The time when “trust your gut” was a decisive factor in developing marketing plans is over. With 30 consecutive months of growth and sales up by 18% on a YTM basis, the Finnish pizza franchise Kotipizza has proved that recurrent and detailed review of marketing efforts and media investments provides clear answers to what creates continued success in sales.
New marketing opportunities within MMM
Marketing mix modelling or MMM is a systematic way to identify the strengths and weaknesses of marketing programs. MMM addresses key issues within your media mix, such as offline, digital and social media, as well as price, promotions and other factors. MMM also examines external influences including competitive actions, seasonality, economic conditions and brand awareness in order to understand how these factors impact your sales performance.
“In an MMM analysis, you get continuous recommendations on changes to a marketing plan. This way you can better meet business goals of improved revenue, sales and profit, and even brand building. We can also forecast and monitor the impact of newly executed marketing plans so as to assess progress and continually improve revenue and ROI”, says Martin Ekenbäck, Product Director at Nepa.
Recipe for success in continued marketing ROI
Often companies don’t know which analytics are available and how granular data can be obtained and analyzed. Without this knowledge, it’s easy to just adjust last year’s strategy and budget a bit, and hope for the best. Even though you might get positive sales ROI, you don’t know why you succeeded. Kotipizza didn’t want to risk leaving money on the table that they didn’t have to.
“Just like everywhere else in our company, in marketing we have to substantiate our budgets and show evidence of success. That’s the main reason why we have incorporated MMM into our decision-making. Although we already exceeded the average growth in the Finnish fast food market, we wanted to make sure that our media mix and campaign structure were effective and provided us with the analytics for continued growth”, says Johanna Kuosmanen, Strategist at Kotipizza.
Look at the relevant sales drivers
Marketing mix modelling combines data from sales and historical marketing to measure ROI on sales. The analysis aims to explain, and in some cases also predict, sales volume and market share depending on inputs from marketing. It’s also important to look at other sales drivers such as competition, seasonality, brand awareness and brand loyalty to get the complete picture.
Take your business model into account
Kotipizza’s marketing mix modelling has revealed that it’s possible to increase budget and still remain within positive ROI, which is not always the case. Kotipizza has a fixed marketing budget that is determined by how the franchising business is doing (certain % of sales). The only way to get a bigger marketing budget is to make the franchisees’ business grow, increasing their total sales. To manage market conditions and get full impact in their marketing, Kotipizza adjusts the marketing budget on a monthly basis. This way the company always stays in control and rarely suffers from any big surprises.
When Kotipizza realized what MMM really meant for their decision-making, they implemented concrete changes in strategy:
New campaign tactics and timing. Before, TV campaigns were designed to cover one weekend and more weekdays. Now, they cover two weekends. Pizza sells best on Fridays, Saturdays and Sundays, not Mondays.
- Coupon campaigns were added. More and shorter coupon campaigns work better than fewer and heavier coupon campaigns per year. Individual coupon campaign effects generated an increase up to +30%.
- TV and digital became primary media as the MMM had proven ROI capabilities in both. You can use both online and offline marketing to drive attitudes and actions. Online advertising is very effective in lifting quantity metrics, yet television ads boost engagement metrics of page views and positive social media conversations.
- Increase in marketing budget will still achieve positive ROI, even though the franchising business model doesn’t budge on this.
Kotipizza now boasts 30 consecutive months of growth and their sales are up by 18% in a YTM period. As the marketing budget has grown following increased sales, the company’s seen the impact of “more marketing spend, more sales” tactic: a positive ROI.
5 proven steps to strengthen your marketing ROI
As a method, MMM will substantially improve your marketing decisions and the return on marketing investments. Handled correctly, it provides scientific means of understanding what drives sales and how much ROI each component of the marketing mix generates. It will also offer smart guidance in developing and refining your marketing plans and budgets.
Here’s what Johanna Kuosmanen recommends you do if you’re not satisfied with your marketing results:
- Build a data-driven marketing ecosystem inhouse.
- Define clear and relevant business KPIs – what can we influence with our marketing and media strategy?
- Analyze results per media, both online and offline.
- Analyze and decide the right metrics related to the relevant KPIs. Remember that marketing investments should translate into both sales and brand awareness.
- Use MMM analysis to find an optimal media mix for planning purposes. This will also help you to figure out which media deals suit you.
Account Manager, Nepa Finland