Marketing Mix Model Optimization: A Practical Guide To Smarter Marketing Investments

Introduction

Harmonizing short-term and long-term marketing strategies is crucial for sustained brand growth. Learn how to optimize your marketing mix for lasting impact.

This article delves into the multifaceted impact of advertising strategies and channel mix on short-term and long-term brand growth.

Understanding how advertising channels influence brand perception and customer engagement is crucial. Brands must balance immediate marketing effects, like sales boosts and brand awareness, with long-term impacts for sustained growth.

A well-rounded marketing approach addresses the need for quick results and ensures that brands stay competitive over the long term. This discussion is essential for marketers looking to optimize strategies and make informed decisions for short- and long-term brand growth.

But here’s the challenge:Most brands end up prioritizing short-term wins—performance campaigns, discounts, and quick ROI—while long-term brand-building takes a back seat. This imbalance often hurts profitability and weakens brand equity.

Marketing Mix Modeling (MMM) helps navigate this by showing how each channel impacts both sales and brand health. Yet, if used with a short-term lens, MMM itself can lead to suboptimal decisions. The real advantage lies in using MMM to balance both immediate gains and sustainable growth.

This blog will show you how.

Definitions

Short-term: The effect is weekly or multiple weeks. In this time scale, measuring the response to promotions is easy.

Long-term: The long-term cumulative effect of marketing and promotion on consumers' brand choice behavior lasts several years. Often in the order of +2 years.

While these definitions seem straightforward, their implications are often misunderstood in marketing strategies.

• Short-term tactics typically drive immediate sales, boost awareness, or activate demand, but may have limited lasting impact.
• Long-term activities focus on building brand equity, trust, and customer loyalty, which compound over time and are harder to measure in immediate KPIs.

An effective marketing mix requires both lenses: short-term activations to meet immediate goals and long-term investments to ensure brand resilience and market share growth.

Effect of advertising on price sensitivity

What is price sensitivity? Price sensitivity reflects the extent to which the prices of goods and services impact customers' buying decisions.

One theory posits that advertising creates product differentiation, which in turn diminishes consumers' sensitivity to prices. In contrast, another theory claims that advertising fosters competition by supplying consumers with information that could enhance their price sensitivity.

In 1995, these two theories were integrated by proposing that advertising affects price elasticity through two main factors:

A) Advertising can enhance price elasticity by broadening the range of brands that consumers consider.

B) Conversely, advertising can reduce price elasticity by strengthening brand preference.

Despite differing opinions, scholars agree on the nature of advertising messaging. When a message is non-price-oriented and aims at branding, it tends to reduce consumers' sensitivity to price. Conversely, when ads emphasize price, they may heighten price sensitivity.

Research shows firms with higher prices favor non-price advertising and brand-building. This suggests that non-price-oriented advertising reduces consumers' price sensitivity over time. For example, this is the main playbook for luxury brands.

Brand-oriented advertising increases price elasticity, while price-oriented advertising decreases price elasticity. For instance, TV advertising is predominantly brand-oriented.

Risk Of Optimizing For Short-Term

A key use of marketing mix modeling (MMM) is optimizing channel allocation. MMM systems utilize predictive modeling to assess each channel mix's impact on sales and other KPIs. This predictive power, paired with a search algorithm, allows MMM to explore and recommend optimal allocations.

The claim is that if the brand uses the recommended allocation, they could see +X% growth in revenue. The actual number depends on the category and industry, but it usually goes from 2% to 10%.

This is excellent news for CFOs or CROs. However, experienced brand managers and marketers understand that growth isn't simply about allocation. The laws of brand growth remain unclear, and empirical evidence repeatedly shows it's a long-term game.

Marketers face a dilemma: how to achieve short-term and long-term goals? They must meet ambitious short-term targets, while leadership and finance demand transparency and measurable resource allocation.

Balancing Short-Term And Long-Term Success

The short-term response is typically defined in terms of months and quarters. On the other hand, when we discuss long-term, as the name suggests, we are interested in measuring effects longer than a year, and usually, it generally tends to be in the order of several years.

Marketing tactics focusing on short-term responses can undermine long-term goals. Prioritizing immediate gains may diminish brand viability over time. Short-term campaigns often deplete resources and restrict funding for brand-building initiatives.

What are the short-term response tactics? One key tactic is price promotions, discounts, and coupons. While these can spur short-term brand growth, they risk long-term drawbacks. Excessive discounts increase price sensitivity, causing customers to wait for discounts rather than buy at full price. Over time, they may demand even higher discounts, jeopardizing long-term brand growth.

Moreover, short-term tactics involve spending more on "activation channels" and "performance campaigns". These channels include Paid Search, Social Media Ads, Direct Marketing, Sales Promotion, and couponing.

Budget cuts will reduce brand-building channels like TV, Radio, OOH, and PR, resulting in fewer brand campaigns. These campaigns are vital for sustained impact. By reaching a broad audience, brands can attract new customers, enabling growth in their customer base.

The challenge isn’t about choosing one over the other but finding the right balance. Effective marketing strategies allocate resources to deliver immediate business outcomes while steadily building long-term brand value. Marketing Mix Modeling (MMM) can support this balance, but only if long-term effects are explicitly modeled alongside short-term returns.

Successful brands treat this as a dual-focus strategy:

• Short-term activation for immediate cash flow and sales
• Long-term brand building for equity, pricing power, and future demand

Without this balance, short-term success often cannibalizes long-term growth.

Channel Mix For Different Time Scales

According to a report from Profit Ability 2 (see references), advertising's short-term effect constitutes about 40% of the total advertising payback, and the remaining 60% concerns the sustained effects of advertising.

40% of advertising payback is short-term, while 60% is long-term.

Interestingly, the PA2 report shows that digital channels suffer from a small carryover effect, making them less ideal for long-term brand-building. This report defines the 'long-term multiplier', which is the extent to which channels deliver their value in the short term compared with the long term.

This result mirrors the results from the Databank, measuring the proportion of campaigns that achieved any significant brand effects using a channel. TV and posters stand out as channels with the highest brand-building effect.

Linear TV demonstrates a robust, sustained effect and generates over half of all media-driven revenue. This explains why TV constitutes 40% of media spending in the UK.

This data underlines an important optimization insight: While digital channels excel at driving quick responses, their limited long-term impact requires them to be complemented by broader reach, brand-building channels like TV, OOH, and Radio.

An effective marketing mix isn't about choosing between digital and traditional—it’s about understanding which channels drive what kind of effect, over what time horizon, and allocating budgets accordingly.

The optimal mix depends on your business maturity, category dynamics, and growth objectives, but the 60:40 brand-to-activation ratio remains a proven benchmark.

Channels With Short-Term Performance

As shown above, digital channels lack a persistent effect over a long time scale. Because of the relatively short attention span in the online environment, digital channels tend to offer a lower carryover effect, translating into shorter impact.

The following figure shows the relationship between reach in the UK and each channel's involvement (average hours spent with the channel). Therefore, channels on the bottom-left corner have relatively small reach and involvement, indicating short-term impact for these channels.

Channels in the bottom-left corner have relatively small reach and involvement, indicating short-term impact for these channels.

In contrast, channels in the top-right corner (like TV) indicate long-term performance over digital channels.

Performance-driven channels like Paid Search, Social Ads, and Direct Marketing are effective at generating immediate actions—clicks, leads, and conversions. However, their impact tends to plateau quickly without the support of sustained brand-building efforts.

Over-reliance on these channels can lead to diminishing returns, increased CPA (cost per acquisition), and lower overall marketing efficiency. To maximize their effectiveness, these channels should be used in tandem with upper-funnel strategies that feed long-term demand.

Channels With Long-Term Performance

TV is a unique channel. The share of spend on TV across the UK brands is about 40%, a figure that has hardly changed over the past decades. Whether we live in the digital age of advertising or the Mad Man era, TV remains a prominent channel for advertisers.

As shown above, TV demonstrates a robust, sustained effect, significantly improving marketing ROI (MROI). In fact, it is shown that TV is effective over all time scales.

It’s worth mentioning that although TV viewing remained constant, the cost of TV advertising has dropped by half over the last decade, which increases TV's ROI.

Brand-building TV ads often have a negative short-term impact. To improve their effectiveness, we recommend combining them with other strategies, especially search and direct marketing. This synergy can lead to higher success rates for campaigns that include TV compared to those that don't.

Finally, let's emphasize the signaling aspect of TV. Unlike messaging, signaling is the value attached to the message.

From a marketing mix modeling perspective, TV’s long-lasting brand impact is often underrepresented because its returns accrue over extended periods. This makes it essential for MMM frameworks to incorporate long-term effect multipliers for channels like TV, OOH, and PR.

Investing in these channels is not about chasing immediate conversions but about creating brand salience, pricing power, and future demand, all of which directly influence sustainable revenue growth.

Understanding Diminishing Returns And Saturation

Marketing investments don't scale linearly. Every channel experiences diminishing returns, a point where each additional dollar spent delivers less incremental value than the previous one.

For instance, increasing spend on a high-performing channel like Paid Search may initially boost conversions, but over time, the audience saturates, costs rise, and efficiency drops. This is known as saturation.

Ignoring these effects often leads to:

• Overspending on saturated channels
• Declining cost-efficiency (higher CPA, lower ROI)
• Misallocation of budgets away from underutilized, high-potential channels

Why This Matters in MMM Optimization

Effective Marketing Mix Models (MMM) must account for these diminishing returns through response curves or saturation functions. These models help visualize the point at which additional spending delivers minimal impact, guiding smarter budget allocation.

Brands that monitor and optimize against these saturation points can:

• Reallocate budgets for maximum marginal ROI
• Avoid over-indexing on "safe" channels
• Maintain a healthy balance of reach, frequency, and efficiency

The goal isn’t to cut back on high-performing channels, but to recognize when their growth flattens and invest incrementally where returns are still growing.

Advanced MMM Techniques and Tools

Traditional MMM approaches, while valuable, often struggle with today’s complex media landscape. Fragmented channels, rapid shifts in consumer behavior, and real-time data availability demand more agile and robust modeling techniques.

Key Advancements in MMM:

1. Bayesian MMM Models: Unlike classical regression methods, Bayesian models incorporate prior knowledge and quantify uncertainty. They are better suited for dynamic environments where data is noisy or incomplete, making them more reliable for long-term effect estimation.

2. Machine Learning & AI-Driven MMM: Modern MMM leverages machine learning to process large datasets, uncover non-linear relationships, and adapt to changing media behaviors. AI-enhanced models provide faster, more granular insights, enabling near real-time optimization.

3. Open-Source Tools (e.g., Meta’s Robyn): Platforms like Robyn democratize MMM by offering scalable, automated solutions that reduce dependency on black-box vendor models. These tools bring transparency, speed, and flexibility to the modeling process, helping brands iterate quickly and learn faster.

Risk Of Short-Term Overoptimization With MMMS

MMM systems package our choices and ideas through math and algorithms. The math part makes them difficult to argue against, and may be seen as the truth. But it's not! They reflect our choices and even our mistakes.

One of the critical mistakes that the brands may make is to emphasize short-term gains and embed this choice into the MMM system.

Perhaps this is why most out-of-the-box MMMs recommend high spending on digital channels like Meta and Search, along with excessive promotions.

The bad news is that it's too late. It's too late to turn the tide, and as the name suggests, long-term growth takes, well, a long time.

To mitigate this risk, brands must ensure their MMM frameworks:

• Differentiate between incremental short-term activations and long-term brand effects.
• Use appropriate decay rates and carryover models to capture prolonged impact.
• Regularly validate assumptions with real-world market dynamics.

A short-term optimization lens can deliver quick revenue bumps but often cannibalizes future growth potential. Sustainable MMM strategies should balance short-term precision with long-term brand health modeling.

Balancing Short-Term And Long-Term

Brand managers must pay closer attention to the assumptions and inner workings of their MMM system.

Brands that balance short-term and long-term campaigns can be successful in both time scales.

The key is not to view short-term and long-term as competing priorities but as complementary levers. Short-term activations drive immediate business outcomes, while long-term brand-building ensures future demand and pricing power.

Effective marketing leaders use MMM to align these two horizons — ensuring short-term efficiency supports, not sabotages, long-term growth.

By modeling both timeframes accurately, brands can make smarter investment decisions that deliver sustainable impact.

40:60 Ratio Mix For Short-Term And Long-Term

Despite significant changes, a consistent 60:40 split between brand-building and activation activities has been maintained.

Based on IPA's report "Long and Short of It", brands are advised to allocate around 60% of their budget to brand-building and 40% to activation.

Effectiveness reaches its highest point at approximately 40% activation.

This ratio isn't arbitrary. Research consistently shows that brands investing around 60% in long-term brand-building enjoy higher market share growth, improved pricing power, and stronger customer loyalty over time.

On the other hand, capping activation at 40% ensures immediate sales objectives are met without over-reliance on promotions or short-term tactics that erode profitability.

While the exact split may vary by category or market maturity, the principle of favoring long-term brand investment holds true across industries.

Brand Response Campaign

Brand response marketing is an advertising technique that combines performance marketing with brand campaigns in a single campaign.

The 2008 Sainsbury’s case study illustrates moving from a brand idea to a brand response strategy.

Brand response campaigns are valuable because they bridge the gap between short-term activation and long-term brand-building. By integrating immediate calls-to-action within a broader brand narrative, marketers can achieve measurable sales impact without sacrificing brand equity.

In the context of Marketing Mix Modeling, these hybrid campaigns help improve model accuracy by showing how investments can simultaneously drive both short-term conversions and long-term brand lift.

Implications of long-term Share of Voice on Share of Market

Share of voice (SOV) remains one of the most important drivers of long-term growth. The following figure shows the relationship between SOV and share of market (SOM).

Most established brands stay close to the vertical line (equilibrium). But the brands that lie above (below) the equilibrium line tend to grow (shrink) their market share.

Another essential metric for assessing a brand's position in the SOV is the Extra Share of Voice (ESOV). The ESOV measures how much a brand's SOV deviates from the equilibrium line. The ESOV of a brand can be translated to an increase in SOM, using a simple formula. The following formula shows how much a brand gains in SOM, with a given ESOV:

▽(SOM) = α × ESOV

On average, α = 0.05, meaning every 20 points in ESOV translates to a +1 point increase in SOM.

In this equation,

α

α defines annualised ESOV efficiency. On average, based on IPA data, the annualised ESOV efficiency is about 0.05. But note that there is a variation around this value, and the value can be highly category-specific.

The main interpretation of the annualised ESOV efficiency when it's 0.05 means that every 20 points in ESOV translates to a +1 point increase in SOM. If, for instance, the service category has 0.1, then every 10 points of ESOV translates into a +1 increase in SOM.

Unlike some arguments against ESOV's importance, it's interesting to note that the data from IPA shows that the value of annualised ESOV efficiency has indeed increased since 2004.

Another interesting phenomenon is the compounding effect of ESOV. If a brand manages to keep its ESOV at a high value, the annualized ESOV efficiency accumulates. This is similar to the carryover effect of advertising.

Applying MMM Insights for Effective Marketing Mix Optimization

Building an accurate MMM model is only half the battle. The real value lies in how organizations translate these insights into actionable marketing strategies.

Practical Steps to Turn MMM Insights into Action:

1. Align on Business Goals First: Ensure MMM outputs are connected to both short-term sales targets and long-term brand growth objectives. Optimization decisions should always ladder up to business priorities.
2. Budget Allocation & Reallocation: Use MMM recommendations to inform channel investments, but apply strategic judgment. Reallocate budgets based on marginal ROI, while maintaining the necessary share for brand-building activities.
3. Scenario Planning & What-If Analysis: Leverage MMM to simulate different budget scenarios and understand trade-offs between channels, campaigns, and time horizons. This helps in making confident investment decisions.
4. Cross-Functional Collaboration: Ensure marketing, finance, and leadership teams are aligned on how MMM insights inform planning cycles. A shared understanding prevents short-term bias from dominating strategic decisions.
5. Continuous Monitoring & Model Updates: Market dynamics evolve, so should your models. Regularly update MMM frameworks with fresh data to ensure relevance and accuracy, especially in fast-changing digital environments.

Without a clear implementation plan, MMM risks becoming an academic exercise. The true power of MMM lies in its ability to guide strategic trade-offs, optimize resource allocation, and balance performance with long-term brand building.

Conclusion

Since the 1970s, economists and marketers have debated advertising's long-term effects. This post reviews advertising's impact on short-term and long-term brand growth.

Excessive promotions create price sensitivity, negatively affecting price elasticity, while brand-building ads, mainly on TV, enhance it. Generally, short-term tactics and long-term growth conflict, making it crucial for brand managers to balance their marketing mix. Digital channels primarily drive short-term growth, while TV and offline channels offer strong long-term results. A recommended split of 60:40 between short-term and long-term channels is advised.

Marketing mix models (MMM) targeting short-term growth can risk long-term competitiveness. Thus, designing these systems for both short-term and long-term optimization is vital.

At ELIYA, we provide tailored MMM services to boost your brand's success in both time frames. Our approach ensures alignment with your brand's long-term objectives, and if you're eager about AI-driven marketing optimization, we can provide exceptional MMM solutions tailored to your needs. Book a meeting with us today to discuss how we can help you.

FAQs

1. How is Marketing Mix Modeling different from Attribution Modeling?

MMM measures the cumulative impact of all marketing activities (online & offline) over time, focusing on overall sales uplift. Attribution models typically track user-level interactions, attributing credit to specific touchpoints in a customer journey, often within digital channels. MMM provides a broader, more strategic view, while attribution focuses on granular, short-term paths.

2. Can small businesses benefit from MMM optimization or is it only for large enterprises?

While traditionally used by large enterprises, advances in AI-driven MMM tools and open-source solutions have made it accessible for mid-sized and even small businesses. The key is having sufficient historical data and clarity on business objectives to gain actionable insights.

3. How often should brands update their MMM models for effective optimization?

Ideally, MMM models should be updated quarterly or biannually, depending on business dynamics, campaign frequency, and market volatility. Fast-changing categories like e-commerce or tech may need more frequent updates than slower-moving industries.

4. What types of data are essential for accurate MMM optimization?

MMM optimization requires media spend data, sales data, promotional activities, pricing changes, external factors like seasonality, competition, economic indicators, and sometimes brand health metrics. The more comprehensive and clean the data, the more reliable the model.

5. Can MMM optimization help in forecasting future marketing performance?

Yes. Optimized MMM models not only evaluate past performance but also simulate future scenarios. Brands can forecast potential outcomes of different budget allocations, media mixes, and promotional strategies to support data-driven planning.

6. What role does customer lifetime value (CLTV) play in MMM optimization?

While MMM focuses on aggregate sales impact, integrating CLTV insights can refine optimization strategies by prioritizing channels and campaigns that attract high-value customers, aligning short-term actions with long-term profitability.

References

• The Long and the Short of It: Balancing Short and Long-Term Marketing Strategies
• Ataman, M. B., Van Heerde, H. J., & Mela, C. F. (2010). The Long-Term Effect of Marketing Strategy on Brand Sales. Journal of Marketing Research, 47(5), 866-882. https://doi.org/10.1509/jmkr.47.5.866
• Mela, C. F., Gupta, S., & Lehmann, D. R. (1997). The Long-Term Impact of Promotion and Advertising on Consumer Brand Choice. Journal of Marketing Research, 34(2), 248-261. https://doi.org/10.1177/002224379703400205
• Profit Ability 2: The new business case for advertising