Marketing mix modeling & optimization are basic elements that help in the enhancement of the marketing mix as better allocation of products are being facilitated. Other importance will be explained in the article.
What is the marketing mix?
The marketing mix is a set of actions and tactics that a company adopts in order to promote its brand or product in the marketplace. It comprises the 4Ps (price, product, promotion, and place). However, the marketing mix recently increasingly includes other Ps such as packaging, positioning, people, and even politics which serve as vital elements of the mix.
The process of marketing or distributing a brand particularly requires attention from management. This is because production is irrelevant until the products are sold. With this, we can say that the marketing mix is the process of designing and integrating different elements of marketing such that an enterprise is able to achieve its objectives.
The marketing mix 4Ps
This is the value placed on a product depending on the cost of production, segment targeted, the market’s ability to pay, and other direct or indirect factors. Several types of pricing strategies exist each tied in with an overall business plan. pricing is usable as a demarcation to differentiate as well as enhance the image of the product.
The cost component of the marketing strategy depends on the willingness of the consumer to pay. However, it should also be considered in alignment with the business’s operating profit margins and long-term marketing strategy. The competitiveness of pricing is also a concern. Different price marketing strategies will introduce new products at reduced prices with the aim of building market share and brand visibility and thereafter increase the prices after the product has established itself.
The product is the item that is actually being sold. It is necessary for the product to deliver a minimum level of performance. If the contrary takes place, even the best work of the other elements of the marketing mix will not be effective. It is the good or service that is being identified, designed, and produced and it fulfills the needs or desires of consumers. From the phase of product development, marketing research begins. This isolates an emerging opportunity for a new product to fill.
The place is the point of sale or the distribution method. This determines the availability of the product to the target consumer. In every industry, capturing the consumer’s attention and making it easy for him to buy is the major aim of the place strategy. Retailers make a premium payment for the right location. By implication, a major factor that determines a successful business is location.
Promotion refers to every activity that makes the product or service known to the user and trade. This comprises advertising, press reports, words, incentives, commissions, public relations, and awards to trade. This promotion aims at generating the interest of consumers in the product. It oftentimes follows the decisions regarding pricing and placement in order to the information in the advertisements. It is expedient for marketing professionals to recognize the strengths and weaknesses of various promotional strategies, identify the needs of consumers and channel the marketing campaigns accordingly.
Marketing mix modeling & optimization
Marketing mix modeling (MMM)
Marketing mix modeling refers to the statistical method of determining how effective marketing campaigns are by breaking down aggregate data as well as differentiating between contributions from marketing tactics and promotional activities, and other uncontrollable factors that drive success.
The marketing mix modeling has a close relationship with the 4Ps above. This is because it looks toward determining the level of success that was generated by each factor and forecasting the future success that can be created through altering and optimizing the marketing mix.
The key purpose of marketing mix modeling is to have an understanding of how different marketing activities are driving a product’s business metrics. It serves as a decision-making tool that brands use to estimate the effectiveness of various marketing initiatives in increasing return on investment (ROI).
Benefits of marketing mix modeling
- Better allocation of marketing budgets
- Better execution of ad campaigns
- Business scenario testing
Better allocation of marketing budgets
Brands can use this tool to identify the marketing channel that is most suitable such as television, online, print, and radio to achieve the marketing objectives and get maximum returns.
Better execution of ad campaigns
Through marketing mix modeling, markets can suggest optimal levels of spending in highly effective marketing channels to avoid saturation.
Business scenario testing
Businesses can use the marketing mix model to forecast business metrics on the basis of planned marketing activities and then simulate different scenarios such as an increase in spending.
Limitations of Marketing Mix Modelling
- Not actionable
Reasoning exists that only the largest brands in the world make use of the marketing mix modeling. They are able to afford to cover these significant expenses as part of their large marketing and analytics budgets. Consulting vendors for the marketing mix modeling is expensive. However, there are modern solutions such as OptiMines have made provision for sophisticated MMM at lower costs thereby making the analytics more accessible than ever.
The traditional money market modeling is slow because it is a manual consulting exercise that takes a significant amount of time. It involves building models and changing them over time. It is a common factor for brands using MMM to get the measures after the period being measured.
Many marketing mix models are highly static and do not change much. this is because brands do not have the resources to evolve models over time.
Almost all marketing mix models make use of highly summarized data which is typically rolled up by a week or by month. Also, because the models are built using efforts that are highly manual, it is almost impossible to get deeply detailed guidance from marketing mix modeling measures. As such, teams get very high-level recommendations that are oftentimes difficult to execute at any level of precision. This is even a bigger issue in the channels of digital marketing that frequently have hundreds or thousands of various campaigns, targeting elements and execution approaches all with performance characteristics that are very different.
Marketing mix optimization
Marketing mix optimization is the act of making the marketing mix more efficient. Through this, marketers are able to maximize returns on their marketing expenditures by determining the best set of advertising as well as targeted campaigns across different channels, both offline and online, and media which can be traditional, digital, and social.
Just like money market modeling, it has to do with an analytical process in which marketers evaluate the performance of different campaigns to determine the ones that have a positive impact on their core audience and the ones that do not. When the information being generated from MMM is available, marketers will be able to optimize their marketing mix as well as invest more time and capital in the channels and messages that better resonated with consumers.
As consumers have become more proficient in tuning out marketing messaging, marketers have made it a priority to create a tailored and positive consumer experience. Therefore, marketers invest more in campaigns with marketing budgets growing steadily over the years. Marketing strategies are being executed in order to improve the consumer experience.
Marketing mix optimization is important as it plays a significant role in modern marketing. It helps in achieving higher returns on investment (ROI) and creating the most tailored consumer experience.
Through the evaluation of data on engagements across touchpoints, marketers understand the channels, creativity, and timing that an individual will be engaged with. From there, marketers can devote more time and money to the creation of those experiences for that user. The user or consumer is, in turn, more likely to have a positive perception of the brand. The brand can, through various channels, ensure that they reach the consumer with these optimized messages the moment they decide to make a purchase thereby increasing their returns on investment.
There are certain questions that core marketers need to answer in the course of trying to determine where to optimize their campaigns. These are;
- Where should the money be spent?
- What channels that the target audience makes use of?
- When and what type of creative and messaging is the target audience responsive to?
This requires marketers to deploy advanced attribution models that make provision for granular person-level data on each touchpoint that is being engaged while putting external factors into consideration.
FAQs on marketing mix modeling & optimization
What is marketing mix optimization?
Marketing mix optimization has to do with an analytical process in which marketers evaluate the performance of different campaigns to determine the ones that have a positive impact on their core audience and the ones that do not. When the information being generated from MMM is available, marketers will be able to optimize their marketing mix as well as invest more time and capital in the channels and messages that better resonated with consumers. It is therefore the use of marketing mix modeling to improve the marketing mix.
What does marketing mix modeling do?
Marketing mix modeling deals with the use of statistical methods to determine the effectiveness of marketing campaigns by breaking down aggregate data as well as differentiating between contributions from marketing tactics and promotional activities, and other uncontrollable factors that drive success.