How does an MMM work?

Media mix modeling (MMM) works through a structured process of data analysis and statistical modeling to evaluate the impact of various marketing efforts on business outcomes. Here's an overview of how MMM typically works:

Data Collection

The first step involves gathering comprehensive historical data, including:

• Marketing inputs: Spend across different channels (TV, radio, digital, print, etc.), pricing information, promotional activities

• Business outcomes: Sales figures, revenue, conversions, etc.

• External factors: Seasonality, competitor actions, economic indicators

This data is usually collected over a period of 2-3 years, often aggregated at weekly or monthly levels.

Data Preparation

Once collected, the data is:

• Cleaned to remove inconsistencies or errors

• Normalized to ensure comparability across different data types

• Aggregated or segmented as needed (e.g., by product lines or regions)

Modeling

The core of MMM involves building statistical models, typically using techniques like:

• Multiple linear regression

• Time series analysis

• Machine learning algorithms (in more advanced applications)

These models aim to establish relationships between marketing inputs and business outcomes while accounting for external factors.

Analysis and Insights

After the model is built and validated, it's used to:

• Measure the impact of each marketing channel on sales/revenue

• Calculate return on investment (ROI) for different channels

• Understand the effects of external factors

• Simulate different marketing scenarios

Optimization

Based on the insights gained, marketers can:

• Reallocate budgets to higher-performing channels

• Adjust the marketing mix to maximize ROI

• Plan future campaigns more effectively

• Set realistic targets based on predicted outcomes

Ongoing Refinement

MMM is not a one-time process. The model should be regularly updated with new data and recalibrated to maintain accuracy over time, adapting to changing market conditions and consumer behaviors.

By following this process, MMM provides a comprehensive, data-driven approach to understanding and optimizing marketing effectiveness across various channels and activities.