As marketers prepare for the death of the cookie, they’re turning to measurement models that don’t rely on individual-level data, and that search has led back to a measurement tactic originally developed in the 1960’s: marketing mix modeling.
Marketing mix modeling (MMM) measures the effectiveness of all media types in a marketing program by looking at historical trends in spend, impressions and clicks alongside external factors like the weather or competitive activity. Capturing each of these variables in one model provides a true representation of how each piece of media is contributing to bottom line revenue for the business. While MMM has been around for decades and was initially used to measure the effectiveness of traditional advertising, digital marketers are finding it a powerful tool to track performance across all media, making MMM a more powerful a tool now than it once was.
"Despite ever-evolving industry innovation & privacy regulations, marketing mix modeling has persisted as a durable solution to provide marketers with valuable insights across all channels of the media funnel,” says Michael Kania, AVP, Marketing Analytics & Insights at Kepler. “Marketing mix models can help highlight opportunities and inefficiencies, and provide a roadmap for marketing action."
Kellie Baran, Director of Marketing Analytics at Kepler explains how MMM works:
While marketing mix models can help transform an organization's marketing strategy, some organizations lack proper staffing or technical expertise, and others struggle to integrate MMM with their existing measurement methods, implement MMM across multiple departments or resolve data inconsistencies across agencies. But with the right partners, marketers can effectively adopt and implement MMM.
One home shopping retailer had been experiencing declining sales for two years in a row when COVID-19 forced them into a drastic organizational transformation that required them to re-evaluate their KPIs, media planning and acquisition strategies. Kepler worked with them to better use their existing marketing mix model to ensure the proper success signals were being used, shared and made available across departments and at all levels of their organization.
Kepler found that 50% of the client’s marketing budget was being invested in an underperforming media channel, but with the improved marketing mix model, the client was able to re-allocate $2mm of their budget to higher performing channels, resulting in a 3.5% increase in return on ad spend.
Kepler was also able to work with organization’s senior leadership to refine the KPIs, channel nomenclature, granularity, cadence, QA processes and action plans necessary to transform the client’s oft-forgotten MMM into a cutting edge resource for effective budgeting, optimization and performance evaluation.
"For the right client,” Kania says, “a marketing mix model will unlock new opportunities, validate assumptions and provide signals across and within channels that have historically presented challenges."
As more platforms, like Roku and TikTok, work to make data passing easier and more granular than ever before, brands should make sure they’re taking advantage of one of the most consistently effective measurement tools at their disposal.