Are Flawed Marketing Mix Models Stunting The Growth Of Marketing-driven Companies?

Nov. 30, 2012 - PRLog -- Delry beach, 30 November 2012 – Forbes.com publishes column by Effective Marketing Management (EMM) that is titled “The Downside of Marketing Mix Models Is That There’s No Upside for CMOs.” (See http://www.forbes.com/sites/onmarketing/2012/11/28/the-downside-of-marketing-mix-models-is-theres-no-upside-for-cmos/.) This column discusses how marketing mix models are flawed to understate the value of advertising and overstate the value of promotion. As a result, mix models have a systematic and detrimental bias that favors corrosive price promotion over brand-building advertising. The fundamentally different EMM model accurately measures the full value of both advertising and promotion.

Price promotion is detrimental as it does not lead to sustainable incremental sales and it is corrosive to brand equity – a brand’s ability to command a price premium. According to Michael von Gonten, principal consultant at EMM: “Price promotion may be placing many of America’s iconic brands at grave risk. And the primary culprit is mix modeling due to its inherent flaws.”

There has been a massive shift from two decades ago in marketing spending from advertising to trade promotion. Ironically, advertising, which originally built all these household brand names, today has been marginalized with a mere fraction of the total advertising spend for most consumer packaged goods. With shrinking budgets, media is driven by efficiency, not effectiveness and Creative fees have also been pared.

EMM has a unique model that accurately measures the effects of advertising and promotion on consumer buying behavior. This model not only leads to more sound spending mix decisions but also affords a better understanding of how advertising and promotion really work in the marketplace.

A recent presentation of this learning at major conference, co-sponsored by the Wharton School of Business and the Ehrenberg Bass Institute, was voted by conference attendees as the “Best Conference Presentation.”  Importantly, all the attendees were distinguished, by-invitation-only leading business managers and researchers.

“Our accumulated learning over the past 20 years in conducting over 5,000 analyses for over 100 major brands has taught us how to successfully engineer effective advertising that can achieve double-digit growth,” according to von Gonten.