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Unlocking marketing mix model literacy: A guide for strategic and performance teams

Explaining how teams use MMM including real life examples

Adrian White

November 21, 2024

Welcome to the forefront of marketing analytics! 📈💪

Marketing mix modeling (MMM) revolutionizes how we measure marketing effectiveness, going beyond simple last-click attribution to provide a comprehensive view of your marketing investments. Let's explore how MMM can transform your marketing strategy and help you make data-driven decisions with Violet.

Understanding marketing mix modeling (MMM): LC vs. MMM attribution

What is MMM and why is it important?

MMM is a statistical analysis technique used to quantify the impact of various marketing channels on conversions and other KPIs.

MMM provides a holistic view of marketing effectiveness beyond the last-click attribution model, allowing for more accurate allocation of marketing budgets and improved decision-making.

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LC Attribution	MMM Attribution
Attributes 100% of conversions to the last interaction.	Attributes a certain % of conversions to non-marketing activities and another % to marketing channels
Focuses on short-term results with immediate conversions and lower funnel investment.	Provides insights into each channel's incremental impact on sales, allowing for optimized budget allocation.
Good for tactical spend decisions (hourly reporting, for example).	Takes into account the contributions of all marketing channels along the customer journey, providing a high-level strategy view for resource allocation.
LC CPA usually creates a lot of pressure on core channels, giving no room for smaller channels to scale.	Statistical Approach with bi-weekly refresh and experiment calibration.

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MMM incrementality vs. LC: An example

Look at the difference between FTBs assigned through LC and MMM by channel:

Marginal CPA

Now let's talk about marginal CPA.

Marginal CPA is a measure that our MMM can bring to the table to further understand incrementality.

Marginal CPA refers to the additional cost incurred to acquire one additional customer through a specific marketing channel.

(mCPA = £9.2, means it costs another £9.2 to bring another customer, given what you are spending today))

How do we use mCPA?

We use it to recommend scaling or optimizing a channel.

And how do we do that? By comparing the mCPA with the MMM CPA.

Our rules:

If mCPA is smaller than MMM CPA –> SCALE (for example, Facebook)
If mCPA is larger than MMM CPA –> OPTIMIZE (for example, TV)
If MMM CPA is relatively high, we will also recommend optimizing.

Why? If bringing an additional customer (given your current level of spend) is cheaper than what it usually costs you, then you should consider scaling to get that extra customer.

If bringing that additional customer is actually more expensive than what your channel is used to paying for that new person, then, you should consider optimizing.

Pro tips for MMM success

Remember, Violet's platform makes these complex insights accessible and actionable, helping you maximize the return on every marketing dollar invested.

Watch for edge cases

Low investment levels can cause MMM CPAs to spike, as the model may not recognize well enough the effect of that particular channel that day. Always cross-validate significant findings with controlled tests.

If you believe MMM is showing an opportunity for your channel, or you don't believe in what MMM is saying, let's test it out!

Focus on comparisons

MMM is most valuable when comparing channels and understanding relative performance. Use it to identify undervalued channels and opportunities for optimization.

Reach out to us

Finally, keep in mind that the Exactius team is here to help you. So reach out to us if you have any doubts or if you have any questions!

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