The history of Marketing Mix Models (MMMs) is the story of an idea's resilience and adaptation.
The Origins of Marketing Mix Modeling
MMM originated in the aftermath of World War II, yet its seeds were planted much earlier—during the Great Depression of 1929-1939.
The "Executive as a mixer of ingredients" idea was originally introduced by business icon Neil H. Borden in 1949. During the 1950s and 1960s, it was referred to simply as MM, not yet MMM! Later, in the 1960s, Borden admitted that he borrowed the "Marketing Mix" concept from his associate, James Culliton.
During the Great Depression of 1929-39, as advertising's economic role was questioned, Borden was commissioned to analyze its economic impact. This work led to the publication of a behemoth 970-page book, "Economic Effects of Advertising," in 1942.
This research was the beginning of Borden's interest in understanding marketing holistically.
In the 1950s, after introducing the idea of the "Executive as a mixer," the nascent MMM models were introduced. Borden developed a complicated model based on at least twelve factors that never gained popularity.
The Rise of the Four Ps
But the 1960s - the Mad Men era — saw the emergence of the classic Four Ps: Product, Price, Promotion, and Place (distribution). E. Jerome McCarthy and Philip Kotler proposed the Four Ps framework in 1960, which has been widely adopted. The Four Ps have become the standard part of marketing.
An enduring concept, the Four Ps framework has evolved into one of the most lasting and widely recognized structures in marketing. Even now, the Four Ps are featured in every standard marketing textbook.
Historically, the Four Ps were initially developed in an environment focusing on consumer packaged goods (CPG), a standard business model in the 1960s. As a result, large consumer packaged goods companies like P&G, AT&T, Kraft, Coca-Cola, and Pepsi have made MMM an integral part of their marketing planning.
Again, the roots of the Four Ps can be found in the 1930s Great Depression. The Four Ps were developed under the influence of the 1930s theory of monopolistic competition—another echo of the Great Depression of 1929!
During this phase, MMM overshadowed most previous techniques:
- Organic Functionalist approach
- System-oriented approaches
- Parameter theory developed by the Copenhagen School
- Earlier approaches: Institutional, Functional, Geography-related Regional all suffered the same fate
The four Ps were considered the “tablet of faith”. But, over time, others tried to expand the Four Ps paradigm by adding other Ps, such as People or Process. There are several variations of the Four Ps: Seven Ps, Four Cs, and more, which are outside the scope of this article.
The 1970s revolutionized marketing. Before this, measuring marketing impact was guesswork. Statisticians at the University of Chicago created the first statistical models,hich quantified the crucial link between marketing activities and sales. Although effective, these early models were cumbersome, requiring months of expert work—a luxury for large corporations with big budgets.
Relationship Marketing and Service Industry
With the rise of the service industry in the 70s and 80s, the most significant push was to include "service" in the standard Four Ps. Without service, the critiques pointed out, "customer service will be isolated from the rest of the organization." Customer service must be everyone's concern, they argued. So, we should not isolate and siloed in a specific department.
In the 1990s, criticisms of Four Ps and MMMs took a new turn. The "service industry," which started a decade earlier, had reshaped priorities, emphasizing long-term customer relationships over traditional marketing strategies. In this new environment, MMM is not just wrong; it's dangerous and must be avoided at all costs!
This is when customer relationship management (CRM) systems became popular. Focusing on long-term relationships with customers has a higher economic impact than focusing on acquisition. This makes sense, especially if you're in the service sector.
But would the same principle apply to other sectors? The law of double jeopardy, promoted by Byron Sharp, argues that CRMs are not sufficient to drive cross-selling and continued purchases from a brand. It's the size of the brand that determines the frequency of cross-sales.
As we celebrate the new millennia, a crisis lurks: The Dot-com bubble is about to explode.
The Digital Revolution
Digital commerce is the future, thanks to the rapid adaptation of the Internet and digital experiences. The digital frontier is rapidly expanding through new platforms like Google, Facebook, Amazon, and eBay and new technologies such as smartphones.
With the digital revolution of the 2000s and 2010s, new marketing channels emerged: Social media, Search, Digital display, Video, etc. In this new globalized economy, powered by the Internet and connectivity, brands can use to reach new audiences.
During the 2010s, marketing technologies were centered around attribution techniques, such as multi-touch attribution (MTA). These techniques use cookies to track user's browsing behavior across the internet.
But with the latest restrictions and phasing out third-party cookies in major browsers, a new era of MMM has started.
Numerous new startups offer MMM solutions, either as Software as a Service (SaaS) or as custom development for specific clients.
The new phase of MMM features the return of AI, raising curiosity about how these technologies will integrate in the next few years.
It seems that we're going back to Neil H. Borden's original idea in the 1950s, which was a long list of marketing ingredients. The modern MMM systems have dozens of channels and exogenous factors, such as seasonality and economic conditions.
Today, the legacy of Marketing Mix Models lives on, continually adapting to the ever-changing marketing environment. The MMM of the 2020s is privacy-centric and focuses on holistic measurement across the entire marketing portfolio.
Conclusion
The history of Marketing Mix Models is a story of resilience and adaptation. From its origins in the 1950s to the digital revolution of the 2000s, MMM has evolved to meet the changing needs of marketers. Today, MMM is more important than ever, as brands seek to understand the impact of their marketing efforts across a wide range of channels. As we look to the future, it will be fascinating to see how MMM continues to evolve in response to new technologies and consumer behaviors.
If you're interested in learning more about Marketing Mix Models and how they can help you business, ELIYA can help. Contact us today to learn more about our MMM solutions and how they can benefit your brand.
