An FMCG example

To enhance strategic marketing effectiveness, portfolio management and the marketing mix need to be optimised for each key account.

Key questions:
What is the optimal allocation of funds between advertising, trade allowances, trade promotion and customer promotion?
What individual SKU pricing and promotional actions will optimise the profitability of the total brand portfolio?
For each retail chain and state, which marketing programs will maximise profitable outcomes?

Rationale for using Mix Models
Only through attributing volume against each marketing activity can the optimal marketing investment mix be determined - this is a complex task for which mix modelling is required.
In order to determine optimal price points for each SKU, a rich understanding of the cross-elasticities within the brand portfolio and against competitive brands is required.

Enhancing promotional effectiveness

Key questions:
What is the optimal frequency and depth of price promotion?
What combination of trade promotion, in-store display and features maximises profit?
What is the optimal level of advertising investment weight?
What particular creative executions enhance advertising effectiveness?

Rationale for using Mix Models
Split cable studies have shown that only around 16% of trade promotions are profitable and that promotion only impacts volume during the promoted period. Therefore each promotion must deliver incremental profit during the promotion period.

Mix modelling is required to benchmark the volume achieved in the absence of that promotion.

Split cable studies also suggest that creative quality has three times more impact on sales than advertising weight. Therefore as mix models develop, the NTF Group suggests that measures of creative quality be incorporated. This enables the identification of productive campaigns, thereby improving the effectiveness of advertising expenditures.

These issues are discussed in Communication Effectiveness.