Marketing Mix Modeling Glossary of Terms

Marketing mix modeling isn’t a new concept, but for the uninitiated the terminology in marketing mix modeling can be confusing. So we’ve put together a list of marketing mix modeling definitions to get you started

Marketing Mix Modeling (MMM):

A statistical analysis technique used to measure and quantify the impact of various marketing variables on sales or other key marketing performance indicators. It helps in determining the optimal allocation of marketing spend resources across different marketing channels and activities.

Dependent Variable:

Also known as the response variable or outcome variable, it represents the metric that is being analyzed or predicted in MMM, such as sales, revenue, market share, or customer acquisition.

Independent Variables:

These variables represent the marketing statistics, inputs or activities that are believed to influence the dependent variable. They include factors like advertising spend, price, promotions, distribution channels, and product features.

Regression Analysis:

A statistical method used in MMM to analyze the relationship between independent variables and the dependent variable. It helps identify the quantitative impact of each marketing variable on the outcome.

Coefficient:

In MMM, the coefficient refers to the numerical value obtained from regression analysis. It represents the estimated impact or effectiveness of an independent variable on the dependent variable.

Elasticity:

Elasticity measures the sensitivity of the dependent variable to changes in an independent variable. It quantifies the percentage change in the dependent variable resulting from a 1% change in the independent variable.

Base Sales:

It represents the level of sales or performance that would occur in the absence of any marketing activities or changes in the marketing mix. It helps in isolating and measuring the incremental sales impact of marketing efforts.

Media Mix:

The combination of different advertising or communication channels used by a company to reach its target audience. It includes television, radio, print, digital advertising, social media, and other promotional mediums.

Return on Investment (ROI):

Marketing ROI is the measurement of the profitability or effectiveness of marketing activities. It calculates the financial return generated by marketing expenditures and helps in evaluating the efficiency of a marketing strategy and the different marketing channels or strategies.

Marketing Attribution: T

he process of determining and assigning credit to different marketing activities or touchpoints for generating a desired outcome. It helps in understanding the contribution of each marketing element to the overall results.

Sensitivity Analysis:

A technique used in MMM to assess the impact of changes in marketing variables on the dependent variable. It helps in evaluating different scenarios and understanding the range of potential outcomes.

Model Validation:

The process of testing and verifying the accuracy and reliability of the marketing mix model. It involves comparing the model’s predictions with actual historical data to ensure its effectiveness and suitability.