The Pros & Cons of Marketing Mix Modeling

Digital marketing and technology have disrupted how brands engage customers. We’ve gone from TV, radio, and print to thousands of channels and as many as 10K ad messages a day – that’s seven a minute. Marketers are looking for guidance about how to invest their advertising budgets so that they can break through the mountains of targeted consumer messaging.

What is Marketing Mix Modeling (MMM)?
It measures the impact of traditional mass marketing channels, such as broadcast TV, print and traditional out-of-home advertising, as well as FSI coupons and trade promotion. It has long been considered the gold standard for accurate measurement, and marketers have been using it for decades.

MMM uses historical data to determine how the combination of dollars spent in each marketing channel will likely impact incremental sales. It measures multiple elements simultaneously and shows short-term return on investment (ROI).

When should – and shouldn’t - I use MMM?
MMM works best when measuring a large number of impressions at scale during a specific period of time. For example, during “back to school”, a brand runs a regional TV ad campaign with 25 weekly HH GRPs, trade promotions across several retailers, or a national online display/video campaign with 20 million weekly impressions.

Note, however, that MMM’s near-term KPIs are inaccurate for low-reach campaigns. Today’s personalized marketing is delivered to the individual and can’t be measured accurately by observing sales at the total market – or even store – level.

Use MMM when you have established products and historical sales. MMM is less effective with new products and emerging brands because there is no historical data to analyze.

Another consideration is that MMM doesn’t accurately reflect the long-term ROI needed for strategic planning. For a new buyer acquisition campaign, near-term ROI measured by MMM must be projected to at least an annual basis by integrating shopper-level trial-and-repeat analysis., While MMM ROI can accurately measure the value of a broad-reach campaign generating incremental sales from a brand’s existing buyers, MMM ROI understates, typically by a factor of 2-3, the value of a campaign targeted to convert new prospects.

What MMM undervalues
MMM does not keep up with the pace of consumption, which has shrunk from weeks to seconds. It short-changes important investments that can lead to customer acquisition, engagement, and brand awareness. MMM doesn’t accurately reflect the impact of PR and emerging channels such as digital OOH, CTV, and podcasts. It also doesn’t account for the impact of new influencers, i.e., ratings and reviews, and it overemphasizes the power of retail trade dollars.

Once you short-change the omni-channel experience, you lose important reference points for what your brand means to your customer and the flexibility to respond today. MMM perpetuates brand planning in silos instead of integrating marketing and sales KPIs.

The Catalina solution
Marketers looking to drive both impressions and engagement more effectively should leverage 1:1 deterministic data at scale and real-time campaign optimization and measurement. Catalina offers:

  • Shopper-level data and analytics to supplement and add value to MMM
  • Real-time measurement tools to drive awareness and spark conversion
  • First mover opportunities enabling marketers to anticipate and react to trends and marketplace disruptions

Being relevant today means something far different than what it did when Marketing Mix Modeling was the center of the brand universe. Use data analytics to think about media and targeting differently and identify which channels can best help you acquire new customers and persuade current ones.

To augment your MMM, partner with Catalina to create custom targeting from its 700 syndicated segments that identifies brand buyers, triers, potential defectors, affinity groups, and more. Work with them to evaluate channel-agnostic media activations and make real-time in-flight adjustments so that you’re always optimizing your return on ad spend (ROAS). By working at the same pace as your consumer, you can take advantage of everything Catalina’s real-time insights and measurement delivers.

To learn how to keep customers engaged with your brand in 2022 and beyond, view our recent Path to Purchase Institute webinar, “Anticipate Your Customer’s Next Move with Multi-Channel Measurement.”

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