A constant concern for any brand is understanding the real impact of their marketing efforts on sales.
For this purpose, the Market Mix Modeling technique exists. This analytical technique is used in marketing to measure the impact and effectiveness of different marketing variables on a company's sales or outcomes. The main goal of an MMM study is to understand how various marketing activities, such as advertising, promotions, distribution, pricing, and other factors, influence sales and profits.
Benefits of Market Mix Modeling Study
- Budget Allocation: Optimal allocation of marketing resources is achieved by determining which marketing activities generate the highest returns and how to redistribute the marketing budget more effectively.
- Marketing Mix Optimization: Identifies the combination of marketing variables, such as advertising in different media, promotions, or pricing levels, that maximizes company sales and profits.
- Performance Evaluation: Provides an objective view of the past performance of marketing activities and evaluates the impact of past decisions on sales and profits.
- Sales Forecasting: MMM models can be used to predict the likely impact of changes in the marketing mix on future sales, helping companies make informed decisions about long-term marketing strategies.
- Synergy and Cannibalization Identification: MMM analysis helps understand how different elements of the marketing mix interact and whether there are synergy or cannibalization effects among them. This helps avoid counterproductive decisions and maximize overall results.
How is a Market Mix Modeling Study Applied?
It starts by understanding the business flow through Customer Journey analysis. This way, we identify which steps of the funnel or process each business lever influences and determine the necessary models for more accurate measurement of advertising impacts. These models are based on a modeling scheme that defines the specific data needed for their development.
After defining the scheme, data collection and processing can begin. In any analytics project, this phase is crucial as data quality will determine analysis outcomes. Different data sources are collected through ETL (Extraction, Transformation, Loading) processes, aiming to achieve an optimized database on which necessary models will be built.
Models are built on Key Performance Indicators (KPIs) referring to variables identified as necessary to evaluate the effectiveness of a marketing strategy. Regardless of the chosen model, the result obtained is an equation capable of estimating the behavior of the analyzed variable. The closer this estimate is to reality, the more robust the model.
In summary, a Market Mix Modeling study is a powerful tool to understand and optimize the impact of marketing activities on business outcomes, enabling companies to make more informed and strategic decisions about how to allocate their marketing resources.
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