Covid-19 has brought misery to the world, many lives have been lost, cities wear a deserted look and economies are on the verge of collapse.
At this point of writing this article there were 2,444,614 number of cases (1,636,267 active cases) worldwide and 168,005 number of deaths.
Across the world, the retail space has seen a huge supply — demand shock. There is an increase in demand for all essential products and the supply has not been able to meet the all the requirement. People have been hoarding basics and essential food items.
In this light of things, how should you go about your MMM models.
Before we get to that, let us look at the many ways your current MMM model could fail!
Most Marketing mix models account for the impact of internal factors like distribution, price, marketing advertisements (TV, print, radio Digital ads and campaigns) and competition activity. In a pandemic situation, many external factors also impact sales. Let us see how:
In this scenario, the typical MMM inputs would not function as usual:
So, if you are an old brand (with strong brand equity) and with a strong distribution, you could thank your stars. As distribution and Brand equity would be the key drivers of your sales.
In an ideal world, all the above scenarios would call for celebrations. But don’t start your celebrations just yet!
Because all these market changes are artificial or induced by force. These are not organic growths !!
The above picture shows the divergence between actual sales and forecasted sales. This is likely to happen in this scenario as the model would not be able to capture sudden changes in sales .The forecasted figures would vary greatly from actual numbers.
The contributions to sales from marketing inputs would change once the dummy variable for Covid-19 is added in the model. Model with contributions without Covid-19 dummy (previous model) and model with contributions with Covid -19 can be compared (revised model). The difference would help quantify the unaccounted attribution due to covid-19.
I hope and pray that this covid-19 ordeal ends soon. Wish you all good health.