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How to Improve the Efficiency of Your Marketing Spend By 40 Percent Why everyone, even the smallest businesses, needs marketing mix modeling (MMM).

By Linda Orr, PhD

Opinions expressed by Entrepreneur contributors are their own.

Most of us have heard the famous quote: "Half my advertising spend is wasted; the trouble is, I don't know which half" (there is debate regarding the author). Unfortunately, decades later, many entrepreneurs, even the most analytically minded ones, still do not understand the effectiveness and efficiency of their advertising spending. Whether you are a single-employee company or a larger one, MMM is still an essential part of a marketing plan.

What is marketing mix modeling (MMM)?

Marketing (or media) mix modeling is a statistical analysis technique used to help measure the impact of promotional spending and external factors on sales and revenue. Activities that do not always sit in the marketing plan, like sales calls and press releases, can also be measured. Even the elusive to measure activities like influencers and brand partnerships can be part of the model. The equations will help determine how various expenditures contribute to different marketing objectives, such as traffic or sales. For example, MMM can assess how increased marketing spend on magazine ads affects overall sales. Because many external variables are part of the model, you can learn if the effects were from your efforts (ad spend) or other factors (competitive declines or something like a global health crisis). Marketing mix models often use two to three years' worth of data to factor in items such as seasonality and organic growth.

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