Marketing Mix Modeling Theory & Practice - Part 2

MMMs are actually designed to uncover the hidden cause-and-effect relationships between your marketing efforts and the results you see.

In this blog, we'll delve beyond the surface of predictions and explore the true power of MMMs – understanding the causal impact of your marketing strategies. We'll explore the limitations of traditional validation methods, delve into the importance of coefficients, and navigate the fine line between good predictions and accurate insights.

MMM is a Causal Inference Problem

Limitations of marketing mix model validation: Models are about causal relations, not predictions, despite being validated through statistical methods.

Unraveling the Mystery of Marketing Mix Models

If you're thinking marketing mix models are all about forecasting like a weather app, think again. Sure, we could use a neural network for predictions and get pretty graphs, but that's not the heart of the matter. The real deal is understanding the cause-and-effect relationship between our marketing efforts and the results they produce. 

Validating Beyond Predictions

So, how do we make sure our model isn't just a crystal ball giving us hazy images? Traditional statistical model validation is our reality check. We take a slice of our data, build our model, and then test it against a holdout sample—a group of data we set aside just for this purpose. It's like practicing your swing in the batting cages before stepping up to the plate.

Coefficients: The Star Players

Now, here's where the plot thickens: the true stars of our show are the coefficients—the numbers that tell us how significantly each marketing input affects sales or conversions. They're the ones we're betting on, not just the accuracy of the predictions. It's like in baseball, where batting average is important, but it's the player's technique that really catches the scout's eye.

The Fine Line Between Good Predictions and Accurate Coefficients

We might hit a home run with our predictions, but if our coefficients are off-base, we're not really understanding the game. It's possible to predict well and still not capture the real causal effects, like winning a game on a technicality rather than skill. The goal is to have both: predictions that hit the mark and coefficients that truly reflect what's driving those results.

The Big Picture

At the end of the day, it's not just about the score—it's about playing the game right. In the world of marketing analytics, we're aiming to create marketing mix models that not only predict outcomes but also reveal the strategy behind the numbers. That's how we play to win, by ensuring our coefficients are telling the real story behind our marketing successes.

MMM In A World Where The Consumer Journey Is Not Trackable

Navigating the Maze of Consumer Behavior Tracking

In the digital age, marketers are detectives, piecing together the mystery of consumer behavior across multiple channels. The quest? To understand the winding path a customer takes from seeing an ad on Facebook to making a purchase on Amazon. Sounds simple, right? Not quite.

The Roadblocks of Privacy and Data Silos

The challenge begins with gathering data, which is becoming as tricky as a high-stakes game of hide and seek, thanks to privacy regulations and data ecosystems that operate like isolated islands, or 'walled gardens' as we call them. These regulations are like rules of the game that keep changing, making it harder to follow the customer's trail.

The Marketing Mix Modeling Compass

Enter marketing mix modeling (MMM), the compass that guides marketers through this fragmented landscape. Unlike user-level tracking, which is getting tougher by the day, MMM works with aggregated data. This is the bird's-eye view that lets us see the forest for the trees, enabling us to analyze data at a granular level without stepping on privacy landmines.

The Holistic Approach

MMM doesn't just peek into the digital world; it gives us a holistic picture that includes both offline and online channels. It's like having a map that shows not only the highways but also the backroads and alleyways of marketing channels. With MMM, we can see the full picture, which is essential when consumer journeys are more like webbed networks than straight lines.

The Takeaway

So, as we navigate the complex web of consumer behaviors, MMM stands out as a powerful tool that respects privacy, breaks down data silos, and offers a comprehensive view of marketing effectiveness. It's about making sense of the data we can access and using it to steer our marketing strategies toward success.