In this article we'll explain how you can make MMM analysis more accurate by adding the context variables.
Context variables are additional factors or conditions that can influence the outcome of your marketing efforts, but are not part of the marketing activities themselves.
These variables help to provide a more comprehensive understanding of the environment in which your marketing campaigns operate.
Examples of Context Variables
- Economic Factors: These are the changes in the economy, such as unemployment rates or consumer confidence, that can affect how people respond to your marketing.
- Seasonality: It means the different times of the year, like holidays or back-to-school season, can impact consumer behavior.
- Competitive Actions: This is what your competitors are doing, such as running their own promotions or changing prices.
- Weather: For some products, the weather can have a significant impact on sales (e.g., ice cream sales in summer vs. winter).
- Events: Major events like elections, sports events, or pandemics can influence consumer behavior and purchasing decisions.
- Etc.
Why you should add Context Variables to your Marketing Mix Modeling data?
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Improved Accuracy: By including context variables, your model can more accurately capture the true impact of your marketing activities. This helps in understanding what is actually driving sales or other key performance metrics.
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Better Insights: You can identify and measure the effect of external factors, helping you understand why certain marketing campaigns performed better or worse than expected.
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Optimization: Knowing the influence of context variables allows you to adjust your marketing strategies to better align with external conditions. For instance, you might increase advertising spend before a major holiday if past data shows higher returns during that period.
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Risk Management: Understanding the role of context variables can help you anticipate and mitigate risks. For example, if an economic downturn is predicted, you can prepare by adjusting your marketing strategies accordingly.
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Resource Allocation: With a clearer picture of what impacts your sales, you can allocate your marketing budget more effectively, focusing on the tactics that are proven to work under various conditions.
The context variables provide a fuller, more realistic view of the environment in which your marketing takes place, leading to more accurate and actionable insights.
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