❓Insights FAQs

What is the unexplained variation on the waterfall chart?

The simple linear regression formula you may have learned in school is: y = x_slope + residual error. Our model is like a really complicated regression. It produces a prediction for your sales in the last seven days, and the difference between the prediction (x_slope) and what actually happened (y) is the residual error, which is what we show in the waterfall chart.

The unexplained variation number will change every week because it’s just a random deviation specific to that week. One week sales may be a little higher than our prediction, the next week a little lower. Over the long run, the average of these deviations should be close to zero (you’ll have as many positive residuals as negative). The unexplained variation is not a measure of how confident we are in any particular channel (we provide confidence intervals for that), and it’s not a prediction of how far off the model will be in the future (we recommend the forecaster to see how big the range of possible outcomes is for a given scenario).

Can you give me an overview of the interpretation of the dashboard?

We sure can!

What does the intercept mean?

The intercept can be thought of as the amount of revenue (or conversions for a customer acquisition model) not attributable to marketing efforts.

It is often called “organic” although that can mean different things in different organizations so we avoid the term.

What is reflected in the intercept?

The intercept varies over time, so it can capture the effect of actions you take outside of marketing. For example, if you release a popular new product that brings lots of new customers, the intercept will trend up. If you introduce new email outreach programs that are successful, that will also be reflected in the estimate of the intercept.

We’re often asked if “word of mouth” is included in the intercept, and that depends on some of the details of your business. The ROI estimates Recast provides are estimates of true incrementality (how many additional sales would you have lost if you didn’t spend this money?). For some marketing efforts, the advertisement causes the person to purchase your product, and then they tell their friend who also purchases the product. This means that if the marketing spend was absent two customers would have been lost, so the incremental benefit was two new customers. To the extent possible, Recast will attribute these to the marketing channel ROIs; however, if the time lapse between the person who was driven by marketing and the person who purchased by word of mouth is large, the model will be unable to identify the causal link back to the marketing channel, and the intercept will absorb that effect.

❓Have a question not covered here? Email us at support@getrecast.com.