Kaenan Hertz,

PhD

Media Mix Optimization

kh@lulustar.com
210-399-1666
 Mathematical Techniques Exist to Reallocate Spend
and Improve Return on Marketing Investments
Current Optimized

vs.

Radio Other Radio Other

5% 40% 10% 30%
Direct mail Email Social Media Direct mail Email Social Media
40% 10% 5% 30% 15% 15%

Derive the same

return from
lower
investment

Derive a greater
return from
same
investment
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 Sample Realized Investment Gains

Beverage Company Auto Manufacturer Media Company

•  Identified savings of 19% •  Identified savings of 16% •  Identified savings of 12%
in total marketing spend in total advertising spend in total marketing spend
•  Reinvested savings to •  ~50% of budget reallocated •  ~40% of budget reallocated
reposition largest brand to increase effectiveness into higher impact activities

Estimated Estimated Estimated

ROI Increase ROI Increase ROI Increase
of 40% of 33%+ of 50%+

Source: Acxiom
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 Techniques Are Based on Econometric Modeling

Key Estimation Components Typical Marketing Mix Optimization

(MMO) Modeling Techniques
•  Lagged and Carry-over effects of media spend,
by channel •  Ordinary Least Squares (OLS)
•  Response saturation, by channel •  Ridge Regression
•  Correlation – over time and across products •  Two-Stage Least Squares (2SLS)
•  Systems of Equations
•  Seemingly Unrelated Regressions (SUR)
•  Model validation and predictive accuracy
•  Multivariate Time Series
•  Share of Voice
•  Spatial Regression
•  Environmental variables (e.g. Employment Rate)
•  Competitive Events
•  Seasonality

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