Marketing Mix Modeling (MMM) empirically analyzes the relative impact of various marketing activities on revenue. It is a powerful qualitative tool for marketers to understand the relationship between marketing actions and the bottom-line impact on the business.
The primary benefit of Marketing Mix Modeling is retaining a strategic view of the business, and allowing managers to make intelligent and smart decisions.
Concept of Marketing Mix Modeling
The overall goal of a company is to increase its market share. This is achieved by optimizing a combination of the four marketing mix elements: product, price, place, and promotion. Marketing Mix Modeling is a technique that illustrates how each of the aspects of the marketing mix will affect the final product.
Marketing Mix Modeling is a marketing tool that helps to design and oversee a successful marketing strategy. The model helps marketers understand how different marketing strategies and tactics affect the sales and profit of a business. In the marketing mix model, some factors are more related to offering various benefits to customers. In contrast, other factors influence a customer’s decision to purchase a product either now or in the future.
The primary purpose of Marketing Mix Modeling is to help strategic decision makers understand the key dimensions that influence buying decisions. It can be used to guide decisions regarding product requirements, distribution channels, branding, positioning, pricing, sale promotions, and advertising. Marketers and business executives who take a systematic approach when developing marketing mix models can be more confident of outcomes in decision-making.
Benefits of Marketing Mix Modeling
The following are the importance of Marketing Mix Modeling:
1. It Determines Marketing Effectiveness
Marketing Mix Modeling can be used as an indicator of marketing effectiveness, where it provides a good picture of the performance of marketing activities. A positive Marketing Mix Modeling result suggests positive marketing effectiveness and vice versa.
2. It Establishes Practical Insights That Allow for Effective Budget Allocation
Marketing Mix Modeling can be an essential element in the budget allocation process of the company. This is because marketers can use it to identify the best marketing mix combinations that correspond to the company’s budget.
3. It Manages Quality of Marketing Data
Using Marketing Mix Modeling, managers can check the quality of the external and internal marketing data. Marketers use sales, profit, and loss data to assess the financial performance of the company and investment goals.
4. It Facilitates Superior Sales Trend Forecasting
Marketing Mix Modeling provides valuable information related to market and product performance. Marketers use this tool to increase the likelihood of being able to recreate their financial forecast.
How to Get Started With Marketing Mix Modeling?
Before undertaking any Marketing Mix Modeling within your business, you must prepare your organization for what is to come. By following these four steps, you will ensure that your organization gains value from your Marketing Mix Modeling (MMM) project:
Step 1: Establish Goals and Objectives for the MMM Project
The main reason for undertaking MMM is to gain systematic knowledge that will enhance your marketing efforts and optimize your budget allocation. Beyond this, your organizational goals should be clear and achievable. Also, list the key questions you want to ask through your Marketing Mix Modeling. Some of these questions may include:
- Budget: Which marketing tactics have the best Median Return on Investment (MROI)?
- Media: Would there be an increase in incremental sales if the TV advertising budget is increased by 15%?
- Pricing: What impact does price change have on sales and profits?
- Competitive: Which competitors’ advertising campaigns have the most significant impact on sales?
Step 2: Present Your Organization and Critical Stakeholders Your Data and Make Them Understand It
Marketing Mix Modeling requires you to collect a large amount of data from several different areas within your organization. Ask your stakeholders how they would like to receive information and set up a way to achieve this. The outcome should be user-friendly in that they can easily access and understand the information.
Step 3: Identify Valid Data
The quality of your data is an essential factor for MMM, so make sure it is as accurate and up-to-date as possible. This includes identifying the audience segment your product or service should focus on.
Step 4: Identify the Needs of Your Audience
Draw focus on what the company is doing best, identify the problems the company wants to address, and create an action plan. An action plan is a clear-cut plan of what the company needs to do to identify the core activities they must continue.
How to Conduct Marketing Mix Modeling
The four stages of the Marketing Mix Modeling process include the following:
Stage 1: Define the Audience
The first stage in any Marketing Mix Modeling process is the most crucial; without it, the model is not stable. Define your target audience and what you can offer them. This strategy will enable you target your marketing plan at the correct people and decide whether you will offer your products to them.
Stage 2: Develop an Appropriate Marketing Mix
It would be impossible to conduct a complete Marketing Mix Modeling without creating a marketing mix. A marketing mix is a composite of the various marketing strategies that an organization is running. Understanding which marketing mix is most effective for your organization is essential. It is even more critical to be aware of the marketing mix used by your competitors to stay ahead of the game.
Stage 3: Identify the Products
Now that your marketing mix is developmentally in shape, it’s time to analyze and identify the products you offer. Once you have this information, it can be used to tailor your marketing strategy to meet the needs of your target market better. Understanding your products in detail (product features, cost, and benefits) will allow you to make well-informed marketing decisions to improve sales.
Stage 4: Model the Process of Offering Your Products and Services
The final stage of conducting Marketing Mix Modeling is to model the process of providing your products and services to the marketplace. Think about how you can connect with your customer, the type of information you can pass on, and how to get the customer’s attention.
To Wrap Up
Marketing Mix Modeling allows businesses to understand their market demand, requirements, and operational constraints. It also enables them to devise an appropriate marketing mix for their business.
This modeling process helps business strategists understand how to incorporate different promotional variables into their marketing strategy.
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