Organizing Variables into Groups

Strategic Approach to Variable Grouping

Organizing variables into groups is a critical step that determines how you'll analyze and communicate your MMM results. The grouping structure should reflect your business priorities, decision-making processes, and reporting needs.

Understanding Variable Types

Before grouping, understand the types of variables in your model:

Marketing Variables:

  • Media spend (TV, Digital, Radio, etc.)

  • Promotional activities

  • Marketing events

  • Campaign-specific variables

Control Variables:

  • Price changes

  • Distribution metrics

  • Seasonality indicators

  • External factors

Base/Structural Variables:

  • Constant term (intercept)

  • Time trends

  • Baseline performance metrics

Grouping Frameworks

Framework 1: Marketing Channel Groups

This is the most common approach for Marketing Mix Models:

Group Structure:

├── Base (Constant, Trend)
├── TV Advertising
├── Digital Marketing (Search, Display, Social)
├── Radio
├── Print
├── Out-of-Home (OOH)
├── Promotions
├── Price
└── Seasonality

When to Use:

  • Standard MMM analysis

  • Budget allocation decisions

  • Channel performance comparison

  • Executive reporting

Benefits:

  • Clear channel attribution

  • Matches budget structure

  • Familiar to stakeholders

  • Enables ROI calculation

Framework 2: Media Type Grouping

Separate digital from traditional media:

Group Structure:

├── Base
├── Traditional Media (TV, Radio, Print, OOH)
├── Digital Media (Search, Social, Display, Video)
├── Promotions
├── Price
└── External Factors

When to Use:

  • Comparing digital vs. traditional effectiveness

  • Different teams manage digital vs. traditional

  • Budget shifting between online/offline

Benefits:

  • Strategic digital transformation insights

  • Compares fundamentally different media types

  • Highlights digital growth opportunities

Framework 3: Customer Funnel Grouping

Organize by marketing funnel stage:

Group Structure:

├── Base
├── Awareness (TV, Display, Video, OOH)
├── Consideration (Content, Social, Email)
├── Conversion (Search, Retargeting, Direct Mail)
├── Retention (Email, Loyalty Programs)
├── Price
└── Seasonality

When to Use:

  • Customer journey optimization

  • Full-funnel marketing strategy

  • Attribution across touchpoints

Benefits:

  • Aligns with customer journey

  • Identifies funnel gaps

  • Optimizes customer acquisition cost

Framework 4: Brand vs. Performance

Separate brand-building from performance marketing:

Group Structure:

├── Base
├── Brand Building (TV, Display, Sponsorships, PR)
├── Performance Marketing (Search, Affiliates, Retargeting)
├── Hybrid (Social, Video - can do both)
├── Promotions
└── External

When to Use:

  • Balancing short-term and long-term goals

  • Different ROI expectations for brand vs. performance

  • Separate budget owners

Benefits:

  • Strategic brand investment insights

  • Different time horizons considered

  • Balances immediate and future returns

Framework 5: Controllable vs. Uncontrollable

Separate variables you control from external factors:

Group Structure:

├── Base
├── Controllable Marketing (All paid media)
├── Controllable Pricing (Price, Promotions)
├── Uncontrollable Market (Competitors, Economy)
├── Uncontrollable Seasonal (Holidays, Weather)
└── Distribution (Store count, Availability)

When to Use:

  • Focusing on actionable insights

  • Isolating marketing contribution

  • Understanding market dynamics

Benefits:

  • Separates what you can influence

  • Highlights marketing effectiveness

  • Contextualizes external impacts

Practical Grouping Guidelines

How Many Groups?

Too Few Groups (< 3):

  • ❌ Loses granularity

  • ❌ Can't identify specific drivers

  • ❌ Limited actionability

Optimal Groups (5-10):

  • ✓ Balanced detail and clarity

  • ✓ Easy to visualize

  • ✓ Actionable insights

  • ✓ Executive-friendly

Too Many Groups (> 15):

  • ❌ Defeats purpose of grouping

  • ❌ Cluttered visualizations

  • ❌ Difficult to interpret

  • ❌ Better to use drill-down instead

Naming Conventions

Good Group Names:

  • Clear and descriptive

  • Business-relevant terminology

  • Consistent across models

  • No abbreviations or jargon

  • Appropriate length (1-3 words)

Examples:

  • ✓ "TV Advertising"

  • ✓ "Digital Marketing"

  • ✓ "Promotions"

  • ✓ "Seasonality"

Poor Group Names:

  • ❌ "Grp1"

  • ❌ "TV_ADS_SPEND_FINAL"

  • ❌ "MKT"

  • ❌ "Variables Related to Media Advertising and Marketing Communications"

Handling Special Cases

Intercept/Constant:

  • Always assign to "Base" group

  • Represents baseline KPI level

  • Should be its own group or combined only with time trends

Interaction Terms:

  • Group with the primary variable

  • Example: TV × Promotion → assign to TV or Promotions based on analysis goal

  • Document interaction effects

Transformed Variables:

  • Group by original variable meaning, not transformation type

  • TV_Ad70 (adstocked TV) → assign to "TV" or "Media"

  • Don't create groups like "Adstocked Variables"

Lagged Variables:

  • Group with contemporaneous variable

  • Example: Sales_Lag1 → same group as other sales variables

  • Maintain logical relationships

Step-by-Step Grouping Process

Step 1: Identify Variable Categories

List all variables and categorize them:

  1. Marketing spend variables

    • Which channels?

    • Which campaigns?

  2. Pricing and promotion variables

    • Price changes?

    • Promotional indicators?

  3. Seasonal and calendar variables

    • Holidays?

    • Monthly effects?

  4. External/control variables

    • Competition?

    • Economic factors?

  5. Structural variables

    • Constant term?

    • Time trends?

Step 2: Map to Business Structure

Align with how your business thinks about marketing:

Questions to Ask:

  • How are budgets allocated?

  • Who owns each channel?

  • How do stakeholders discuss performance?

  • What decisions need to be made?

Example Mapping:

Business Structure → Variable Groups

CMO oversees:
├── Brand Team → "Brand Media"
│   ├── TV_Spend
│   ├── Display_Spend
│   └── Sponsorships
│
├── Performance Team → "Performance Media"  
│   ├── Search_Spend
│   ├── Social_Spend
│   └── Affiliates
│
└── Pricing Team → "Price"
    ├── Price_Index
    └── Promotion_Flag

Step 3: Consider Analytical Goals

Different analyses may require different groupings:

For Budget Optimization:

  • Group by budget line items

  • Keep channels you might shift budget between separate

  • Combine channels with fixed budget relationships

For Executive Reporting:

  • Use high-level categories

  • Match board presentation structure

  • Align with strategic priorities

For Operational Decisions:

  • More granular channel grouping

  • Separate test vs. always-on

  • Group by campaign type

Step 4: Apply Grouping in MixModeler

In the Contribution Groups page:

  1. Select your model from the dropdown

  2. Review all variables in the table

  3. Start with major categories:

    • Assign all media variables first

    • Then pricing/promotion variables

    • Then seasonal variables

    • Finally base/structural variables

  4. Use multi-select for efficiency:

    • Check multiple TV channels

    • Assign all to "TV" group at once

  5. Refine and verify:

    • Check for consistent naming

    • Ensure no variables are unassigned

    • Validate grouping logic

Examples from Real Models

Example 1: CPG Brand Model

Model Variables:

  • TV_National

  • TV_Local

  • Digital_Display

  • Digital_Video

  • Search_Branded

  • Search_Generic

  • Social_Paid

  • Radio

  • OOH

  • Print_Magazine

  • Trade_Promotions

  • Consumer_Promotions

  • Price_Index

  • Holiday_Indicators

  • Trend

Grouping Structure:

Base: Constant, Trend
TV: TV_National, TV_Local
Digital: Digital_Display, Digital_Video, Search_Branded, Search_Generic, Social_Paid
Traditional Other: Radio, OOH, Print_Magazine
Trade: Trade_Promotions
Consumer Promotions: Consumer_Promotions
Price: Price_Index
Seasonality: Holiday_Indicators

Example 2: E-Commerce Model

Model Variables:

  • Search_Brand

  • Search_NonBrand

  • Social_Facebook

  • Social_Instagram

  • Display_Prospecting

  • Display_Retargeting

  • Video_YouTube

  • Email

  • Affiliates

  • Promotion_Discount

  • Shipping_Free

  • Month_Dummies

  • COVID_Period

Grouping Structure:

Base: Constant, COVID_Period
Search: Search_Brand, Search_NonBrand
Social: Social_Facebook, Social_Instagram
Display: Display_Prospecting, Display_Retargeting
Video: Video_YouTube
Owned: Email, Affiliates
Promotions: Promotion_Discount, Shipping_Free
Seasonality: Month_Dummies

Example 3: B2B SaaS Model

Model Variables:

  • Paid_Search

  • LinkedIn_Ads

  • Display_Retargeting

  • Content_Syndication

  • Webinar_Spend

  • Event_Sponsorships

  • Email_Campaigns

  • Organic_Traffic

  • Free_Trial_Rate

  • Price_Changes

  • Comp_Activity

Grouping Structure:

Base: Constant
Paid Acquisition: Paid_Search, LinkedIn_Ads, Display_Retargeting
Content Marketing: Content_Syndication, Webinar_Spend
Events: Event_Sponsorships
Owned Channels: Email_Campaigns, Organic_Traffic
Conversion: Free_Trial_Rate
Price: Price_Changes
External: Comp_Activity

Common Grouping Mistakes

Mistake 1: Over-Grouping

  • Putting all media in one "Marketing" group

  • Loses ability to compare channels

  • Can't make optimization decisions

Solution: Separate major channels or at least digital vs. traditional

Mistake 2: Inconsistent Naming

  • "Media" in one model, "Marketing" in another

  • "TV Ads" vs "Television" vs "TV"

  • Makes cross-model comparison difficult

Solution: Standardize group names across all models

Mistake 3: Mixing Levels

  • Combining "TV" group with specific channel "Facebook"

  • Different levels of aggregation

  • Confusing comparisons

Solution: Keep groups at the same hierarchical level

Mistake 4: Ignoring Business Structure

  • Grouping that doesn't match how business operates

  • Groups that don't align with decision-making

Solution: Involve stakeholders in grouping decisions

Mistake 5: Too Many Small Groups

  • 20+ groups each with 1-2 variables

  • Cluttered visualizations

  • Defeats purpose of grouping

Solution: Combine related variables, use drill-down for details

Testing Your Grouping

After grouping, validate by:

1. Run Decomposition

  • Do the groups make visual sense?

  • Are contributions interpretable?

  • Can you tell the story?

2. Share with Stakeholders

  • Do they understand the groups?

  • Do groups match their mental model?

  • Can they make decisions based on it?

3. Check for Actionability

  • Can you optimize based on groups?

  • Do groups align with budget allocation?

  • Are insights clear?

4. Verify Completeness

  • All variables assigned?

  • No overlapping groups?

  • Clear group boundaries?

When to Regroup

Regroup variables when:

  • Business structure changes

  • New stakeholders with different needs

  • Analysis goals shift

  • Current grouping doesn't yield clear insights

  • Adding/removing variables

  • Visualizations are cluttered

Flexibility: Grouping is not permanent - adjust as needed to serve analytical goals

Next Steps

After organizing variables:

  • Assign colors to groups for visualization

  • Set adjustment parameters if needed

  • Save configuration

  • Run decomposition analysis

  • Use group drill-down for detailed insights

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