In every Marketing Mix Modeling (MMM) project that we undertake, we always study the previous spend pattern of the client.
Why?
Because how much one spends in marketing channels gives us only partial information. The other half is about the spend pattern in those channels.
A brand with a ‘single burst’ strategy may not be able to match the ROI performance of a brand that has been investing in channels consistently.
A haphazard spend pattern also affects the Reach and Frequency.
Therefore we always conduct a Spend pattern analysis before building an MMM model.
Below are the benefits of spend pattern analysis:
📌 Gives us a clue about the client’s past marketing and media strategies.
Numbers sometimes tell only half the story. Visualizations often complete it. A spend pattern analysis chart brings out clearly the consistency or erratic spend patterns.
This offers clues about the client’s past marketing strategies.
📌 Gives us an insight into what the client believes their top drivers of KPI are.
Often a consistent deployment on a medium indicates that the company believes it will work or has worked well in the past. Now this belief can be vindicated or disproved by MMM. But the important point is to discern this belief.
📌Helps us set up adequate hypothesis for experimentation and causal studies.
We recently published a whitepaper on ‘Proving the efficacy of MMM through Difference in Difference’ method (ICYMI link in resources). We also tried this technique with one of our client. The spend pattern proved crucial in setting up the treatment parameter.
📌 Helps us diagnose the saturation curves better.
Sometimes clients have a query on why certain medium’s saturation curve is linear, flat or plateauing. Spend pattern analysis offers clues as to why it may be so.
📌 Acts as a good reference for MMM calibration.
Sometimes a model could indicate that a variable is top driver of the KPI. However when compared to the previous spend pattern, the medium might not have seen any significant spends. This is not to say the results are wrong but it certainly allows the analyst to be suspicious and investigate more about the effect of that medium.
📌 Provides input for budget optimization.
Historic spend patterns often prove helpful in budget optimization exercises as it provides a benchmark.
