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3 simple steps to combining Media Mix Modeling (MMM) with Incrementality Testing to unlock cost effective growth

Kush Shah

12 Jan 2024

“Half the money I spend on advertising is wasted; the trouble is I don't know which half.” Kush Shah gives his insights in how he leads brands to marketing success by combining Media Mix Modeling (MMM) with incrementality testing to create effective and measurable marketing campaigns.

Every smart marketer wants to know the same thing: how can I drive incremental and cost effective growth in a competitive market? In a world of constant economic uncertainty, it is all the more important to prove the value of marketing investment. Two powerful tools in the marketer’s arsenal to achieve this are:

  1. Media Mix Modeling (MMM): using historical data to derive a statistical model that determines the influence of cross channel marketing efforts on ROI
  2. Incrementality testing: randomised control trials or geo lift tests to determine the causal impact of a specific marketing channel

Let's first look at the pros and cons of each approach.

Media Mix Modeling

Pros

  1. Holistic overview: MMM provides a macro-level view of marketing effectiveness.
  2. Optimisation for long-term planning: MMM is excellent for overall budget planning, giving marketers a sense of how to allocate budgets across various channels

Cons

  1. Data-intensive: MMM requires extensive historical data, making it less agile in rapidly changing market conditions.
  2. Lacks granularity: MMM may not capture the nuances of individual customer journeys or the impact of specific campaigns at a granular level.

Incrementality Testing

Pros

  1. Real-time feedback: It provides immediate insights into the effectiveness of current campaigns, making it agile and adaptable.
  2. Precision and specificity: This method allows for a more detailed understanding of how changes in marketing tactics impact customer behaviour, providing genuine causal inference for a marketing intervention

Cons

  1. Isolation from external factors: Incrementality tests often occur in a controlled environment, which may not fully replicate real-world market conditions.
  2. Resource intensive: Properly configuring and conducting these tests at scale requires time and expertise.

So on their own, neither MMM or incrementality testing solve the whole problem. This is where combining the two approaches comes in – allowing for both forward-looking planning and real-time adjustments.

3 steps to combining MMM with incrementality testing

  1. Use MMM for strategic allocation: Start with MMM to understand how to distribute your budget across various channels on a macro level.
  2. Refine with incrementality testing: Implement incrementality testing for specific campaigns or channels to fine-tune the strategy based on real-time data.
  3. Feedback loop: Use the insights from incrementality tests to continually refine and update the MMM, creating a dynamic, data-driven approach to budget allocation.

Combining MMM with incrementality testing enables marketers to make informed decisions that balance strategic planning with tactical agility. This synergy not only enhances the effectiveness of marketing campaigns but also ensures that every penny spent is driving incremental growth.

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