How much do we need to spend to hit our 5-year market share goal?

This question was posed to us by a national CPG client, prompting us to delve into Market Mix modeling. While the question appears straightforward, it encompasses numerous underlying inquiries: How significant is each market to the brand and the category? What are the current and potential growth trends in distribution (ACV)? How do prospective purchasers vary across different markets? What is the history of the brand and its competitors in these markets? How does the Ad Stock decay curve affect this particular brand? What is the impact of pricing in each market? And so many other econometric variables.

Assumptions and sourcing the data

Variables of interest were collected from Vivvix, the Client, IRI, and the U.S. Energy Information Administration on a weekly basis, with some variables being flatlined from less less granular sources.

Critically, the model assumes that the five-year horizon is accurately represented by the historical data.

Building the model

The dataset was constructed, and the features were transformed to closely imitate a normal distribution. We employed multiple approaches for model fitting. The most effective model achieved an R-squared value of 0.92 and an RMSE of 0.17, demonstrating its accuracy in predicting unit share on the standardized test set.

Applying the model

Media spend by market and medium was optimized for the goal across three scenarios.

1. All local spend: $180mm investment over 5-years

   • Concentrating investment in the most reactive markets sets them up for success, but requires a few markets to work significantly harder to reach a national goal. This strategy also increases exposure to unpredictable market factors.

2. All national spend: $225mm investment over 5-years

   • This approach more evenly distributes spend across all markets, reducing the heavy reliance on a subset of markets for growth. However, it does not prioritize more effective markets for greater media spend.

3. Local heavy-ups with a national plan: $160mm investment over 5-years (optimized local/national split)

   • This is the most cost-effective scenario to reach all markets. It increases the probability of success by targeting all markets while focusing more heavily on key markets. Having a national presence also helps create a halo effect for potential new products and likely results in stronger pull through.

Media dollar efficiency by plan split