Optimizing Marketing Investment Decisions with MMM

Introduction

The advance of digital privacy laws has brought a renewed focus on solutions such as marketing mix modeling (MMM). According to the IAB’s State of Data 2022 report, 42% of advertisers surveyed are changing their approach to attribution modeling as an alternative to advances in third-party cookie policies and access to personal identifiers.

The end of cookies and Apple’s new limits on what advertisers can track are examples of how user-level measurement of media platforms is becoming increasingly challenging due to a possible scarcity of data. In this scenario, investing in an MMM solution is an option for maintaining visibility of media results while complying with legislation. This is possible due to the fact that this modeling produces measurements and insights based on data variation, without the need to reach the user level.

What is MMM?

Marketing Mix Modeling (MMM) is a statistical methodology that makes it possible, through analysis, to measure the incremental impact of your marketing activity on sales or other desired results.

Here are some possibilities for using MMM to make more informed decisions about your marketing investments:

1. Impact Attribution: MMM allows you to identify and quantify the relative impact of each element of the marketing mix on sales or business goals. This helps you understand which component is contributing most effectively to results and optimize investments accordingly.
2. Budget optimization: With MMM, you can allocate marketing resources more effectively, distributing the budget to the tactics that have demonstrated the greatest effectiveness in boosting results. In this way, you can maximize the return on investment (ROI) in marketing.
3. Strategic planning: Using MMM, you can carry out simulations and forecasts of future scenarios. This helps you formulate more informed strategic plans, which take into account the impact of different marketing activities on business goals.
4. Identifying synergies: MMM allows you to identify interactions between different marketing activities. For example, you can analyze how advertising and promotion actions work together to drive sales, identifying synergies that can be exploited.
5. Long-term evaluation: By analyzing historical data, MMM can help you understand how marketing strategies can have long-term effects on sales and the company’s overall performance. This allows for a more structured and long-term approach to making investment decisions.
6. Decision Support: By providing a quantitative view of marketing results, the MMM helps marketing managers and decision-makers to base their choices on hard data, rather than relying solely on intuition or guesswork.
7. Sensitivity Analysis: MMM can be used to carry out sensitivity analysis, exploring how changes in marketing investments affect results. This is useful for understanding critical points and making more informed decisions in uncertain scenarios.

However, it is important to note that the implementation of Marketing Mix Modeling requires adequate and accurate data, as well as expertise in statistical analysis. In addition, MMM is best suited to companies with a solid history of sales data and marketing activities. If your company doesn’t yet have a well-structured track record, other analytical approaches, such as A/B testing and digital marketing data analysis, may be more appropriate for making informed decisions about marketing investments.

If you would like to learn more about how MMM or another analytical approach can optimize your company’s decision-making, please contact us. DP6 will help you choose the path that best fits your objectives.

Profile of the Author: Laís Tavares | She holds a BA in Advertising from the University of Fortaleza, an MBA in Business Management and Market Intelligence from Saint Paul and is specializing in Big Data analysis and Data Engineering from FIA Business School. Passionate about turning data into business insights. Currently a Business Analyst at DP6.