Two roofing companies compete for business in the same city. Both companies start out with excellent marketing campaigns. But while one company ignores their marketing analytics, the other uses those analytics to reoptimize their marketing over time.
Between the two companies described above, which is more likely to earn more revenue? If you said the second company, you’re right. By paying attention to the data their marketing drove, they reoptimized their campaigns and ultimately drove more customers and revenue.
Your company can benefit from using marketing analytics to uncover marketing insights through marketing mix models (MMM).
But what is marketing mix modeling? Keep reading to find out. Then subscribe to Revenue Weekly to receive more digital marketing info right in your inbox!
What is marketing mix modeling?
Marketing mix models are a type of analytics tool used to measure the impact of different marketing factors on the results driven by your campaigns. In other words, MMM is something you use to figure out which factors impact your marketing results, and how much of an impact each one had.
The math involved in these models is complicated, so we won’t be getting into that. However, we will talk about some of the factors that are considered in these models, as well as the basic process of creating one.
Factors considered in marketing mix models
There are a few different categories of marketing factors you consider in marketing mix models. Here are driving factors:
1. Base drivers
Base drivers are factors that exist outside of your active marketing efforts. They include aspects such as product demand, brand value, and seasonality.
So, let’s say you’re selling a Christmas-related item. If that item does well in December, you can infer that the high sales were due largely to it being the Christmas season. That factor would qualify as a base driver since it existed independent of your marketing.
Base variables are present even if you aren’t marketing your business. If you added a product to your store and didn’t market it, base factors would drive any purchases of that item.
2. Incremental drivers
Incremental drivers are factors produced directly by your marketing efforts. Anything you do with your marketing that encourages people to buy from you counts as an incremental driver.
You can benefit from breaking down this category a bit further. Rather than looking at the impact of your marketing efforts as a whole, it’s good to look separately at the impact of top-of-funnel, middle-of-funnel, and bottom-of-funnel marketing.
That is, if you sell a product, how much of that sale can you credit to your brand awareness efforts versus your bottom-of-funnel campaigns? If someone bought your product after reading a blog post and a product page on your site, how much credit do you give each page?
3. Other drivers
Finally, the remaining factors fall into the “Other” category. Often, factors in this category look at overlapping or conflicting marketing elements.
The two best examples of factors in this category are competitors and cannibalization. Your competitors are constantly running their own marketing efforts. Even if your marketing is top-tier, you still might lose sales if your competitors’ marketing is better.
Similarly, if you offer multiple products that serve similar functions, users won’t buy both. That means if someone chooses to buy Product A, they’ll avoid buying Product B, leading to cannibalization. So, you could find yourself competing against your own products, which affects sales.
Steps of using a market mix model
Now that we’ve reviewed the types of factors you’ll look at in your marketing mix modeling, let’s look — in broad terms — at how to go about that process.
Here’s a brief step-by-step guide:
1. Collect your marketing factors
The first step to creating marketing mix models is to gather all your potential factors. We’ve just covered the types of factors you’ll want to look at, so you can use that as a reference for this part of the process.
Consider all the potential factors that could affect your sales, paying attention to all three of the categories listed above. Then list them out so you know what to include in your modeling during the following step.
2. Model your marketing performance
With your marketing factors listed out, it’s time to start building your model. This is easily the most involved step in the process, so expect to spend plenty of time here.
For this step, you create estimates for how much each factor contributes to your marketing. You develop formulas and run numbers to discover the most influential factors.
Since this step involves detailed math, you may want to consider hiring a team of professionals to help you. By the end of this step, you should have a working market mix model.
3. Analyze your results
Now that you’ve finished creating your MMM, it’s time to start analyzing it. This is a vital step — without it, your model won’t benefit you! Creating your MMM helps you learn from it to make better business decisions.
Look for any patterns you see. For instance, you might find that the strongest factors are base drivers, while all the incremental drivers have a fairly low impact. That tells you that your marketing needs improvement and reoptimization.
4. Optimize your campaigns
Leading off the last point, the final step of your marketing mix modeling is to reoptimize your marketing efforts based on your findings. Whatever you learned from the model, take that knowledge and use it to improve your marketing.
Maybe there’s a particular campaign that seemed to have a low impact, or maybe your bottom-of-funnel marketing isn’t doing as much as you hoped. Upon learning that, you can get to work on your marketing to make those things better and drive more revenue down the line.
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WebFX can help you optimize your marketing mix models
If you’re looking for someone to help you manage your marketing analytics, partner with WebFX! We have over 25 years of experience managing digital marketing campaigns, giving us the expertise we need to handle your marketing mix models.
With our marketing analytics services, you won’t worry about struggling to get accurate results. We’re a do-it-for-me agency, meaning we’ll handle all your marketing ourselves and free you up to manage other areas of your business.
To get started with us, just call 888-601-5359 or contact us online today!
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