Essential Ingredients of An Effective

Market Mix Model

Amit Satsangi
 Amit Satsangi
https://www.linkedin.com/in/amitsatsangi/

• Data Scientist (Consultant)

• 10 years: Analytics, IT and
Management experience
MS Physics → MS Comp Sci → MBA
 Agenda

What?
1 WHAT
15%

Why?
2 WHY
15%

How?
3 HOW
50%

May I ask?
4 QUESTIONS 20%

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Market Mix Modeling: WHAT?

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 What is Market Mix Modeling?

SALES .

SALES BASE INCREMENTAL

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Market Mix Modeling: WHY?

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Attribution: Assigning $ Value to Channels

DisplayAds/Paid Search (SEM)

Email

Television Ads

Print Ads

PR Events

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 Marketing The Channel Attribution Problem
Activity
Spend
Day1: Paid
User searches for a beauty Search Originating Channel
product, and clicks on Google Ad ($7)
(Paid Search)

Day 5: SEO
Organic Search by user, lands on ($5) Assisting Channel
the company website, provides (SEO)
email, abandons cart
Day 6: Email Assisting
User receives email and clicks on ($0.05)
it, but still does not buy
Channel
(Email)
Day 7: Facebook
User sees ad on Facebook, clicks Ad Converting
Channel
on the ad, and makes a purchase ($2.0)
(Facebook)
Revenue Generated $100
Multi-touch Attribution Modelling (It sucks!)

Paid
Search First-click
Facebook
Last-click
SNAP
Linear .

Email
Time Decay
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 Missing From Attribution Modeling… 4P’s

Product Price Promotion Place

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Missing From Attribution Modeling… Offline Channels

37% Image Credit: http://midwestrocklobster.blogspot.com

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Linear Regression 101

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 Regression 101

Regression enables us to predict “y” based on its

relationship with “x”

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Regression Example

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Market Mix Modeling: HOW?

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 Market Mix Modeling: Linear Model

1. Basic Linear Model

Sales = 169 + 34*Price + 4.3* DISTRIBUTION + 3.5*TV + …

2.5*RADIO + 1.1*PRINT + 2.5*BILLBOARDS +
7.0*SOCIALMEDIA + 6.1*EMAIL+ 5.2* PAIDSEARCH +…
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 Ingredients of a Marketing Mix Model

01 Relative Variables (Normalization)

02 Adstock (Carryover Effect)
03 Proxy Variables
04 Dummy Variables (Seasonality)
05 AIC (Model Comparison)
06 MAPE (Accuracy)
37%
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Temporal Effects of Advertising

Modeling Marketing Mix

Gerard J Tellis
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Relative Variables and Dummy Variables in Action

Source: Market Response Models: Economic and Timeseries Analysis, 2nd Edition

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 Statistical Testing
Issue Test for Detection Remedy
Non-Linearity Ramsey Reset Test Generalized Linear Models (GLM),
Transformation

Outliers 1.5*Inter-quartile Take out outliers from the model

Range
Multivariate Q-Q Plot Generalized Linear Models(GLM), Box-Cox
Normality Transformation
Heteroscedasticity Breusch-Pagan Test Weighted Linear Regression, GLM,
Transformation
Autocorrelation Durbin Watson Test GLM, Transformation
Multicollinearity Tolerance (< 0.1), VIF • Regularization: Ridge, Lasso, Elastic-net
• Subset selection (Forward/Backward)
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 Patterns of Advertising Response

01 Current Effect

02 Carryover Effect

03 Shape Effect.

04 CompetitiveEffects

05 Dynamic Effects

06 Content Effects

0737%
Media Effects
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Market Mix Modeling: A Few
Techniques
2. Multiplicative Model

3. Logit Model

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Modeling Marketing Mix (Gerard J Tellis)
Market Mix Modeling:
Experimental Results

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Input Data

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Results From The Linear Regression Model

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Results From The Log-linear Multiplicative Model (I)

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Results From The Log-linear Multiplicative Model (II)
licative Model

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Evolution of Base

Slide Sourced from: Axtria.com 29

Learning is the eye of the mind…

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 Recap: MMM Essential Ingredients
• Multi Channel Attribution sucks
• MMM What? Sales = Base Sales + Incremental Sales
• MMM Why? Brand Value + Chanel Value (ROI) +
Performance
• MMM How? Linear Regression Models –
Relative/Proxy/Dummy Variables. AIC/MAPE (Accuracy
Parameters)
• Statistical Tests – check for Heteroscedasticity,
Collinearity, Normality, Auto-correlation etc.
• Model complexity depending on the effects and the
desired accuracy : current vs. carryover vs. shape etc:
Non-linear models, Multiplicative models, Exponential
Models 31