Marketing Mix Modeling in Need of an Update?

Marketing mix modeling (MMM) has recently come under some criticism. Concerns are being raised that this strategy of finding correlations between marketing spend and revenue, divided broadly across marketing channels, fails to be granular, comprehensive, or quick enough for today’s marketing needs. But this may be changing as agencies and vendors have taken steps to update MMM to better respond to the rise of digital and multi-screen marketing.

MMM rose to popularity first as an approach used by consumer packaged goods companies to link marketing activities to sales. But as other industries—e.g. automotive, financial services, and retail—sought a more statistical understanding of the impact of their marketing channels, they have turned to MMM, as well. This growing application of the approach meant that increasingly some marketers were using it in ways not ideally suited for it. This has been compounded by the growing role played by digital and social media marketing.

“It’s not as straightforward anymore,” says Tina Moffett, an analyst at Forrester Research. “You have the complexities of crosschannel and impact of multiple devices; we’re not living in a simple world and the proliferation of devices has caused that.”

Asking the right questions

That has been a concern for Mike Ketcham, general manager of Staccato Brands, which runs several niche e-commerce businesses, including Diving Lights Direct and Weather Radios Direct. The company has used MMM to make decisions on easily quantifiable online marketing channels such as pay-per-click and banner ads.

But recently Staccato Brands has deepened its investment in social media and content marketing, posting blog posts and articles aimed at customer education, such as tips on how to prepare for a disaster (which includes a link to the company’s Weather Radios Direct) or how to prepare for deep-sea diving (to help promote Diving Lights Direct).

“We’re putting resources out there that are of value to customers and hopefully it will lead back to contributing to our bottom line, but how do you quantify that?” Ketchum asks. Cathy Carleton, director of data analytics at DMW Direct, counters that in this situation it’s not that marketing mix models are necessarily lacking, but that marketers need to consider asking different questions of the modeling results.

Jason Martin, director of marketing for the Nashville Area Command of the Salvation Army, has been using MMM to adjust its direct marketing efforts in more long-term ways. A decline in donations, despite steady direct mail efforts, showed a need to shift the marketing mix balance, moving from channels that appeal to baby boomers to those targeting younger donors.

“We see marketing mix modeling as being the foundation for everything that Salvation Army does in its donor outreach,” Martin says.

Using fundraising CRM software from Blackbaud, Nashville’s Salvation Army is working to segment its different categories of donors. The organization has refined its direct mail and email outreach, shifting from blanket targeting based on the average income of a ZIP Code to communications based on previous donations and other behaviors.

MMM 2.0

Data consultancy Analytic Partners recommends that MMM models go deeper, like Nashville’s Salvation Army. This depth can incorporate average customer income and past purchase history, as well as customer lifetime value and knowledge of various segments.

“This is a data-driven approach,” Forrester’s Moffet says, “and it should be seen as not the answer to everything, but a guide.” 

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