Client Name: Hindustan Unilever

Project: Marketing Mix Model

In a nutshell, it is measuring the effectiveness of all marketing activities. It involves
helping the client decide on the spends for its marketing mix, the 4Ps of marketing
(Product, Price, Place and Promotion) in order to maximize ROI.

Process:
1. Data Collection
Data is received from client and third party. Typically data for 3 years is
used in MMM
o
o
o
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Retail (Sales volume/ value, Distribution (No. of

stores, No. of dealers etc., Price) SKU level data
Media Spends, GRPs, Advertising
Promotion
Economic factors

2. Exploratory Data analysis is conducted next. This part will have 2 sections
a. Data is validated and checked for outliers, missing values etc. through
visualizations
b. Charts/Plots, breakups i.e.; calculations presented through
visualizations that show what is called category context summary is
prepared. This uses client and competitor data. Following are included
in the analysis
i. Category value/volume trend, year on year growth, seasonality
ii. Market share of categories- share down to brand level
iii. Price segments- Mass, Medium, Premium
iv. Computation of certain derived variables GRP, RPI, ND, WD etc.
v. Correlations of these variables with volume gives an indication
of the directional strength. E.g.: Increase in price usually results
in reduced volumes (need not be so, however)
This analysis helps us formulate hypothesis. Useful for formulating a
story around the analysis and other specific client questions.
3. Models are then built (With SAS tool) Multivariate regression is used.
Regression equation is of the form
a.

VolumeSales=Constant+ 1variable 1+ 2variable 2+ 3variable 3+ 4variable 4 etc

Where Variablei -> all independent variables whose effect on volume needs to
be understood
i -> coefficients of the independent variables as found by regression
Elasticity values are computed- This gives us an indication of how much will
sales vary given a change in a particular independent variable keeping other
independent variables constant.

4. The story initially formulated in the EDA stage is strengthened or corrected

based on the regression analysis.
a. That is What if scenarios (e.g.: study the effect of increasing the price
for a particular product in a particular market) may be performed.
b. Predictions on sales volume for next quarter/year may be made etc.
along with client specific questions.
c. Since we have sales data and marketing expense data, ROI
calculations are made.
5. The results are presented to the client and checked into the repository in an
appropriate location.

What does MMM enable?

MMM helps one understand the interaction of these factors (independent variables)
with sales/volume. Specifically

Factors driving sales

Relevant importance of these factors
ROI for various activities
Optimal mix of spending in each activities
Sales of a product is a function of -> Sales = base sales + incremental sales
Base sales-> actual demand of the product without promotional/ marketing
activity
Incremental sales -> demand of the product with promotional/ marketing
activity
MMM, explains contribution of marketing activities to the incremental sales.

Some terms that need clarity in the usage in the process of MMM

Extract Transform and Load My understanding is that this process is for

collection of data from various sources and making it useful for analysis. Not
sure how it is done though
ROI calculations aggregate level? Brand level? SKU level?
Advertising Adstock transformations for non-linear and lagged effects