Marketing mix Modelling

Exhibit 35.1   Marketing mix modelling reveals the effectiveness of the marketing mix elements in terms of their contribution to sales and profits.

“It is difficult to hide from the illumination of a market response model.” — Hanssens et al. (2003).

Marketers need to align their brand’s marketing mix into a cohesive programme designed to generate revenue and profit. To achieve their desired goals, they need to understand how to optimize the brand’s performance. This requires an appreciation of how sales respond to the elements of the marketing mix. It would be useful if there was a method for evaluating the impact of these variables on sales and return on investment (ROI).

Fortunately, there is such a method, known as marketing mix modelling or market response modelling. These models employ statistical methods of analysis of historical market data to estimate the impact of various marketing activities on sales. This estimation allows for an evaluation of the effectiveness of individual marketing mix elements in terms of their contribution to sales and profits. Armed with this knowledge, marketers are able to formulate plans that optimize resource utilization and infuse marketing decisions with the logic and discipline of analytics.

Marketing mix modelling encompasses a wide range of methods and techniques, constituting a vast topic. This chapter focuses on the methods and models that hold the greatest relevance for marketing practitioners. These models are multifaceted, often considering interactions and interdependencies among marketing mix variables, as well as dynamic effects such as lagged responses. The chapter emphasizes the facets that necessitate consideration and provides guidance on the application, interpretation, and analysis of these models.