This article is part of Sellforte's MMM Procurement guide. We are in Chapter 2A of the guide, as illustrated below:

Getting approval for MMM at your company typically requires three activities:

In this article, we will share a simple approach for building a business case for MMM.

The business case calculations presented in this article are also available as a spreadsheet. Send a direct message in LinkedIn to https://www.linkedin.com/in/lauripotka/ to get one. No strings attached.

A great MMM business case has five characteristics:

While MMM can help marketing teams in various ways, such as tracking marketing ROI and comparing performance of advertising channels, ultimately the financial benefit of MMM is realized through optimization of budget allocations.

There are two main factors that drive how much value MMM can bring through budget allocation optimization:

To estimate the additional sales & profit that can be driven through more optimal budget allocation, following steps are needed

To start with, let's assume our example company is a multinational fashion retailer with following characteristics:

To estimate how much additional sales can be driven through better budget allocation, an estimate is needed for total marketing-driven sales.

One might ask: Isn't "marketing-driven sales" one of the outputs of MMM? Yes it is, and you can actually compare your estimation in the business case to the actual result when you have implemented MMM, and update your business case accordingly.

Marketing-driven sales can be estimated by multiplying annual marketing budget with estimated Sales ROI for marketing. "Sales ROI" tells how many euros/dollars marketing brings back for each invested euro/dollar in marketing.

Typical Sales ROI is in the proximity of 3-5. It varies depending on many factors, for example:

A safe assumption for an established fashion retailer is 3, meaning that we can add the following last two rows to our information table.

Now we are ready to move on to analyzing the value-creating levers and estimating their potential to drive more sales.

First, we will estimate the additional sales potential from allocating budget more optimally across countries (or states in the US). In the table below, you can find typical outcomes on how much additional marketing-driven sales you can gain from better cross-country allocation, depending on how many operating countries/states a company has. These are based on Sellforte's experience on cross-country optimization results.

Let's assume our fashion retail company has 5 operating countries, so we will get the following benefit from MMM:

Next, we will estimate the additional sales potential from allocating budget more optimally across campaign types / objectives. In the table below, you can find typical outcomes on how much additional marketing-driven sales you can gain from better budget allocation, depending on how many campaign types / objectives you have in use. These are based on Sellforte's experience on optimizing campaign types.

But what are the "campaign types / objectives" we refer to here? In the table below, you can find typical campaign types/objectives in fashion retail. You might need to adjust this table to your own media hierarchy. Let's assume that our example company has 8 campaign types (marked with "X").

With 8 campaign types, we will get the following benefit from MMM for our fashion retail example company:

Next, we will estimate the additional sales potential from allocating budget more optimally across advertising channels. In the table below, you can find typical outcomes on how much additional marketing-driven sales you can gain from better budget allocation, depending on how many advertising channels you have in use. These are based on Sellforte's experience on advertising channel budget allocation.

In the table below, you can find out what we mean with "advertising channel" in Sellforte's media hierarchy. Let's assume that our example company has 10 advertising channels in use (marked with "X").

With 10 advertising channels, we get the following estimated benefit from MMM for our fashion retail example company:

The table below sums up the business case: We can drive 780k EUR more sales by adopting more optimal budget allocation. This is 30% improvement to the marketing-driven sales and 3.9% improvement to the total sales.

With this information, you should already be able to evaluate, whether MMM brings sufficiently large benefits for your company to be worth investigating.

To deepen the analysis, we also suggest the following:

Depending on where you are in the process, you can also evaluate the granularity of the available marketing and sales data to ensure that measuring marketing within the optimization dimensions (country, campaign type, advertising channels) is possible.

If the business case is attractive to you and your working team, the next steps from here are the following:

We are preparing articles on these topics - stay tuned!

Interested to learn more?