Make sure your Internet spend shows up in marketing mix modeling.

CPG and retail marketers depend on Marketing Mix Modeling to evaluate and guide their marketing investments, but the Internet is rarely included in the models.

As an early pioneer in digital marketing, I spent eight years helping marketers use the Internet to meet their marketing goals. Much of that time was spent convincing clients to allocate more budget to the Internet, and developing ROI tools and metrics to measure, evaluate and support those investments. In the early and mid '90s the arguments for Internet spending included the need to experiment and learn, the opportunity to reach early adopters and establish early brand leadership in a new medium. These benefits clearly did not lend themselves to clear measurement of ROI, and marketers were pretty forgiving in this regard.

By the year 2000, we were in the midst of an Internet boom in which companies were willing to make massive multi-year commitments to portals simply because everyone else was doing it. Media companies made common practice of selling around the agencies, exploiting clients' competitive fears or their desperate need to address Wall Street's demand for an "Internet strategy."  For a brief time, we agency folk found ourselves begging our clients not to do that next multi-year portal deal. Despite our best efforts in that regard, this industry is only now recovering from the hangover we got from that binge buying.

Now in 2004, we seem to be having a healthy dialog. Internet spending is growing again, but in a far more sensible and accountable way. Big and small clients in industries far and wide are all spending something online. They accept that the Internet is part of the marketing mix, and that it is here to stay. To be sure, there are still challenges that prevent Internet efforts from being viewed equally with traditional media efforts: lack of reliable tools for reach and frequency planning, and the continued question of the relative branding impact of interactive ad units. But for the most part, the relevant question has changed from "should I spend online?" to "how much should I spend online?" and "how should I spend it?"

Funny, but these are the same questions the most sophisticated marketers ask of all their marketing expenditures.

In CPG and retail, savvy marketers use a technique called marketing mix modeling to establish the relative effectiveness of their various marketing investments to drive sales and profit. This statistical modeling approach tells marketers which tactics are working and which are not, and how to manage budgets to get the most bang for the buck. Unfortunately, despite our belief in its power, the Internet rarely registers in these models as a significant driver of sales, relative to other media and promotions vehicles. This fact weakens the interactive marketer's case, which leaves us doubting ourselves and making excuses for our discipline.

However, there are three things marketers can do to help their Internet efforts register in their marketing mix models.

1. Spend enough to be meaningful. Marketing mix is designed to tease out the impact of separate marketing vehicles. But it can only identify those marketing elements that are meaningful contributors. Depending on the amount and quality of your data overall, it can be quite sensitive. But it has its limits. If you only spend one half of a percent of your marketing overall on interactive, don't expect it to register in the model.
2. Stagger spending in short bursts. Be strong when in: If your interactive budget is light, you may get a better read on its contribution if effort is pulsed in short, strong bursts. These bursts should both align and counter align with other efforts. The statistics behind mix modeling are influenced by periods of change in the data. If programs are very consistent over time, it is hard to read their impact. Further, if interactive is always "stacked" on TV in the media plan, it is harder still to discern its separate impact. 
3. Don't decompose digital programs. Aggregate vehicles and tactics. If you are trying to define the impact of Web site page views, ad exposures and click-throughs separately, you are splitting some very fine hairs. Instead, define a common metric such as "digital points," and assign point values for each digital interaction. By aggregating these points, your digital efforts in total will be more strongly represented in the model.

This approach might make interactive planners cringe. It might not be the most logical or efficient use of the interactive budget.

However, I would argue that this trade off is essential to help marketers get a common-basis read on the Internet's dollar-per-dollar impact relative to the rest of the marketing mix. Across a large marketing organization, it will not take very long to gather some meaningful data points. With this insight in hand, marketers might be willing to allocate more spend. Or maybe not.

Either way, marketers will feel more confident in an Internet budget decision based on quantitative apples-to-apples evaluation, within an analytic structure that is understood and accepted in the company.

John Nardone is EVP Marketing and Product Development for Marketing Management Analytics (MMA). From 1994-2002, he led pioneering interactive media, advertising and research efforts for Modem Media.