How to leverage MMM practices toward more sustainable performance (3/3)
Back to all articles
How Marketing Mix Modeling (MMM) reinvents itself to bridge your marketing and environmental constraints?
Because we believe that the sustainable transformation of organizations is the revolution of the next 10 years — in the same way that digital technology was for the past decade — we want to re-imagine a Marketing Mix Optimization capability to accompany a change that is profoundly shaking up our clients.
While marketing has been one of the cornerstones of our activities, we no longer see it only as a promotional tool: We are firmly convinced of its immense potential to change the game on decarbonization.
In this last article in a series looking at How Marketing Mix Modeling can become a powerful tool for sustainable business performance, we explore how MMM is reinventing itself to tackle your marketing and environmental constraints.
Introduce new performance indicators
MMM knows how to “optimize”: your marketing mix levers, your channels, value creation, investment strategies based on “classic” business indicators. Today, it is about optimizing your decarbonization. This is one of the major changes we have made to our MMM platform and methodology. We can now integrate a €/carbon cost ratio into your scenarios[1]. The goal: to reach more quickly the objectives set in the regulatory constraints (CAFE[2] or SBTi regulations, for example) or in your company’s own strategic roadmap (which aims at carbon neutrality).
If your company has not yet adopted a sustainable strategy, it is also possible to set optimization objectives, both for the margin and the carbon mix of the product, which can be monitored at the same time as the other traditional MMM indicators.
In this perspective, different scenarios can be considered to simulate possible trajectories to reconcile short-term business obligations and long-term climate ambitions.
This is how we reconcile management of traditional marketing performance indicators with the impact of the marketing mix, a “new generation” indicator.
How the modern MMM reinvents the steering of your marketing mix
In the past, MMM has demonstrated its ability to develop and measure the impact of brands and products:
– by taking into account the differences in positioning and strategic objectives,
– without destroying the more established — and profitable — brands and products,
– by continuing to optimize margins.
The same mechanism can be applied today with sustainable and less sustainable product lines. MMM can be used to guide, make reliable and operate a transition from the less responsible products (old products) to the more responsible ones (new products), such as promoting electric vehicles instead of internal combustion ones, promoting second-hand in the clothing sector, making people prefer poultry or vegan products to beef, etc.
What does this mean in practice? The new equation of your media/product mix will probably be to promote an iconic product (which will probably remain more carbon intensive at first) in the short and medium term, while ramping up communication on a sensible and profitable alternative product (low or no carbon) in the long term — until the old product is fully replaced by the new one and the new business model is in place.
We can draw a parallel with the example of Kodak mentioned earlier: Its direct competitor, Fuji, also had to face and adapt to the disruption of digital technology. Rather than trying to save its film photography business at all costs, the Japanese film giant refocused its entire strategy on its core business, specialty chemicals. The process began with a new strategic plan, which lasted five years and saw the company undertake structural reforms to target its new growth areas, including healthcare. More than 20 years later, the company is still here and thriving, with a different business model.
It is this transition that MMM could accelerate by pushing the campaigns on the new, more responsible offers and the new business model.
Ultimately, this new product portfolio management makes it possible to simulate product mix trajectories by year and therefore to gradually push the offering toward more and more responsible products, while respecting margin, revenue and profitability issues.
We are talking about supporting a change in business model: a major, fundamental transition that will not happen overnight. For you, as marketers, this long-distance race implies working on both the short term (sales, channel arbitration, reduction of the carbon footprint on the direct effects of marketing) and the long term (evolution of the product strategy, evolution of the brand promise, or the business model).
Identify risks and opportunities
MMM’s predictive capability will help identify the risks and opportunities — from scenario adaptation — that your marketing and products face in a carbon-constrained environment. This is especially true for organizations that are exposed to extreme events, those with significant transportation and supply costs. (Remember the impact of the Icelandic volcano eruption in 2010 on global air traffic? Or the current semiconductor crisis?) MMM can help you optimize cost structure and predict extreme scenarios.
“We don’t believe in green marketing. We believe in marketing for green.”
We are convinced: Because analyzing performance is its nature, Marketing Mix Modeling is a powerful tool for steering your marketing strategy in a context of carbon constraints — environmental performance becoming a new indicator of overall performance. Just as you need to achieve business objectives today, MMM will also help you to build up your sustainable development marketing strategy in parallel.
And to reinforce your brand strategy: By working on a product mix already oriented toward “sustainable performance”, you also work on the legitimacy and attractiveness of your brand, and in the long term to align it with market expectations.
But more than that, marketing is called upon to take on a new role, that of “responsible” influencer. Doesn’t it already play a considerable role in society, by influencing consumers’ purchasing decisions? A formidable lever for change, it now has its part to play in reorienting behavior (from the “disposable” and “carbon-based” culture to the responsible decarbonized one) and the collective imagination (by creating a desirable future).
If we place MMM on more concrete ground, that of the regulatory constraint, we consider it only a matter of time before measurement of environmental performance becomes mandatory[3]. In the same way that management controls are mandatory in companies, it is likely that non-financial controls will be introduced in the near future.
But there is no longer any need to demonstrate that the world belongs to those who understand the profound changes that move society. The examples of Kodak and Fuji have inspired us a lot in the writing of this white paper. These companies made a strategic choice that profoundly impacted their business model, leading to the disappearance of the first company and the rise of the second. In the second case, Fuji understood the changes as soon as they came to its door. Sustainability is now knocking loudly on every door: As we said in the introduction, it is the major challenge of the next decade. To implement this essential sustainable transformation, marketing departments will have to seize on the issue and think of this strategy as ever more businesslike and ever more decarbonized. Those who are the most visionary will turn it to a competitive advantage. In this context, we are deeply convinced that MMM — through its ability to link ROI/performance/sustainability — could be a prime instrument of change, one of the tools to decipher KPIs, whether financial or not.
Interested in finding out more?
[1] By the end of 2023, this €/carbon cost ratio will be integrated into the platform’s basic modules
[2] Since 2021, the European CAFE regulation imposes on car manufacturers an average CO2/km emission threshold that must not be exceeded. If they do not meet this threshold, the manufacturer will be subject to severe financial penalties. And in December 2022, the European Union adopted a new border carbon tax that aims to limit climate-damaging foreign industrial imports. It will come into effect between 2026 and 2027. This tax is intended to force companies from non-EU countries to comply with the European climate standards already in force (EU Emissions Trading System).
[3] The CSRD (Corporate Sustainability Reporting Directive) adopted by the European Union in December 2022 is a step in this direction. It requires European companies to report ESG data in the most demanding way (from 2024-2025). We imagine that organizations will eventually integrate ESG data into their data lake.
