There is a lot of buzz around multi-stage models for MMM. And everyone means something different by it. It is a catch phrase and often used to check the box (“we have a multi-stage model’ too”.) It is crucial to assess whether these stages are breaking out the most important and most fundamentally-different steps in the chain from marketing spend to revenue.
The Two Stages of Marketing’s Impact
Marketing spend influences revenue through two fundamentally different forces—one rooted in economics, the other in consumer psychology. Understanding these separately is the key to making marketing investments work harder.
Stage 1: The Economics of Advertising Pricing
Advertising platforms operate as live marketplaces, where prices fluctuate based on competition, seasonality, and external factors. Our Advertising Cost Model analyzes these changes in real time:
- Tracks daily pricing fluctuations for more precise cost forecasting.
- Accounts for external factors like holidays, promotions, and competitive shifts.
- Updates frequently to reflect real-time market dynamics.
Consumers don’t see and aren’t influenced by the price a marketer paid for the impression or click. In addition, the economics of advertising change daily with strong effects driven by day of week, holidays or sales promotions amongst the competitors. Without this layer, performance marketers risk misattributing cost spikes to consumer behavior, leading to flawed budget decisions.
There are even solutions in the market that use constant cost factors or just model on spend, ignoring non-linear relationships between spend and events. That ignores a lot of arbitrage opportunities.
Stage 2: The Consumer Response Model
Once impressions and clicks are secured, how do they translate into revenue? Our Consumer Response Model measures how exposure to ads influences purchasing decisions over time:
- Uses longer-term data to understand gradual shifts in consumer behavior.
- Separates true ad impact from external demand changes.
- Helps forecast how different levels of ad exposure drive conversion rates.
By isolating ad cost dynamics from consumer response, marketers get a clearer, more actionable view of what’s actually driving sales. Having to model ad costs at the daily level, it stands to reason that modeling consumer behavior at the same level of granularity increases consistency and agility of the combined models
Why Multi-Stage Modeling Matters for Performance Marketers
By separating these two forces, advertisers unlock powerful advantages:
- More Accurate Forecasting – Avoid conflating cost-driven fluctuations with consumer trends.
- Smarter Budget Allocation – Optimize spend across channels with greater precision.
- Better Scenario Planning – Predict future outcomes without distorted data.
This approach forms the backbone of LiftLab’s Agile Marketing Mix (AMM) model, powering tools like Reporting, CurveViewer, and Forecasting/Optimization to give brands a sharper, more reliable way to drive performance.
Conclusion: The Future of Marketing Measurement
Multi-stage modeling isn’t just an upgrade—it’s a necessity for brands that demand true ROI clarity. If your current MMM approach isn’t giving you actionable insights, it’s time to rethink how you measure success.
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