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How to Increase your Return on Investment?

In order to overcome the effects of the COVID-19 crisis, brands are reviewing their marketing budgets and their pricing strategy as well as different marketing channels. In addition, they are keenly focusing on optimizing return on investment to ensure cost-effectiveness and sustainable growth in the post-pandemic landscape.

Marketers are asking the following questions today:

  • Which media channel is it best to invest in?
  • What is the ROI for each marketing campaign and toucpoints?
  • What impact do my digital campaigns have, combined with other media campaigns?
  • How can I simulate the effect of a media plan on the target KPI?

The best way to answer these questions is to know how to measure the effectiveness of these different touchpoints. Generally these metrics are based on calculating ROI to optimize Marketing Spend.

To model the impact of marketing on sales, time-series approaches have been proven to be successful. Especially, the contribution of Marketing Mix Modeling supported by machine learning is very important.

The key purpose of a Marketing Mix Model is to understand how various marketing activities are driving the business metric of a product. It is used as a decision making tool by brands to estimate the effectiveness of various marketing initiatives in increasing return on Investment (ROI).These factorsaffecting marketing mix can be defined as:

Incremental drivers: Business outcomes generatedby marketing activities like TV and digitalspends, price discounts, promotions, social buzz,etc.

Base drivers: Base outcome is achieved without anymedia invesments. It is due to brand equity built overthe years. Base outcomes are usually fixed, unlessthere are any economic or environmental changes.

Other drivers: They are a sub-component of baselinefactors and are measured as the brand valueaccumulated over a certain time period due to longtermimpact of marketing activities.

We can also focus more granuler media channels.

Online channels (Instagram, Facebook, Search, Website traffic, Twitter, etc.)

Offline channels (TV, Out of Home, Radio, Press, Billboardsetc.)

Once the analysis is done, we can establish the relationship between all the variables.

Importance of Marketing Mix Modelling

Marketing Mix modeling offers several important benefits for marketers:

1.Better allocation of marketing budgets

Model results can be used to identify the most suitable marketing channel (Eg. TV, online,

print, radio, etc.) to achieve the marketing objectives and get maximum returns.

 2.Better execution of ad campaigns

Through MMM, markets can suggest optimal spend levels in highly effective marketing channels to avoid saturation.

3.Business scenario testing

MMM can be used to forecast business metrics based on planned marketing activities and then simulate various business scenarios like increase in spends by 10%, level of spends required to achieve 10% lift in business metric etc.

Marketing mix modeling techniques can minimize much of the risk associated with new product launches or expansions. Developing a comprehensive marketing mix model can be the key to sustainable long-term growth for a company. It will become a key driver for business strategy and can improve the profitability of a company’s marketing initiatives. While some companies develop models through their in-house marketing and analytics departments, many choose to collaborate with an external company to develop the most efficient model for their business. The right insights will help you not only survive turbulent times but emerge stronger from them.