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US market spends on an average more than $140 Billion on just marketing every year.

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5/22/2017 MarketMixModeling|SASProgramming

Provided that marketing is such an important component of the total expense by every company,
it is very essential to know the actual bene t from these marketing campaign. But today, marketing
is not done using a single channel. Every company uses multiple channels like TV, radio, outdoor
activities, banners, social media, and many more, to advertise their products. With such a wide
spread types of expense, it becomes very di cult to quantify the bene t from each of these
channel campaigns. Market mix model is a statistical model accepted industry wide to quantify
these bene ts and optimize the budget allotment to di erent campaigns.

What is a Market mix model ?

There is a very famous quote BRAND IS BUILT OVER YEARS, but managed over quarters.
Quantifying bene ts in shorter window helps business to optimize their spends on marketing.

The total sales can be divided into four primary components:

(https://www.analyticsvidhya.com/blog/wp-content/uploads/2014/08/Bk-Deepak-rk.png)

Market Mix Modeling is an analytical approach that uses historic information like point of sales to
quantify the impact of some of the above mentioned components on sales.

Suppose the total sale is 100$, this total can be broken into sub components i.e. 60$ base sale,
20$ pricing, 18$ may be distribution and 2$ might be due to promotional activity. These numbers
can be achieved using various logical methods. Every method can give a di erent break up.
Hence, it becomes very important to standardize the process of breaking up the total sales into

these components. This formal technique is formally known as MMM or Market Mix Modeling.

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How is Market mix model quantied?

We have all heard regression and I think regression continues to be savior here as well. This raises
a couple of important questions :

Why do we need econometric techniques like OLS, multivariate time series models to estimate a
marketing ROI? Why cant we be simply estimate the ROI, which can be calculated as the ratio of
income to the investment or expenditure?

The answer to the above questions is simple and straightforward: each brand has a di erent
characteristic, tastes, and so di erent market and cost structure. Thus the marketing e orts of each
brand are not homogeneous; it depends on di erent kind of promotions and advertising. It is very
useful to separate and decompose the e ect of marketing e ort. The purpose of econometric
modelling is to create response curves for each type of marketing spend and then use them to
calibrate an optimization model to determine a more optimal marketing mix. Response curves, in
turn, measure the incremental lift in actual $ Orders per additional $ spent on marketing activities
like promotions, advertising, and so on. A response model forecasts the change in a dependent
variable, Y, as a function of the change in one or more independent variables, X, e.g., the change in
sales of a product as a result of a change in advertising or price of that product or the change in a
persons preference for a service as a result of a change in the quality, timeliness, or price of the
service.

Decoding Market Mix Modeling with a Retailers sample dataset

Suppose there is a large retailer and we have 2 departments, 2 year sales for 2 DMAs i.e. marketing
regions.

Wk_end_dt Region Department SBU Sales Tvsn_game

06/07/2014 500 D001 FOOD $10000 467

06/13/2014 500 D001 FOOD $10500 467

06/20/2014 500 D001 FOOD $10476 462

06/07/2014 500 D002 CONSUMABLES $10001 467

06/13/2014 500 D002 CONSUMABLES $10502 467

06/20/2014 500 D002 CONSUMABLES $10503 462

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5/22/2017 MarketMixModeling|SASProgramming

06/07/2014 501 D001 FOOD $10000 467

06/13/2014 501 D001 FOOD $10500 467

06/20/2014 501 D001 FOOD $10476 462

06/07/2014 501 D002 CONSUMABLES $10001 467

06/13/2014 501 D002 CONSUMABLES $10502 467

06/20/2014 501 D002 CONSUMABLES $10503 462

Here is the description of the dataset:

Wk_end_dt: Cumulative sales till the weekend date

Region: Sales at store level is rolled up for each Region

Department: Every retailer combines each item into a category and each category is mapped to a
Strategic business unit i.e. SBU

Sales: Total sales rolled up at Region wk_end_dt and department level.

TVSN_game:TV grps for a particular campaign rolled out by retailer.

This dataset represents an example of correlated data, several sales measurements may be taken
over time on each of the several subjects.Since the same response variable i.e. sales is being
measured at di erent times ,we typically refer to such data as repeated data and the collection of
responses on the same subject is often called a cluster responses.

When such repeated measures are taken over time, the study is called longitudinal study.

There are several approaches to analyze repeated measures data and one of them is general
linear mixed model.

The SAS MIXED procedure can carry out the computations required to t such a model.

Market Mix modeling with SAS mixed procedure:

Typical SAS syntax to illustrate the use of mixed procedure:

procmixeddata=datasetname;

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classregiondepartmentwk_end_dt;

modelsales=base_salestvsn_grp/s;

run;

This program will give us a coe cient for TVSN_grp which when multiplied by GRP value will give
us the contribution by this variable.

Contribution =coe cient * value of GRP.

GRP= reach X frequency, where reach (expressed in %) is a measure of the number people in the
target market exposed to advertising, and frequency is the average number of people have the
opportunity to see/hear advertising. For example, 100 GRPs mean 100% of market exposed once
or 50% of market exposed twice or 25% of market exposed 4 times and so on.

We can then roll up the contribution for the total time period i.e. the period in which we want to
know the e ciencies of the campaign and calculate the values given below in the table.

MEDIA DRIVER Contribution Investment ROI(Average)

TV X$ Y$ X/Y (say 190%)

RADIO A$ Y$ A/Y(say 100%)

Internet Search B$ Y$ B/Y(say 90%)

PRINT C$ Y$ C/Y(say 50%)

In this example, TV is lucrative marketing channel. But all other marketing channel seem to have a
higher investment than the additional value they bring in. Radio is a channel which can be
considered, provided it brings in some other non-quanti able value. This table is a typical output
shared with the clients when dealing with MMM projects. This helps clients to optimize their media
mix across various channels.

Typical Challenges faced during MMM:

Data issues:

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1. GRP data is basically given by media agencies .The data collected by them can be at di erent
levels, i.e. di erent from the requirements of our project.The data has to be sliced and
aggregated at various levels which sometimes a ects the accuracy of data.
2. Veracity of data: Sometimes there arises a discrepancy between what is actually planned and
what is actually done in the market .There is a certain advertising budget planned for the year
and correspondingly there are planned GRPs but what actually happen s is a di erent
scenario. These discrepancies sometimes lead to spurious results in the regression

Modeling issues:

In MMM we typically calculate response curves of advertising on sales and assume a S shape
response curve but due to change in media i.e. typically digital data we cant expect the same
response and hence we get spurious.

Food for thought

Narendra Modi, current prime minister of India, has rewritten the rules of the game and rede ned
Indian politics. Brand Modi has not only captured popular imagination but also trumped Brand BJP
but for the next elections, it will be worth knowing the role of various mediums in his stellar
electoral performance and MMM is the most apt technique to do that.

Dependent Variable: Votes recorded in each region of BJP.

Independent Variable: Impressions recorded across mediums or trps of news channels, radio
when NarendraModi is giving a speech.

This article was submitted by Amogh Gupta (http://in.linkedin.com/pub/amogh-

gupta/6/b14/906) as part of his application for Analytics Vidhya Apprentics programme
(https://www.analyticsvidhya.com/blog/2014/06/unveiling-analytics-vidhya-apprentice-
programme/). Amogh is a masters graduate in business economics from Delhi University, having a
total work experience of ~3 years in analytics. He has worked across multiple domains like
Hospitality, Retail, Manufacturing performing various kinds of analysis and has worked on several
techniques like which includes response modeling, market mix modeling, and exploratory
analysis.Amogh has worked extensively on SAS products and uses Tableau for visualizations. He is
also an avid Swimmer and likes reading books in his free time.

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5 COMMENTS

sumit says: REPLY (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/?REPLYTOCOM=17289#RESPOND)

AUGUST 18, 2014 AT 6:34 AM (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/#COMMENT-17289)

q1)
model sales= base_sales tvsn_grp/s;

how you are getting base_sales please explain

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5/22/2017 MarketMixModeling|SASProgramming

q2) you have use only TV_GRP .. so if I have to use other GRP as well how we use
simultaneously in one code

explain sas code for that

q3) If we dont have GRP data can we use MMM & how

q4) what will be problem for Arimax

Amarjeet (https://www.linkedin.com/pub/amarjeet-sahoo/7/609/145) says:

REPLY (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/?REPLYTOCOM=17394#RESPOND)
AUGUST 18, 2014 AT 6:56 PM (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/#COMMENT-17394)

Hi Amogh,

It is really a nice way to present MMM brie y. I would like to ask you if you could explain me the
way to calculate the carry over e ect/decay e ect of the Adstock of the TV variable.

Thanks.

Amogh Gupta says: REPLY (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/?REPLYTOCOM=17911#RESPOND)

AUGUST 21, 2014 AT 2:38 PM (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/#COMMENT-17911)

Hi Amarjeet thanks for the question.

Here are the calculations:

Wk GRP Adstock 80% Adstock 80% ,Power .2 Adstock 80% ,Power .2,Lag1
1 100 100 2.511886432
2 0 80 2.402248868 2.511886432
3 90 154 2.738445765 2.402248868
4 0 123.2 2.618919453 2.738445765
5 0 98.56 2.504610166 2.618919453
6 80 158.848 2.755474208 2.504610166

aditya says: REPLY (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/?REPLYTOCOM=60494#RESPOND)

JANUARY 3, 2015 AT 7:10 PM (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/#COMMENT-60494)

Please lets stretch on things beyond codes ..how do we know which is the optimum point in a
linear regression..how do we convert this from an in ninte to a nite series where it peaks out

SAS and other things makes everyone believe that we know a lot which can be dangerous

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Rakesh Jha says: REPLY (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/?REPLYTOCOM=84708#RESPOND)

APRIL 19, 2015 AT 7:22 AM (HTTPS://WWW.ANALYTICSVIDHYA.COM/BLOG/2014/08/MARKET-MIX-MODELING/#COMMENT-84708)

Hi Amogh

How are the interaction e ects and random e ects captured in the model? To have a very
simple linear relationship would be not very representative of real examples. Often there are
interactions and random e ects?

Can you please explain this?

Also, I am interested in knowing if any t-test or z-test is done? If so in what stage?

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