Media Mix Modelling - 5 Useful Ways It Can Benefit Your Marketing

How do you define the economic value that marketing creates for your business? What is the right mix of marketing channels? Guesswork and intuition can be well off the mark when it comes to an understanding of what works and what doesn’t.


If you’re serious about measuring the effectiveness of your online and offline marketing, you need to look at the historical relationship between marketing spend and business performance. And this is where Media Mix Modelling (MMM) has significant strategic value. Put in the hands of CMOs and senior marketing managers, MMM provides a foundation from which to make evidence-based decisions on how to achieve maximum return on marketing investment (ROMI).

One of these essential decisions is knowing when to cap your advertising spend because ROMI has reached its peak. By predicting this saturation point, MMM can help you optimise your profitability, aligning your budget to ensure your spend is no higher than what is likely to be recouped in revenue.

In a recent project, an Australian superannuation fund sought to understand the effectiveness of their seven media channels, including their electronic direct-to-member campaigns (eDMs) and their traditional direct-to-member mailings. The project began with Datalicious aggregating and cleansing three years’ worth of historical marketing spend and sales performance data supplied by the fund. Pairing sophisticated analytics technology with a consultative approach, the Datalicious team used MMM to measure how specific marketing stimuli had a contributing influence on sales.

Among the many findings, two eDM channels were identified as driving marketing revenue. Traditional media campaigns conducted through trade publications were found to have potential, but limited opportunity compared to other channels. On a holistic level, the project furnished the superannuation fund’s executive team with quantitative evidence about the contribution of marketing and brand to sales. They could they see which elements of campaigns were working, and how much of it was down to marketing or brand value. If the superannuation fund’s marketing efforts were switched off, MMM demonstrated how much of their sales were solely reliant on brand value.

Once a company knows what’s happening in their business, a good MMM project should recommend what to do next. In other words: here’s what to do now to improve the performance of your marketing spend. Our recommendations to the superannuation fund, for example, included the importance of targeting the right segment of customers, as we could see this would yield better returns with the same budget. Also, coupling traditional media with direct mail as a strategy to boost sales.

External influencers such as seasonality, gender, age, promotions, holidays and weather are often factored into a media mix modelling’s analytics. As such, marketers can understand the impact of each variable on sales – a crucial consideration when allocating media budgets. In a recent MMM project we conducted for a specialist toy retailer, for example, we isolated the recurring effects of the Christmas period on sales. The company’s Paid TV and Free to Air TV channels were found to be highly effective in driving sales during this period. Among our recommendations, we suggested a redesign of these channels could open the opportunity for year-round customer engagement.

Among the marketers who most benefit from MMM are those who seek to optimise their media across online and offline. Here we look at five ways that media mix modelling can help strengthen business performance and boost competitive advantage for these marketers.

  1. Determine brand value

Your brand is greater than your products or services. What consumers think of your brand holds powerful sway over its financial value – brand equity. And this consumer perception is coloured by variables like marketing, product quality and customer service. Even external factors like seasonality and weather come into play. Media mix models incorporate these potential synergies when measuring brand value, so they don’t over attribute or under attribute success to any one variable. 

For the superannuation fund, for example, it was determined that brand value drove 57% of sales. Compare this to 19% of sales attributed to marketing and 24% to macroeconomic factors. In the absence of all marketing activities, Datalicious analysis predicted the number of sales issued in the short term would drop to around 80% of the current value.

  1. Understand channel contribution

When a marketing campaign uses multiple channels, it’s critical to measure the contribution of each channel. Which is the most effective for driving traffic and conversions?

In another example, a toy retailer frequently used more than ten channels in their campaigns, ranging from in-store promotions and high-impact displays to consumer brochures and public relations projects. With media mix modelling, they could better understand which channels and elements of their campaigns were working, which don’t and why. The analysis undertaken by Datalicious for one of their toy campaigns showed that even though video, mobile and Paid TV accounted for 22% of the marketing spend, these channels contributed less than 1% of revenue.

  1. Compare ROI across different media

Should you continue to spend more on your marketing efforts, or should you dial it down a notch? Knowing the return on investment (ROI) for each specific channel and activity is an invaluable decision-making tool to help with better budget allocation.

It was from our recent MMM project with the toy retailer that we discovered one of its marketing activities – a consumer brochure – had reached its saturation point. This insight had vital significance as it meant the brochure’s ROI had peaked, and any effort to increase marketing spend would result in diminishing returns.

  1. Predict expected return

Without hard facts, it’s difficult to predict the future. But with quantitative MMM insights based on past performance, it’s possible to answer all sorts of ‘what if’ questions. What if we reduced our direct mail budget and used it for video? What if we upped our spend on social media?

MMM can project the sales gains and losses expected with an increased or decreased investment in each channel. In doing so, marketers can reduce spend on ineffective channels and confirm they are using the right channels. The superannuation fund, for example, discovered through MMM that a more aggressive digital media strategy could lift sales. So could an increase in the reach and frequency of campaigns using traditional media.

Our MMM presentation included recommendations on how the superannuation fund could gain incremental dollars above what their brand already achieved from its current marketing activities. Several short-term actions aimed at improving media efficiency were found to add a 10% lift in incremental sales.

  1. Optimise channel interactions     

Understanding the contribution of each channel to sales is all very well, but what about their contribution to each other? How does your digital marketing interact with your traditional offline channels? What are the halo effects of different marketing channels? In other words, what is the overlap effect between one channel over others?

These are the questions that media mix modelling can answer. For example, a recommendation that came out of the MMM toy retailer project was to consider taking advantage of the positive impact of complementary channels. From the modelling, we could see several channels worked well in tandem. High impact toy displays and mobile advertising complemented each other. Public relations activities and paid search also showed positive sales results when used in combination.

It’s this unified view of marketing performance that helps companies like the toy retailer and the superannuation fund make informed marketing spend decisions.

To understand how MMM can help replace gut instinct with data-driven decisions, contact us for more info.

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