Interest towards marketing mix modelling (MMM) is growing among businesses in India as the customer journey becomes more complex and the span of marketing touchpoints gets more diverse.
What the privacy-centric statistical method offers is a comprehensive view of how one’s marketing spend and activities drive sales, and how budgets can be optimised. So it’s top-of-mind for business leaders.
MMM helps businesses find ways to optimise their marketing performance and ROI by analysing data from a range of sources, including their own sales data, marketing activities, and seasonal and macroeconomic factors.
But for businesses in India to fully unlock the potential of MMM, we’ve also found — through our collaborations with various advertisers, CMOs, and MMM providers — that three mindset shifts are needed.
1. From one-time use to regular optimisation
In India, it’s not uncommon for businesses to view MMM as a "once-and-done" exercise. But that approach fails to capture the dynamic marketing efforts of a business across various platforms, and the everchanging behaviours of consumers.
Conversely, research shows that brands which adopt regular measurement programmes and test-and-learn strategies achieve ROI gains of between 25% and 70%.
When a business shifts from one-time use to regular use of MMM, such as half-yearly or quarterly, the model continuously refreshes its data. So it provides the latest analysis on the effectiveness of various marketing efforts and helps marketers make timely budget adjustments to optimise returns.
The analytical capability of MMM has also improved alongside advancements in the elements that power it, from specialised software to cloud computing and AI. As such, it can support more frequent, and even real-time data-gathering to provide the most up-to-date insights.
Indeed, many leading businesses in India, including Mondelez Foods India, have come to regard the regular use of MMM as essential to optimising their marketing plans, spends, and returns
“MMM provides feedback on what is and isn’t working with one’s marketing strategies. The regular use of MMM makes it possible to measure both the efficiency and effectiveness of one’s extensive range of marketing efforts, and the impact of different variables on revenues.”
2. From a limited scope to holistic coverage
The practice of evaluating marketing ROI holistically doesn’t come easily to most. Nielsen’s Annual Marketing Report 2024 found that only 38% of global marketers evaluate their marketing ROI holistically by measuring traditional and digital marketing together.
To unlock MMM’s full potential for assessing marketing effectiveness, businesses need to move towards incorporating a wide range of factors in their analysis.
When a model takes into account all factors that can affect revenue, such as advertising, promotions, seasonality, competitor impact, and macroeconomic forces, the holistic assessment helps a business make well-considered marketing decisions towards driving sales and profitability.
The personal care product company Honasa Consumer Limited, is an example of a business that embraced a comprehensive scope of factors in its MMM. As a result, it was able to make well-considered marketing decisions to connect with its millennial customers across India.
“We analysed everything from sales and marketing data to external factors. We also layered in our geo lift experiments to better understand how different marketing strategies worked in different geographic areas to impact performance at a local level.”
3. From unnoticed to key indicator of media investment potential
Businesses in India often regard MMM as a valuable way to understand their marketing effectiveness and ROI. Its ability to help businesses determine their media investment potential, however, tends to go under the radar.
Yet it’s when businesses recognise how MMM can help them analyse their media saturation level that they’re able to unlock MMM’s full potential. With data-driven insight about their media investment headroom, they can better make decisions about how to optimise their media mix, investment, and ROI. And that’s much needed.
The Nielsen 2022 ROI Report found that 50% of brands were not investing sufficiently in the right media to maximise ROI. That’s not surprising, since it’s not uncommon for marketers to use subjective approaches such as rule of thumb to decide how much to invest in a media channel. That report also found that when brands increase their investment to an optimal level, they can improve ROI by a median of 50%.
A company that has unlocked the full potential of MMM by using it to determine its optimal investment level for each of its media channels is India's largest fantasy sports platform, Dream11.
“For the past couple of years, we've been using MMM to understand the optimal investment levels for each of our media channels. The saturation curves generated by MMM helped us visualise the relationship between our spend and impact, and avoid wasting media spend on various media platforms.”
He adds, “This data-driven approach has also allowed us to identify channels with more investment opportunities at better marginal efficiency. As a result, our investments in Video reach campaigns have gone up by 2.5X compared with the year before, and that helped us improve our overall media effectiveness by 8%.”
For any business in India looking to optimise its ROI on marketing spend and sales, running MMM is key. But to fully unlock the potential of MMM, three mindset shifts are necessary. One, embrace regular use of MMM. Two, ensure it covers a holistic range of factors that influence revenue. And three, use it to determine the optimal investment level for each media channel.
