Marketing Mix Modeling On Trial

As marketing expenditures among CPG manufacturers and retailers in the U.S. grow exponentially, accountability has become a C-level imperative; marketing spend grosses more than $1 trillion (equaling about 10 percent of GDP). CMOs and financial stakeholders require a more precise accounting of marketing budgets and their impact on top-line and bottom-line performance. Marketing Mix Modeling (MMM) has arguably become the de facto measurement approach for marketing performance.

Financial stakeholders welcome the transparency and accountability that MMM offers, but brand advocates are not so thrilled, justifying their opposition to MMM with the claim that MMM ignores the consumer perception and longer term equity building effects of advertising. In some respects, they have a valid point. While MMM has a role in evaluating the effectiveness of advertising campaigns, it is not a panacea for measuring all benefits of these campaigns.

There is clearly a need to “modernize” the MMM discipline. To gain a more accurate and holistic view of marketing performance, marketers must consider MMM as just one solution in an arsenal of measurement disciplines. This report dissects the issues with traditional marketing mix modeling and reveals strategies to help marketers gain a more accurate and holistic view of marketing performance.

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