Australia and New Zealand continues to navigate uncertainty with a volatile and inflationary economy fuelling widespread financial stress and pessimistic behaviour for consumers. We know that when economic growth slows, advertising budgets shrink in tandem. Adding to this is the challenges of exploding channel choices, privacy concerns and changing viewing habits continue to get harder.

Fundamentally, advertisers faced with a difficult economy, and complex marketing landscape with dwindling budgets are confronted with a central challenge: when spending less, how do we spend smarter?

On their journey to smart marketing investment, marketers have resorted to various optimisation tools such as incrementality testing, Multi Touch Attribution (MTA), scenario analysis in spreadsheets – you name it. But there probably isn’t a tool that is spoken about more than Marketing Mix Modelling (MMM) is today.
MMM has seen some spectacular technical advancements over the years, with machine learning now incorporated in some of the more sophisticated models. Under the new umbrella that MMM operates and the noise that has been created in market as well as its power of transformation, it is fair to say that MMM has come of age. This reflects MMM’s evolution from a niche analytical tool to a mainstream, indispensable capability for data-driven marketing and business optimisation – and it could represent the fuel that changes company cultures and drives CMOs and their teams to think differently about their budget.

This is exactly where the fun part begins with MMM.

Rather than debating the technicalities of MMM and the sophistication of models leveraging machine learning, I will focus on the outcomes and new realities MMM has the power to produce, starting with how companies leverage MMM for strategic and tactical purposes. In subsequent articles in the coming months, I will also share how MMM contributes to business cultural transformation and the evolution of collaboration with advertising and media agencies.

CMOs and companies leverage MMM for a variety of strategic and tactical purposes.

They primarily utilise MMM to optimise marketing investments and drive growth, such as:

— Quantifying marketing performance and ROI: in its most basic form MMM allows CMOs to attribute
measurable value to diverse marketing strategies, identifying the channels with the highest marginal returns and having a broad view of channel ROI.

— Strategic resource allocation: with data-driven insights from MMM, CMOs can then optimise marketing budgets, focusing them in the highest performing channels and removing from those channels that are falling behind. And depending on the sophistication of the model, some can provide marketers with that perfect plan altogether, heavily reducing the time needed otherwise by their planning teams to plan the campaigns.

— Understanding complex interactions and synergies: marketing strategies are often multi-faceted, involving numerous channels that work synergistically. MMM helps CMOs decode these intricate relationships, and can provide with a clearer perspective on how multiplier effects happen both in the short- and the long-term, and what channel and marketing mix works best.

— Forecasting and scenario planning: MMM is a predictive tool that allows companies to forecast business outcomes based on various marketing strategy scenarios. It enables ‘what-if’ scenario testing and marketing plan optimisation, helping businesses anticipate the impact of market changes and make more accurate sales forecasts.

— Identifying performance drivers: MMM identifies the factors that contribute most to the success of campaigns and channels including media, pricing, promotions, and external factors like seasonality or economic conditions. Without the inclusion of these factors, we are missing important explanatory variables as part of the marketing optimisation process.

— Privacy-compliant measurement: With increasing privacy regulations and limitations on user-level data tracking (like third-party cookies), MMM is the most realistic alternative as it uses aggregated data.

In essence, MMM is not just a tool for marketers; it is a strategic asset that leads to more efficient use of media, which either saves money in tough times or delivers stronger outcomes from the same budget.In a future edition, I will show how when MMM is fully embraced, it can lead to a more data-informed, collaborative, and adaptable business that is better equipped to drive sustainable growth.