Attributing Sales Results to Marketing Expense.

Most multi-channel catalog marketers we deal with today struggle with properly attributing marketing and sales actions and expenses to results.   Many still confuse where they receive an order with how and where they create an order. In the age of “internet mania” there is a bias or a tendency to rush to the conclusion that if the order or new customer came into the business from one of the online channels that must be where that order or new customer was created. Often, this is not the case, and can lead to erroneous actions like shifting marketing dollars from “offline” activities to “online” activities.

We have been involved in several client assignments over the last several years where such “all thing Internet” exuberance has resulted in the reduction of catalog mailings or outbound calling efforts to the detriment of revenue, the active customer file and customer quality (lifetime value).

Accordingly, it’s more important in today’s multi-channel marketing environment where marketers frequency deploy more than six very different marketing tactics (mailings, telephoning, PPC, email, PLAs, SEM, trade shows, etc.) to determine the exact combination and sequence of events that resulted in an order and/or new customer being acquired.

Easy to say but where do you start?

Every marketer has data and, more often than not they are using that data to draw conclusions and refine tactics.   Increasing they are building attribution models that assess what past combinations of marketing activity produced desired results.   By examining these past activities and their “period of influence” on an order predictive models emerge.     Simply put, by looking backwards and examining the combination of activities that produced an order or new customer (with varying LTV/1 year values) they can predict what a similar sequence of marketing actions will produce in the future.

By overlaying the response curves or “periods of influence” of various marketing actions and by studying their interrelationships such an attribution model can assess where results have come from and where they are likely to come from in the future.   Such models can be built simply, internally or with more sophistication, particularly around determining interdependencies and interrelationships of tactics, by specialized external data modeling firms.

The key output is the “attribution report” that details by marketing activity by revenue, customer acquisition, and customer reactivation.   By adding in 1-year value to customer attribution and margin to revenue the marketer can see more clearly the ROI/value on both revenue generation and customer acquisition/retention activities.

Not surprisingly, no matter how good any attribution analysis and modeling is there will be a percentage of orders and customers that, for a variety of reasons, will not be able to be attributed.   In this case, marketers often prorate the “unknown” orders and customers acquired proportionately or by using a judgmental business rule.   Often knowing the channel the unknown order came in on provides a clue to it’s probable, if not confirmed, source.

So with attributed revenue and new customer acquisition, the marketer now has a better picture of “cause and effect” of marketing actions that he/she would have if they were only using direct or “last click” reporting.

We believe that marketers need to do the best job on attribution they can, however, they need not get overly engrossed in the 100% accuracy of their attributed revenue and new customer acquisition results.   Ultimately, it’s not the absolute number than counts but the comparison of the relative results to the relative marketing spend. The goal becomes re-allocation/balancing and overall improvement not moving absolute accuracy from, say, 95% to 98%.  The “yardstick” of absolute attributed performance can be a little off as long as it’s applied consistently in all ROI analysis.

If you are struggling with implementing attribution analysis or simply beginning the move towards more accurate marketing ROI we would be happy to have a no-obligation initial conversation with you about how to approach it in your business.

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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