Now more than ever marketers are evaluating budget allocation: where to invest, why to invest, and what to expect out of the investment. Traditionally marketing mix allocation was a mashup of last year’s plan and a few top-down financial objectives. There was little in the way of science, program simulation and predictive planning found in the allocation decision process.
A cottage industry of agencies emerged. Firms like MMA, Hudson River Group and Analytic Partners introduced modeling science to mix planning. Other strategy consulting shops like Bain and McKinsey developed marketing mix analysis frameworks. In both cases, the deliverable was either a 2 inch thick binder of recommendations and/or a “what if” tool built into Microsoft Excel. Nothing scaled beyond the initial deliverable.
There is a new breed of marketing mix modeling technology that is starting to shift how CMOs are managing their marketing investments. While the underlying science is consistent with what the cottage industry players provide, the step change is in the delivery. This new breed is delivered via Software-as-a-Service, providing always-on access, frequent model updates and broader visibility throughout the enterprise. Companies like M-Factor and Breitley are leading the charge with promising customer traction.
The big unknown here is whether marketing leadership is ready rethink how they approach mix allocation. By and large, mix modeling is still an annual (and perhaps bi-annual…maybe quarterly) process that then drives a lot of downstream decisions. Mix allocation is not really thought of as a fluid process to accommodate the week-to-week noise that filters in from the market. But the upside is potentially so big if the industry does embrace this new way of thinking. And some big CPG manufacturers have put a stake in the ground and are starting to shift behavior to be more in line with a fluid, “always on” approach to mix management.
The tools are upon us and the economic case is starting to gel for a different approach to marketing mix allocation. It should be exciting to see this new and emerging space take shape.