Group Categories & Best Practices

Standard Group Categories

Base

What to Include:

  • Intercept/constant term

  • Long-term time trends

  • Structural baseline effects

Purpose: Represents the KPI level when all marketing is zero - your organic baseline performance

Typical Contribution: Usually the largest single group, showing stable baseline demand

Best Practices:

  • Always include the constant term in Base

  • Keep Base separate from other groups

  • Helps identify incremental marketing impact

Media/Marketing

What to Include:

  • All advertising spend channels

  • TV, Radio, Display, Video, OOH

  • Any paid media campaigns

Purpose: Shows total marketing contribution to KPI

Subgroups Option:

  • Can split into "Traditional Media" and "Digital Media"

  • Or separate by channel: TV, Digital, Radio, etc.

Best Practices:

  • Group all marketing together OR separate into meaningful subgroups

  • Don't mix media with promotions or price

  • Enables ROI calculation by channel

Digital (Optional)

What to Include:

  • Online marketing channels

  • Search (Paid Search, SEO)

  • Social Media

  • Display Advertising

  • Video (YouTube, etc.)

  • Email Marketing

Purpose: Separate digital from traditional for strategic comparison

When to Use:

  • Different teams manage digital vs. traditional

  • Budget shifting between online/offline

  • Digital transformation initiatives

Price

What to Include:

  • Price variables

  • Price indices

  • Discount rates

  • Price elasticity variables

Purpose: Measure price sensitivity and revenue impact of pricing decisions

Best Practices:

  • Keep price separate from promotions

  • Enables price elasticity calculation

  • Critical for pricing strategy

Promotions

What to Include:

  • Promotional campaigns

  • Sales events (Black Friday, etc.)

  • Coupon/discount promotions

  • Trade promotions

  • BOGO offers

Purpose: Quantify promotional lift and effectiveness

Best Practices:

  • Separate from baseline pricing

  • Distinguish trade vs. consumer promotions if relevant

  • Helps evaluate promotional ROI

Seasonality

What to Include:

  • Holiday indicators

  • Monthly/quarterly dummy variables

  • Seasonal indices

  • Weather effects

Purpose: Isolate seasonal patterns from marketing effects

Best Practices:

  • Clearly separate from marketing

  • Helps understand natural demand cycles

  • Critical for forecasting

External/Market

What to Include:

  • Competitor activity

  • Economic indicators (GDP, unemployment)

  • Market trends

  • Category growth

Purpose: Control for factors outside your influence

Best Practices:

  • Separate controllable from uncontrollable factors

  • Provides market context

  • Helps justify marketing performance

Distribution

What to Include:

  • Store count

  • Distribution expansion

  • Product availability

  • Geographic coverage

Purpose: Measure impact of distribution on sales

Best Practices:

  • Important for CPG and retail

  • Separate from marketing

  • Helps evaluate expansion impact

Industry-Specific Best Practices

CPG/Retail

Recommended Groups:

- Base
- National TV
- Local TV
- Digital
- Traditional Media (Radio, Print, OOH)
- Trade Promotions
- Consumer Promotions
- Price
- Distribution
- Seasonality

Key Considerations:

  • Separate trade vs. consumer promotions

  • Distribution is critical

  • Seasonal patterns are strong

E-Commerce/DTC

Recommended Groups:

- Base
- Search (Brand + Non-Brand)
- Social Media
- Display (Prospecting + Retargeting)
- Video
- Email/Owned
- Affiliates
- Promotions
- Seasonality

Key Considerations:

  • Digital-heavy, granular channel grouping

  • Separate prospecting vs. retargeting

  • Email/owned channels important

B2B/SaaS

Recommended Groups:

- Base
- Paid Search
- LinkedIn/Social
- Content Marketing
- Events/Webinars
- Display/Retargeting
- Organic/SEO
- Price/Packaging
- External (Market/Competition)

Key Considerations:

  • Longer sales cycles

  • Content and events matter

  • ABM vs. demand gen separation

Balancing Granularity

Too Few Groups

Signs You Need More Groups:

  • Can't make actionable decisions

  • Too many channels lumped together

  • Stakeholders ask for more detail

  • Can't identify best-performing channels

Solution: Split major groups into sub-groups

Too Many Groups

Signs You Need Fewer Groups:

  • Cluttered, unreadable charts

  • Groups with minimal contribution

  • Difficult to see patterns

  • Too many colors to distinguish

Solution: Consolidate small groups, use drill-down instead

Optimal Balance

Aim for 5-10 groups:

  • Detailed enough for decisions

  • Simple enough to communicate

  • Easy to visualize

  • Clear patterns emerge

Use hierarchy:

  • High-level for executives (5-7 groups)

  • Mid-level for marketing leads (7-10 groups)

  • Detailed drill-down for analysts (variable-level)

Best Practices by Use Case

Budget Allocation

Group Strategy:

  • Separate controllable spend categories

  • One group per budget line item

  • Match finance reporting structure

Example:

- Brand Marketing (TV, Display, Sponsorships)
- Performance Marketing (Search, Social, Affiliates)
- Promotions
- Price Investments

Enables: Clear ROI by budget category, reallocation decisions

Executive Reporting

Group Strategy:

  • High-level business categories

  • Align with strategic priorities

  • Simple, clear story

Example:

- Marketing
- Pricing
- Promotions
- External Factors

Enables: Strategic conversation, board-level reporting

Channel Optimization

Group Strategy:

  • Separate each major channel

  • Enable channel-to-channel comparison

  • Detail where budget decisions happen

Example:

- TV
- Digital Search
- Digital Social
- Digital Display
- Radio
- Print
- Out-of-Home
- Promotions

Enables: Granular ROI comparison, tactical budget shifts

Customer Journey Analysis

Group Strategy:

  • Organize by funnel stage

  • Track customer progression

  • Identify journey gaps

Example:

- Awareness (TV, Display, Video)
- Consideration (Content, Social, Email)
- Conversion (Search, Retargeting)
- Retention (Loyalty, Email)

Enables: Full-funnel optimization, journey mapping

Grouping Workflow

1. Initial Categorization

Start with broad categories:

  • Base/Baseline

  • Marketing

  • Price/Promotions

  • Seasonality

  • External

Then refine based on needs:

  • Split Marketing into channels

  • Separate Price from Promotions

  • Add industry-specific groups

2. Stakeholder Alignment

Involve key stakeholders:

  • Marketing leadership (channel grouping)

  • Finance (budget alignment)

  • Analytics team (technical feasibility)

  • Executives (strategic alignment)

Questions to Ask:

  • How do you think about marketing performance?

  • What decisions will this analysis inform?

  • How are budgets structured?

  • What metrics do you track?

3. Test and Validate

Run decomposition with initial grouping:

  • Do contributions make sense?

  • Are patterns clear?

  • Can you tell the story?

Adjust if needed:

  • Combine small groups

  • Split large heterogeneous groups

  • Rename for clarity

4. Document and Standardize

Create documentation:

  • Group definitions

  • Variables included in each group

  • Rationale for grouping decisions

  • When to use this structure

Standardize across models:

  • Use same groups for similar analyses

  • Maintain consistency over time

  • Enable year-over-year comparison

Common Grouping Challenges

Challenge 1: Multi-Function Variables

Problem: Variable serves multiple purposes

  • Example: Social media drives both awareness and conversion

Solutions:

  • Primary purpose: Assign to most relevant group (Awareness if primarily brand)

  • Split if possible: Use platform data to separate brand vs. performance spend

  • Hybrid group: Create "Hybrid Channels" group

  • Document: Note the multi-function nature

Challenge 2: Seasonal Marketing

Problem: Marketing that only runs seasonally

  • Example: Christmas TV campaign

Solutions:

  • Group with channel: Christmas TV → TV group

  • Separate seasonal: Create "Holiday Marketing" group if significant

  • Best practice: Group by channel, use time analysis to see seasonal patterns

Challenge 3: Test Campaigns

Problem: Short-term tests vs. always-on campaigns

Solutions:

  • Group with channel: Test campaigns → same group as regular channel

  • Separate if analyzing: Create "Test" group if evaluating test effectiveness

  • Typical: Include with main channel for standard reporting

Challenge 4: Organic vs. Paid

Problem: Mix of paid and owned channels

Solutions:

  • Separate groups: Paid Media vs. Owned Media

  • Within digital: Paid Search vs. Organic Search as separate groups

  • Depends on analysis: Separate if optimizing paid/owned mix

Challenge 5: Cross-Channel Campaigns

Problem: Integrated campaigns across multiple channels

Solutions:

  • Individual channels: Assign each channel separately

  • Campaign group: Create campaign-specific group if measuring integrated effect

  • Best practice: Use individual channels, analyze campaign timing separately

Advanced Grouping Techniques

Hierarchical Grouping

Create multiple levels:

Level 1 (Executive):

- Marketing
- Non-Marketing

Level 2 (Marketing Leadership):

- Traditional Media
- Digital Media
- Promotions

Level 3 (Channel Managers):

- TV
- Radio
- Search
- Social
- Display

Implementation: Use different grouping configurations for different audiences

Dynamic Grouping

Adjust groups based on time period:

  • Pre-digital era: Fewer digital groups

  • Digital transformation: More digital granularity

  • Current period: Balance based on spend mix

Use case: Historical analysis with changing channel mix

Scenario-Based Grouping

Different groupings for different questions:

Question: "What's the ROI of our media?" → Group: All Media together

Question: "Which channel performs best?" → Group: Separate each channel

Question: "Digital vs Traditional?" → Group: Two major groups

Flexibility: Change grouping based on analytical goal

Grouping Checklist

Use this checklist to validate your grouping:

Completeness:

  • [ ] All variables assigned to a group

  • [ ] Constant term in Base group

  • [ ] No variables orphaned

Clarity:

  • [ ] Group names are clear and descriptive

  • [ ] Names are consistent across models

  • [ ] Business stakeholders understand groups

Logic:

  • [ ] Variables in same group are logically related

  • [ ] Groups match business structure

  • [ ] Grouping enables key decisions

Balance:

  • [ ] 5-10 groups (optimal range)

  • [ ] No groups with only 1-2 variables (unless strategically important)

  • [ ] No single group dominating with 20+ variables

Actionability:

  • [ ] Groups align with budget allocation

  • [ ] Enable channel comparison

  • [ ] Support optimization decisions

Communication:

  • [ ] Easy to visualize

  • [ ] Clear color assignment

  • [ ] Enables storytelling

Examples of Effective Grouping

Example 1: National Brand Launch

Context: Launching new product nationally

Groups:

Base: Constant, Pre-launch trend
National TV: All national TV campaigns
Local TV: Regional TV support
Digital Brand: Display, Video, Social (brand)
Digital Performance: Search, Retargeting (conversion)
Retail Support: Trade promotions, POS
Launch Events: Special events, sampling

Rationale: Separates launch investment types, enables ROI by tactic

Example 2: E-Commerce Growth

Context: Scaling e-commerce business

Groups:

Base: Organic baseline
Upper Funnel: Display Prospecting, Video, Social Brand
Mid Funnel: Content, Social Engagement
Lower Funnel: Search, Retargeting, Shopping Ads
Owned: Email, SEO, Affiliates
Promotions: Discounts, Free Shipping

Rationale: Funnel-based for customer journey optimization

Example 3: Retail Chain Expansion

Context: Opening new stores while maintaining existing

Groups:

Base: Existing store baseline
National Media: TV, Radio (all markets)
Existing Markets: Marketing in current locations
New Markets: Marketing in expansion areas
Promotions: Sales events, coupons
Distribution: New store openings
Price: Pricing strategy

Rationale: Separates expansion from maintenance, measures new market investment

Tips for Success

Start Simple:

  • Begin with 5-7 broad groups

  • Refine based on stakeholder feedback

  • Don't overthink initial setup

Stay Flexible:

  • Grouping isn't permanent

  • Adjust as business evolves

  • Different groupings for different questions

Focus on Decisions:

  • Group to enable actions

  • Match budget structure

  • Support strategic choices

Test with Real Data:

  • Run decomposition early

  • Check if groups tell clear story

  • Iterate based on insights

Document Everything:

  • Record grouping decisions

  • Explain rationale

  • Share with team

Get Buy-In:

  • Involve stakeholders early

  • Align with business language

  • Ensure groups make sense to decision-makers

Next Steps

After establishing group categories:

  • Proceed to Color Assignment Strategy

  • Configure Adjustment Parameters

  • Run Decomposition Analysis

  • Analyze Group-Level Performance

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