Marketing Mix Modeling: Choosing Causal Variables and KPI

Marketing Mix Modeling Series

Part 1: The Art of Measuring Marketing Effectiveness Part 2: 7 Metrics to Use and Boost Your ROI Part 3: Choosing Causal Variables and KPI Part 4: Transform Your Marketing Data with Carryover, Lag, and Saturation Part 5: Strategies to Control Bias in Marketing Mix Models Part 6: Hands-on with Bayesian MMM using PyMC Part 7: Response Curves and Budget Optimization

In this blog post, I will explain the meaning of some causal variables and key performance indicators (KPIs) in marketing. Causal variables are factors that influence the outcome of a marketing campaign, such as sales or revenue. KPIs are metrics that measure the performance of a marketing campaign, such as visits or profit.

Causal variables in Marketing Mix Model

A MMM typically includes data such as product and price, customer targeting and timing, distribution channels, advertising, and public relations.

Some examples of causal variables in MMM are below.

Spend

This is the amount of money invested in a marketing channel, such as TV, online, print, or radio. Spend is usually measured in dollars or other currency units. Spend can affect the reach and frequency of a marketing message, as well as the quality and quantity of leads generated.

Impressions

This is the number of times a marketing message is displayed to a potential customer. Impressions are usually measured in thousands or millions. Impressions can indicate the awareness and exposure of a marketing message, as well as the potential size of the target audience.

Clicks

This is the number of times a potential customer clicks on a marketing message, such as an online ad or a link. Clicks are usually measured in absolute numbers or percentages. Clicks can indicate the interest and engagement of a potential customer, as well as the effectiveness of a marketing message.

KPIs in Marketing

KPIs are metrics that measure the performance of a marketing campaign against predefined goals and objectives. KPIs can help marketers evaluate the success and return on investment (ROI) of a marketing campaign, as well as identify areas for improvement and optimization. KPIs can vary depending on the type and purpose of a marketing campaign, but some common examples are:

Visits

This is the number of times a potential customer visits a website or a landing page. Visits are usually measured in absolute numbers or percentages. Visits can indicate the traffic and popularity of a website or a landing page, as well as the quality and quantity of leads generated.

Revenue

This is the amount of money generated by a marketing campaign, such as sales or subscriptions. Revenue is usually measured in dollars or other currency units. Revenue can indicate the profitability and ROI of a marketing campaign, as well as the conversion rate and customer lifetime value.

Profit

This is the amount of money left after deducting the costs and expenses from the revenue generated by a marketing campaign. Profit is usually measured in dollars or other currency units. Profit can indicate the efficiency and sustainability of a marketing campaign, as well as the margin and breakeven point.