Note: This post has moved from Leapthree.com to Ayima as part of the 2018 acquisition.
With the incentive of an iPad, eConsultancy membership and a free pass to JUMP, I spent a proportion of my time while hiking around Peru trying to develop my thoughts on optimising the return from doing both online and offline marketing. Naturally, as a web analyst, my focus on this is related to measuring and understanding the performance of marketing campaigns – based on the idea that the more that you understand about the performance of past campaigns, the more you can improve your future campaigns.
The approach that I am developing towards evaluating marketing performance can be used across both online and offline marketing. It is intended to be used to optimise the financial return that is gained from investing in marketing via multiple channels , taking into account the performance of individual channels and their combined impact on business performance.
The future is campaign attribution??
Working with online businesses, the common approach is to use campaign attribution to allocate revenue to the different marketing channels that are being used. (I am going to keep it simple here by only referring to ecommerce websites that have revenue as their goal although the same principles can be applied to non-ecommerce websites using alternative conversion actions). Whichever campaign attribute technique is used (first touch, last touch, weighted attribution, etc), it provides a revenue figure that each marketing channel can claim credit for earning. With this data, the business owner or marketer can calculate the ROI against marketing spend by channel and to understand what the impact would be if marketing spend for a particular channel was increased or cut.
There are known issues right now with this approach due to limitations in the various models. However web analytics and other marketing management tools are developing more sophisticated techniques for attributing revenue to the different touch points.
This is naturally incredibly valuable information as long it reflects reality and I just don’t think it does. It can only be based on known online touch points prior to a purchase being made online and this leaves out so many factors:
- Offline marketing influences are not captured as these cannot be tracked online (except in the use of vanity URLs or similarly identifying features)
- Non marketing influences such as a friend’s recommendation or product reviews are not captured
- Only online touch points on the same computer used to make the purchase are captured, when people could easily have researched the purchase on a different computer
- Purchases made offline are not captured but these could also have been impacted by online marketing and should also be used in any ROI calculations
Beyond all this, marketing campaign attribution relies on being able to convert a person’s buying decision into simple numbers, to calculate the weighting each touch point had on that decision. I don’t believe this is actually possible as people would not be able to accurately say themselves what motivated them to make a purchase – did you book that holiday 15% due to an email, 25% due to a link on an affiliate marketing site and 60% due to a paid search link? This is further complicated by the interaction between different information sources and the requirement to develop a model that works with all people (maybe some people are impacted by the first touch point and others by the last touch point).
What are business owners and marketers really trying to achieve?
My philosophy about all this is still in development (and I totally reserve the right to change my mind based on feedback from others) but my current recommendation is to lose the belief that you can accurately or usefully attribute revenue between different marketing channels. Instead I think you should evaluate the performance of marketing at two levels:
- Overall business performance
- Individual marketing channels based on success actions
The real question that business owners and marketers need the answer to is what to do for the next campaign, not how much revenue did each marketing channel make in the last campaign. While that information would be great to have in order to plan future campaigns, I don’t believe it is possible to calculate. Instead the focus should be on gathering useful information that is accurate and that will allow for the optimisation of future marketing campaigns.
Evaluate overall business performance
As a web analyst, I could list off several pages of potential metrics for understanding performance across different marketing sources and several might even be valid KPIs. But at the end of the day, only one number is going to matter and that is profit.
The measure of success of a marketing campaign is quite simply whether the incremental profit generated was greater than the incremental marketing spend (including salary costs for people working on the campaigns) during the defined time period. A simple way of looking at things maybe but it is what the CEO is going to do.
This simplistic approach to evaluating the performance of marketing covers both online and offline marketing and also purchases made through websites or in store. As the public is using multiple channels to research your products and then makes the purchase via whichever method is most convenient (or offers best value), this approach covers all angles and most importantly covers all customer behaviour.
Note that it does rely on a decent forecast being made of what revenue would be if nothing changed, whether this means no marketing at all or no extra investment in additional marketing channels.
This approach may also just be the best way of evaluating how different combinations of marketing channels perform. While there are numerous statistical and econometrical approaches that can be used, the business bottom line is the one true test. Different combinations of marketing investment across multiple marketing channels can be compared between regions or different date ranges in order to determine the optimal combination.
Evaluate individual marketing channels based on success actions
Being unable to attribute revenue to marketing channels does not mean that their performance should not be measured or evaluated as successful or not. But instead of linking performance purely to purchases and thus revenue/profit, each channel should be evaluated based on predefined success actions. These are specific to each marketing channel based on what you are trying to achieve with the investment in that channel. This applies to both online and offline marketing channels.
The success actions can be linked to website behaviour, other online behaviour or any offline behaviour. Examples of potential success actions include:
- Website visits from a particular traffic source
- Website entries on a particular landing page
- A level of engagement with the website (e.g. view at least two product pages) for traffic from a particular traffic source
- In store voucher redemptions
- Use of a particular hashtag on twitter
- Increased brand awareness as measured by a survey
- Increased sales of a particular product, either online or in store
- Increased sales within a particular store
These success actions need to be defined in advance as part of the marketing planning process, both what the actions are and at what level can the performance of that marketing channel be considered a success given the investment in it. It is this information that is used to review the performance by marketing channel and to decide on future investment in it.
Learn from experience
So if you want to achieve excellence in using multiple marketing channels, my advice is to measure performance, compare against forecasts and use what you have learnt to improve future marketing campaigns.
Do not try and split your revenue between marketing channels, it is just not possible to do accurately. Instead evaluate individual marketing channels against success actions relevant to what you are trying to achieve with that marketing channel.
Be prepared to experiment with different channels, all the old ones and the new ones. But look to the bottom line to understand which combinations work best. Use the data gained from previous marketing campaigns to improve and optimise your future marketing campaigns.
This post was first published on AussieWebAnalyst on 17th Sept ’10.