Marketing-Mix Modeling: A Road of Missed Opportunity for Brands

michaelcollinsData-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Michael Collins, CEO at Adelphic.

If you are in brand management, chances are you have leveraged marketing-mix modeling (MMM).

In case you haven’t, MMM is the well-used planning tool that helps brands determine where ad spend should be appropriated for campaigns. For many marketers, it is the center of their media planning process. However, this singular channel-focused tool misses a profound amount of marketing opportunity and holistic insights into audience and ad campaign reach.

It is an understatement to say that audiences are fragmented more than ever before. Further complicating the job of media planners, audiences are also increasingly spreading their time between multiple channels. Originally conceived as a planning tool during the days when television dominated, MMM provides advertisers with generalized statistics based on national or regional time series data. At its inception, this was an effective tool before audiences became so fragmented.

What MMM fails to provide is a true holistic view of consumers based on their behaviors across multiple channels and screens. It also cannot give marketers the ability to plan for a seamless, sequenced dialogue with individual consumers across multiple screens. It is also not effective in leveraging the stream of real-time consumer insights that marketers now receive from newer, interactive channels.

Consumers are, by nature, multichannel and they consume content through multiple screens every day. Marketers need to better align their consumer engagement efforts with this multichannel behavior. When done successfully, this realignment allows for more effective ad spend, as placement decisions can be made in real time based on each consumer’s prior engagement with a brand.

For instance, if a brand successfully engages a consumer with an upper-funnel message in one channel, it would be inefficient to serve another upper-funnel message to the same consumer on another channel. Armed with the insight that the consumer is already engaged, a mid- or lower-funnel message would be better use of budget.

Different channels also provide different benefits for brands. For example, mobile is a very strong channel for engagement, with an average of 0.5% click-through rates, but it is not as strong as other channels on conversion. Conversely, desktop is strong on conversion rates, but weaker for engagement, with an average of 0.1% click-through rates. So, initially engaging a consumer in mobile and then driving that same consumer to conversion in desktop will likely drive a higher ROI than conducting both activities in the same channel.

Making decisions in real time based on cross-channel data and engagement will significantly improve advertising ROI. The most innovated and forwarding-thinking brands are moving to this audience-centric approach to campaign planning and execution. As more brands move in this direction, the legacy of MMM and planning based on television will be replaced and the age of digital advertising will finally have arrived.

The industry continues to evolve the solutions that will ultimately take the place of MMM. In the interim, marketers should focus on a few things: Plan for audience, not channels, sites or apps; build holistic, multichannel consumer profiles — and make them actionable in real time.

And, finally, brands need to test and trial cross-channel solutions that will help set the standards for measurement and attribution that we will need for the future.

Follow Adelphic (@AdelphicMobile) and AdExchanger (@adexchanger) on Twitter.

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