How To Know If You're Ready For Media Mix Modeling
How To Know If You're Ready For Media Mix Modeling
Understand how MMM applies from startups to enterprises and if it solves a common marketing problem for you
Navigating Media Mix Modeling: A Primer
In the (sometimes unnecessarily) intricate world of advertising and media strategy, Media Mix Modeling (MMM) is an under-appreciated analytical tool for optimizing media spend and understanding the impact of different channels on overall business outcomes.
Marketing Leaders Are Flighty
It’s especially easy in marketing to get caught in “Shiny New Object” Syndrome. Reading a single compelling post online can change how leadership wants to market.
Hype cycles in the field burn hot and fast. The metaverse came and went like a summer rain. But advertisements only brought in a little over $500MM for a platform that has been a $36,000MM investment.
The disproportionate amount of time board meetings spent talking about the metaverse has a huge opportunity cost for more boring, but durable planning.
Marketers are often the red bear in this scenario.
How Should I Balance Marketing Channels Then?
Instead of directionless jumping from one trend to the next, look before you leap. Recently, I had the good fortune to talk with Nelson Elliott, an expert marketer with 15 years of experience across paid search, performance marketing, and media buying strategy.
He called upon his experience to how to build less flashy, but more consistent marketing success.
We covered the role of MMM in the modern marketing landscape—when and how it would apply in companies from startups to enterprise-level corporations. The discussion led to great advice for refining media strategies.
In this post, we’ll cover the basics of media mix modeling, when it would be appropriate to do, and what some common challenges.
Exploring Media Mix Modeling
What is Media Mix Modeling?
At its core, MMM is a statistical analysis technique that quantifies the effectiveness of various media channels in contributing to a company's sales and marketing goals.
For a good primer with example math, check out this series on Towards Data Science
Nelson described it as "…a regression of media spend by channel versus your business outcomes”.1
By the end of an MMM study, you should have an understanding—and business-specific numbers to use for projections—of the behavior for your marketing spend.
If you move dollars from one channel’s bucket to another, you should be able to predict the result before it happens.
Overall, you’ll get a good picture of the strategic importance of how different channels contribute to overall performance, offering a more nuanced view than what surface-level metrics can provide.
The Value Proposition of MMM
The conversation highlighted the potential for MMM to guide strategic decisions for businesses at different growth stages.
For enterprises, MMM not only sheds light on the near-term return on investment (ROI) of media spend but also serves as a big-picture strategic compass.
"You get to enterprise measurement... and you start to get a sense of which channels are working,"—MMM can guide longer-term budgetary decisions and guide channel allocation to maximize effectiveness.
Overall, MMM shines a light into the marketing landscape for your business. It answers what obstacles and opportunities may be nearby.
The Strategic Implications of MMM
From Startup to Scale: The Role of Reach
For a growing business, Nelson emphasized the importance of reach in a marketing strategy.
The most important thing is reach... How you do that is going to be dependent on what your channels look like and what your distribution looks like.
MMM isn’t usually an appropriate investment in a growing company with only a few channels or in a few markets.
At this business stage, Nelson also highlighted the importance of the product itself:
From a media standpoint, we can benchmark.
We can look at what you're paying for your media…and how many people you're reaching.
But if… people are getting to your website and they're not converting, you've either got a website problem or you've got a product problem
Ensure you’ve mastered the product market-fit before trying to incorporate complex marketing modeling into your business roadmap.
These foundational steps—focusing on reach and product—set the stage for the more sophisticated analyses that MMM provides when a company has matured.
MMM for Enterprise-Level Strategic Insights
For larger, more established companies, MMM offers a view of media efficiency across channels, allowing businesses to reallocate resources for optimal impact.
By the time you're an enterprise client... you're spending tens of millions. MMM... is going to tell you where you should be putting your money
At this stage, most mature companies have channel-specific strategies being managed by separate teams. There may be only a few people who have a full cross-company view of the marketing efforts.
MMM helps leadership understand how changes in channel allocation—both effort and money—can lead to changes in the bottom line.
This level of insight is invaluable for companies operating at scale, where even marginal improvements in efficiency can lead to significant financial gains.
Challenges and Considerations in MMM
The Cost-Benefit Analysis of MMM
Despite its benefits, MMM comes with its own set of challenges, chiefly its cost.
Nelson counters the cost issue by framing it as an efficiency: “It's expensive... but the question is, do you believe that your media can be 10% better?"
Given that an estimated 22% of all 2023 online ad spend was lost to fraud, most enterprise companies would quickly say that a 10% improvement is possible.
Nelson’s rhetorical question underscores the need for businesses to weigh the costs of MMM against the potential for improved media spend efficiency and the overarching benefits of a data-driven approach to advertising strategy.
Addressing MMM's Limitations
Nelson candidly addressed MMM's limitations, including its inability to provide real-time data for tactical decisions and slower time to results.
All kinds of stuff happens during these tests.
For example, a competitor launches a major campaign or in one of your states you get some big national PR and those can totally swamp your results in these in these cases.
[MMM is] not necessarily a sure thing, but it's going to be as sure as you can get…
Is it slower? Yes, but you'd rather be slower and better.
However, he stressed MMM's value in strategic planning and channel optimization, suggesting a balanced approach to leveraging MMM alongside other—more immediate—analytical tools and methods.
Beyond MMM: A Holistic View on Advertising Effectiveness
The Cumulative Effect of Advertising and Brand Building
Shifting focus, Nelson also touched on the broader aspects of advertising effectiveness, including the dangers of neglecting brand management for short-term performance marketing gains.
"A lot of the traditional brand management methods have been neglected... they're really critical things to do."
I've seen it with precision marketing. People assume if you get precise enough, things will immediately get better and that's not necessarily true.
In fact, it's the opposite in a lot of cases….When you get really segmented and you get really precise, you lose your scale.
In a lot of cases getting really granular, getting heavily optimized in performance marketing winds up being counterproductive and solves the wrong problem.
Integrating MMM with Comprehensive Marketing Strategies
Ultimately, the conversation circled back to the integration of MMM within a broader marketing strategy that includes audience understanding, creative messaging, and multi-channel messaging.
This balanced approach ensures that while MMM provides the data-driven backbone for media spend optimization, the nuances of durable effective marketing—brand perception, channel personality, and the importance of reach—don’t get forgotten during strategic planning.
Conclusion
In conclusion, Media Mix Modeling emerges not just as a tool for analyzing past performance but as a strategic guiding asset.
When integrated with a comprehensive understanding of marketing fundamentals, MMM can enhance the effectiveness of advertising spend.
As (usually enterprise) businesses navigate the complexities of the media landscape, MMM offers clarity, guiding strategic decisions and fostering growth in a competitive business environment.
Obviously a good MMM output will only be able to predict local trends in a marketing spend. If you try to minmax your spending on only the best channel results, the trends that MMM discovered will break down.