A simplified guide to MMMs

Navreen Aulakh
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Marketers face numerous choices regarding where, when, and who to advertise to. To succeed, they rely on data-driven analysis to support their advertising strategies and budget allocation. This is where Marketing Mix Modelling (MMM) comes into play.  In this article, we aim to provide you with a straightforward and easy-to-understand guide to the fundamentals of MMMs, covering what they are, why they matter, and how they can elevate your marketing efforts effectively and efficiently.

What is MMM?

Marketing Mix Modelling is a statistical technique used to understand how ads affect sales (or other KPIs). By looking at past data, MMM shows which ad channels, like TV, print, radio, and online ads, influence customers and are correlated with sales to determine a Return on Investment curve as shown.

Arima’s media optimization modelArima’s media optimization model


How it works

Usually, MMMs are conducted by professionals who gather the data relevant to the brand. This data encompasses details about advertising spend, promotions, pricing, distribution channels, external factors like economic conditions, and sales data over a specific timeframe. The professionals then analyze the data and present the findings in a clear and comprehensible manner for stakeholders.


Evolution of MMM over the Years:

MMM is not a recent invention; it has a remarkable history spanning 70 years. 

Kraft was an early adopter of MMM using it to launch a campaign for Jell-O. For example, they may have looked at past TV commercials and print ads to see how each affected Jell-O sales. 

In the early days, the lack of computers made MMM slow and expensive. This limited the use of MMM to larger brands with larger budgets. The advent of small computers, starting with the Apple II in the late '70s, and the invention of the spreadsheet in 1979 began to improve the landscape. In more recent years, MMM went through a significant evolution, largely driven by the adoption of cloud-based software as a service. This has not only improved the quality of insights but also the breadth, speed and cost.

In the past, MMMs required extensive time to complete and often the marketing situation had changed by the time the results were presented. However, with the implementation of cloud computing and application programming interfaces (APIs), once the data workflow is set up, Arima’s MMM turnaround time drops to hours. This means companies can now make faster, data-driven decisions, especially considering the vast array of media choices available in the modern marketing landscape.

For instance, one of our recent clients partnered with Arima and saved an impressive 91% of the time they used to spend on marketing science, thanks to the efficiency of modern MMMs. 

Results from Arima’s partnership with Statflo Results from Arima’s partnership with Statflo 


How MMM Empowers Marketers:

MMM is essential for marketers and agencies because it takes the guesswork out of marketing. Think of MMM as a bird's-eye view of marketing effectiveness. Unlike other metrics that rely on user-level data like ad views or clicks, MMM doesn't focus on the individual’s customer journey which is limited to digital media.

Instead, MMM gives a broader picture of how marketing connects to sales performance. This helps with long-term planning and strategy. By showing which channels are effective and which ones aren't, marketers can improve their tactics and achieve better results from their campaigns. Plus, with the time and energy savings, businesses can focus more on strategy and implementation, making their marketing efforts much more effective and impactful. Here are some features of modern MMMs and how they help marketers and agencies:

Merging MMM insights with media planning data

MMM is a powerful tool which can be made actionable by integrating its insights into media planning data and tools. Media ROI curves represent the connection between a brand's past media decisions and the consumers who bought their product. Marketers can create future media plans by combining these past curves with projections of media consumption for their target audience. Essentially this completes the loop between media exposure, audience and sales while taking into account environmental factors. We call this MMM-based Media Planning.

In summary, since its advent, Marketing Mix Modeling has transformed into a game-changing tool for agencies, advertisers, and marketers. It provides actionable insights to optimize marketing strategies. With technological advancements and analytical capabilities, modern MMM platforms empower users to make data-driven decisions to help them compete in today's fast-paced market. If your company wants to make the most of its marketing efforts, budget and time, look no further than MMM.  


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