What Modeling Method Should Be Used For Media Mix Modeling?

What Modeling Method Should Be Used For Media Mix Modeling?


Hi, I’m John Colias, Senior Vice President
of Decision Analyst’s Advanced Analytics Group, here again with the Media Mix
Minute. Today we’re going to talk about the modeling method used in media mix
modeling. To begin with, it’s very important to decompose the time series
variation, the across time variation from the cross-sectional variation, that would
be across brands, across markets, across regions, for example. And the reason it’s
important to decompose it, is to get an accurate measure of the media activity
itself on unit sales. As an example, if you see the bar chart in the slide, you
can see that media activity for two brands is increasing over time,
represented by the bars increasing in height over time, and on the chart the
graph, we can see that as the media activity increases, we get these bumps in
the unit sales and we have two lines one for one brand and one for the other. And
if we were trying to model this data, and we have this sea of points out
there, and we fit a line to the data, we get to dash the line. If we didn’t take
into account the variation across brands, the differences of the two brands, then
we would get this dashed line, which you can see has a slightly steeper slope
than each of the individual brand lines. And what this means is, that if we do
this kind of modeling, if we use a modeling method that doesn’t decompose
the variation across brands from the variation across time, we would get a
bias in the measure of the impact of media activity on the unit sales as
represented by the little bit steeper slope that you see in that line. So
bottom line is we need to decompose these these two elements the time series
of element, and the cross-sectional element.
The way that we do that is to apply a method called mixed modeling. It’s the
most common method used to do this in media mix modeling. And by using this
media mix, this mixed modeling we can get a more accurate measure of the impact of
media activity on sales. Thank you. you

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