Econometrics: Consumer mix modelling

Simeon Duckworth, Jeremy Pounder and Paul Ward
Mindshare and Kantar Worldpanel

Modelling techniques are advancing and while Consumer Mix Modelling has similarities to Marketing Mix Modelling, it overcomes many of MMM's limitations and can measure marketing RoI at more sophisticated levels.

Marketing Mix Modelling (MMM) has been the gold standard method of measuring advertising RoI for over 30 years. Using aggregated sales data, it can quantify and predict marketing RoI, isolating one driver from another. It is reasonably easy to implement, largely working with existing streams of aggregate data and it can yield significant improvements in RoI, with 15-20% improvements not untypical. Given these benefits, it is slightly surprising that it is not used more by advertisers. As the Israeli-American psychologist Daniel Kahneman has pointed out, even simple models frequently outperform the biases inherent in informal decision processes.