Market Mix Modelling - Lessons from CPG to Tech

A world-class organization like LinkedIn knows how to develop and execute incredibly effective marketing strategies. This is why I was so thrilled to get to chat with Sudha Ranganathan, a Product Marketing lead at LinkedIn. When I opened my inbox to find her go-ahead on the interview I'd been trying to set up, I was excited. I had no idea it would be one of the most insightful interviews in my career though.?

Marketing Mix Modelling (MMM) is an area in business that's both misunderstood and not understood enough, as it combines business strategy, marketing execution, and mathematics uniquely. However, MMM experts can deliver some of the most valuable insights to help drive business success.?

The global MMM community is still pretty small and close-knit. If you're interested in MMM and its applications across industries, then Sudha is one of the best people to speak to. She shared her story of how she got started in MMM and some important areas of MMM focus that have helped her drive marketing effectiveness at reputed companies.

How Did You Get Into MMM in the First Place?

“I was really lucky early on in my career”, says Sudha, and explains; “My first job as a Market Researcher was at Procter & Gamble. The really interesting thing about P&G is that, unlike in many other companies, the role is focused on business research. Put simply, researchers were taught to identify specific business problems, and use market research and analytics to answer these and guide the business toward better performance.”

We spoke about Sudha's educational background, and how it prepared her for MMM. This is an area that requires both a mathematical approach and a layer of business expertise. Sudha’s versatile background helped prepare her for this, although she explains that she was only able to learn certain skills like business-acumen through on-the-job experience with the help of some amazing managers.

“Although I had a deep understanding of Market Research and analytical methodologies from business school AND I had an engineering degree that taught me analytical problem-solving skills, nothing in my education gave me the practical experience of applying that knowledge to a real-life business challenge.”

Sudha spoke enthusiastically about her experiences working at P&G and how she was able to build and use regression models to answer key business questions about Marketing ROI. I asked about the differences between B2C Consumer Packaged Goods (CPG) and B2B Technology companies in how they evaluate brand performance.?

“To properly answer the question, let’s take a few steps back. The big difference between CPG and B2B Technology is their view on Brand Marketing and Performance Marketing. In CPG, Brand Marketing and Performance Marketing are one and the same. Products flying off the shelf, whether it’s laundry detergent from brands such as Ariel or Tide, or sanitary pads such as Always, is the result of brand marketing being successful. The metric used to measure the success of Brand Marketing in CPG is sales volume and sales value ($$).

Whereas in B2B, e.g. in high tech, Brand Marketing is considered to be a ‘top-of-funnel’ activity that drives metrics like brand awareness and perceptions. These metrics are often measured using long-term brand trackers and aren’t perceived to directly influence downstream metrics such as sales.

Basically, once Brand Marketing has established a company as a known and credible solution to relevant customer needs, Performance Marketing helps drive conversion to clicks, leads, and subsequently, sales and revenue.

Sudha’s background has seen her work with plenty of brands, applying MMM tactics to their marketing performance.?

What Happens When You Take That B2C Learning and You Apply it to B2B?

“Two things are happening differently in B2B. First of all, you are separating Brand Marketing from Performance Marketing. So this possibility of your top of funnel brand messages being completely divergent with bottom of funnel performance marketing messages, which means your customers are hearing many different things from the same brand. And that can get in the way of building consistency.?

The other factors at play in B2B are the sales partnership and the customer experience, both of which are a really big part of the brand-building experience. Unlike with CPG, where you go to the shelf, you pick up something, and you use it, in B2B, you first deal with a sales partner. And their ability to be a great partner to you rather than just be a salesperson to you determines your brand perception.?

And then your customer’s experience with the product and your organization’s ability to help them derive the most value from it also builds your brand perception. So I feel like, in B2B, there's just a lot more at stake, but it's harder to do solid, consistent brand building because there are so many different avenues through which you build your brand, and it's easier for them to diverge rather than for them to come together.”

Are There Any Key Lessons From Your Early Days at P&G That You’ve Been Able to Apply to Your Current Role at Linkedin??

“So, in market mix modeling there is this notion of base volume and incremental volume. Base volume is the sales volume your brand enjoys even when you pull out incremental marketing support for short periods of time. Simply put, the higher your base volume, the more likely you are to survive fluctuations in the market landscape and business cycles.?

So, the big lesson that I had while working at Procter is that the key to securing a strong base volume for your business is long-term brand building, done through deliberate, focused, and consistent executions.?

This way, you build a long-term brand that can help secure your base volume and help you weather many storms regardless of budget. I'd say that's one big aha that I took away.”

Let’s Talk About Challenges Faced in MMM.?

What Were Some of the Bigger Challenges That You Faced When You Started Applying an MMM Approach?

“Almost any method of measurement is imperfect. The question to ask is, "Is it better than doing no measuring at all?" Which is usually the alternative. And the answer to MMM's list was, it was still worth doing because it was better than not measuring anything at all, and because we got some amazing insights that we're able to change the course of how we invested our money and created bottom-line results for the business.?

So let's start by saying that, yes, there are issues with MMM, but I still think that, depending on the context or the category, it can be the best alternative to doing nothing at all.

I think the first thing I would say is because this was back in 2012, and our digital spending tended to be very low. Automatically what that does is any channel that has low spend, is going to inflate the ROI of that channel.?

So how we applied our judgment and business context to interpreting digital ROI back in the day, was a problematic piece. And there was just not enough experience and expertise in the category to do that well. The other thing within digital is the performance of digital channels can vary depending on which digital medium you're using and depending on your execution in that medium.

And in general, what I'm saying is any new channels are just really hard to understand in MMM, or any channels where you're spending very, very little money, it can be hard to quantify the results.

Then there is data. Long data is this challenge that you need to have a certain minimum amount of spend over a minimum period with a certain level of consistency, otherwise, it's just tiny pieces of signal and noise all over the place, and you can't isolate the signal from the noise anymore. That was the other big challenge.”

Do You Have Any Great Success Stories With MMM?

“One success story, for example, is that we used to get really clear guidance on using 15 versus 30-second advertising for our mid-tier vs. premium-tier brands.

Another one was, the point I made earlier about the importance of building up your base volumes and the role of brand building and especially, brand consistency over time in building those base volumes.?

Finally, we had some great learnings about how numeric distribution vs. weighted distribution drove volumes for different products in our portfolio.”

Sudha’s marketing ROI and brand-building experience has applications across industries, from consumer goods to B2B technology. Much of this comes down to gathering valuable insights about marketing performance and using them to make smarter business investments. Sudha’s story shows just how much impact marketing mix modeling can have on a business.?