst, it becomes important for you to know the various factors or KPIs that impact the sales/revenue/profit of a firm.

Let’s learn more about this in the video below.

Thus, as you saw, MMM helps the CMO to address four top questions:

• Performance driver analysis: Which KPIs drive the top-line performance? Which among these drivers could be controlled by internal influence (e.g., pricing, promotion, advertising, loyalty offers, etc.) and which are external to our control (e.g., competition, new disruptive technologies, industry trends, macroeconomic and demographic policies, etc.)?

• Impact analysis on marketing RoI: What is the quantitative impact of each commercial lever on the outcome parameters, i.e., revenue, traffic, customer’s perception, or loyalty to the brand or company? This tells us how much a 1-unit increase in each marketing lever impacts the outcome parameters. For example, if you increase the frequency of TV commercial by 1%, what % incremental traffic would it bring?

• Trade-off between marketing levers: What is the trade-off among marketing levers? Since these impacts are not necessarily additive, what is the compound influence of multiple levers at a time? There could be levers that improve traffic but not necessarily revenue. What is the impact on revenue growth when advertising and promotions are done in isolation as compared with when done together?

• Optimising marketing spends: How can you best allocate the marketing budget to gain the highest outcome? How to allocate the budget between commercials and promotion? Once you know the commercial budget, how should you spend it on various media solutions such as TV, radio, print media or digital?