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:
Key Considerations:
Separate trade vs. consumer promotions
Distribution is critical
Seasonal patterns are strong
E-Commerce/DTC
Recommended Groups:
Key Considerations:
Digital-heavy, granular channel grouping
Separate prospecting vs. retargeting
Email/owned channels important
B2B/SaaS
Recommended Groups:
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:
Enables: Clear ROI by budget category, reallocation decisions
Executive Reporting
Group Strategy:
High-level business categories
Align with strategic priorities
Simple, clear story
Example:
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:
Enables: Granular ROI comparison, tactical budget shifts
Customer Journey Analysis
Group Strategy:
Organize by funnel stage
Track customer progression
Identify journey gaps
Example:
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):
Level 2 (Marketing Leadership):
Level 3 (Channel Managers):
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:
Rationale: Separates launch investment types, enables ROI by tactic
Example 2: E-Commerce Growth
Context: Scaling e-commerce business
Groups:
Rationale: Funnel-based for customer journey optimization
Example 3: Retail Chain Expansion
Context: Opening new stores while maintaining existing
Groups:
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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