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Econometrics 101: modern modelling techniques for marketers
by Phil Gaudoin, Director, MetaMetrics

Phil showcases how econometric modelling techniques can help marketers in their quest to provide evidence of media performance and help them inform future marketing strategies.

5th November 2021 Read time: 46 minutes
In business, knowing where to put your budget and making better media spend choices is vital. Marketers need to understand media results and present irrefutable ‘facts and figures’ to the higher-ups to evidence how well specific media channels have performed.  
 
Philip Gaudoin, Director of MetaMetrics, joined the What’s Possible Community sessions to demonstrate how econometric modelling can support marketers in their quest to provide evidence of media performance and help them inform future marketing strategies. 

What is econometrics? 

Econometric modelling is an approach to marketing attribution. It can take the risk out of media spend decisions by applying rigorous modelling techniques to gain the best possible understanding of your organisation’s situation. Those findings assist with decision making, boost ROI, and save budget. 
 
MetaMetrics specialises in econometric modelling that helps answer those ‘common questions’ that marketers may get from the higher-ups, including:  
 
  • Should we be investing in digital, and how?
  • Factoring in media cost, which channels are most efficient in terms of ROI? 
  • How should we flight our media? Burst or drip?  

The misconceptions of modelling  

Phil cautions that econometric modelling is not a silver bullet that will solve all your marketing problems. Some may think of it as a crystal ball and use terms like ‘big data’, ‘AI’ and the like. He stresses that econometrics can’t predict the future, but it can make sense of the past.  
 
Once you’ve established what’s happened in the past, future deployment is much more guided.  
 
Another issue Phil has identified in the industry is that organisations looking to map out how well their media is performing sometimes have an over-reliance on models to make decisions.  
 
“We always say that one of the biggest mistakes that anyone who is thinking about doing this can make is to over-rely on a model. A model is a reduction of reality. It aims to basically reduce down the essential elements and say, ‘look, stripping out all the noise, this is what happened, and this is why it happened’,” Phil said.  
 
Econometricians, Phil says, can take a look back at the past, equipped with data. Then they will untangle it. 

How it can help you 

Econometrics is a foundational approach to marketing attribution. Other forms of attribution include source code tracking, claimed attribution, digital attribution modelling, TV/radio spot matching, etc.  
 
“Econometrics is the only thing that we’ve got still, I would say as marketers, and as marketing scientists, that can stand back and look at everything, attempt at least, to put it on a level playing field and say, ‘what is the contribution of PPC versus television versus affiliates versus out of home’ and so on,” Phil explains.  
 
MetaMetrics can take the historical data, tease it apart, and produce a chart to demonstrate which drivers led to which sales. They quantify the contribution and can then determine what the return on investment (ROI) is.  
 
All in all, econometrics will help you:  
 
  1. Unpick the ‘DNA’ of your business to understand what drives your KPIs
  2. Prove the value of your marketing – channel by channel
  3. Optimise your marketing budget, allocation, and deployment to drive performance 
  4. Provide forecasts and simulations of different investment scenarios to inform planning 
This is only scratching the surface of how econometricians can help marketers achieve their goals. MetaMetrics have made an e-book available for the What’s Possible Community’s growth-minded marketers who are interested in delving further into the world of econometrics. 
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