How to validate effectiveness and ROIs

Insights Drawn from Marketing Mix Model

First of all, effectiveness refers to how well various marketing activities and channels contribute to achieving desired business outcomes, such as sales & revenue and efficiency is or return on investment (ROI).

In simple words, Effectiveness is Amount of brand’s volume driven by unit of marketing activity.

It is calculated as:- Effectiveness : Incremental Volume / Unit of Marketing Activity

Also, ROI Expresses the financial return of a dollar spent against a given activity. In simple words, For every dollar spent what we are getting in return.

So, it is calculated as: ROI :- Incremental profit / Marketing spend

Effectiveness of Marketing Channels:

• Impact of Each Channel: Identify which marketing channels (e.g., TV, digital, print, social media) have the most significant impact on sales or other key performance indicators (KPIs).
• ROI Analysis: Assess the return on investment (ROI) for each channel to determine where marketing dollars are best spent.

So, In a nutshell, it can be drawn as an insight that The Higher the effectiveness , The Better the ROI for that particular campaign. If a campaign has performed better so that means it has been effective throughtout the execution year.