Once a year, Marketing Directors take the important steps of planning the budget for the upcoming year.A fortunate few will build around their previous plan and possibly try to incorporate something they’ve been thinking about for years.Unfortunately, the majority will be in cash strapped organizations that have already experienced months of cost reductions and slashed budgets.In these cases, there are difficult decisions to be made on how to best invest their limited resources while maintain or growing profits.
For decision support, a growing number of Marketing Directors in Fortune 500 corporations are turning towards Marketing Mix Models (MMM).By turning to analytical marketing methods, Marketing Managers can determine the best way to allocate their funds and maximize their strategy.
The typical Marketing Mix model is based on multivariate statistical models, neural networks and time series forecasting methods that use sales and marketing data as model inputs to project the impacts of various product, price and promotional tactics on sales.
With the adoption of data warehouses by most companies, marketing-mix models are gaining popularity particularly in the consumer packaged goods, Financial Services, Automotive, pharmaceuticaland Hospitality industries.In fact, P&G, Kraft, Coca-Cola, Pepsi and other Fortune 500 companies are already considering it an integral part of their marketing planning.
While Marketing Mix Models can simplify planning decisions, there are some limitations that must be taken into account based on the calculations used.However, CEO’s are demanding increased accountability and effectiveness. Without tools like Marketing Mix Models, it is difficult for marketing organizations to know how best to allocate spending, or to justify spending at all.
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