We use the most applicable techniques in market mix modelling to reflect the commercial side of our clients business, in order to best answer the questions at hand. These models are carefully hand crafted based on this commercial understanding of the business in order to extract the most accurate marketing ROI’s.
Market Mix Model Decomposition Chart
Market Mix Modelling, or econometrics, allows you to break down historical sales into the key components that drive consumers to buy products. This means identifying the sales uplift generated from media, promotions, price, seasonality, economy, climate, distribution, and so on.
The graph below is a visualisation of this, with each of the bars explaining how much that particular driver is contributing to sales in a given week. This model is then used to determine the sales uplift from a given driver, which when put against a cost delivers the marketing ROI, and enables the optimisation of budgets to deliver more sales and profit.
The process also helps with more accurate sales forecasting.
The weekly decomposition, or brand painting, is a useful chart more for the analyst to check the econometric model makes sense week to week. Summarising this chart into annual changes then becomes much more interesting and useful for the client, particularly Finance Directors. An example of an annual change waterfall from the above market mix model is shown in the chart below, where now its clear to see that increased prices has contributed mostly to the decline in sales, as well as reduced promotions, but increases in distribution have helped counter this to some degree:
When the quantification of all sales drivers is completed, it is then possible to calculate the sales uplifts into profit. Putting this then against cost works out efficiencies for marketing channels. An example of a media ROI chart is below, with TV and Online Display delivering the best payback. Within FMCG, this can also be replicated for promotional ROI by mechanic, account, pack, etc.
Further work can then be done beyond the market mix model to set and optimise budgets, please click here to find out more