Attribution modeling or how can you find out which marketing channel is more efficient than the othersTiberiu Anghelina /
Many times marketing departments are shocked to find out that the overall marketing budget generates a very small or even a negative ROI, even if every marketing channel is optimised and generates a positive ROI. How can this be?
Well, it’s the attribution models’ fault.
Attribution models usually come along with a problem: they generate false expectations.
Most companies I worked with on attribution models expected to be able to easily identify where to invest their marketing budgets to have the highest possible impact.
Unfortunately, this question is answered by more complex algorithms than by simply applying attribution models to your marketing channels data.
Now, you will be surely wondering what this attribution model is all about and what is it useful for.
So, let’s set the expectations straight. Attribution modeling answers a totally different question: how efficient is a marketing channel compared to the others?
Lets imagine the following scenario: let’s assume you are using AdWords as a marketing channel, and it reports a number of 50 generated conversions with a total value of $ 10,000.
In case all the 50 clients interacted only with AdWords to find your product (mind you, this means they didn’t use any other traffic source to get to your product), all the 50 conversions will be correctly attributed to AdWords regardless of the attribution model which was used. But this is highly improbable.
It is very likely that the 50 clients used more than one marketing channel to discover your product before converting. This means that, when applying an attribution model to AdWords, we will be able to attribute it a lower number of conversions.
Let’s assume we apply Time Decay as an attribution model. It will report 35 conversions to Adwords, which are worth $ 6,000.
After the attribution model is applied on AdWords, the investment will be profitable as long as it is under the profit margin of $ 6,000, regardless how investments are made in the other marketing channels.
Applying the same attribution model to each marketing channel will not only guarantee that every channel will generate a positive ROI, but also that the overall marketing budget will generate a positive ROI.
But what is there to do if you don’t have the correct data tracking or the necessary resources to apply an attribution model?
Regardless of the attribution model you are using, it will always have an impact on the final results by decreasing the number of reported conversions per channel.
The easiest and most accessible solution in case you cannot apply attribution models is to apply a discount to the number of conversions per channel.
Basically, if you are still profitable even after applying a discount between 10% and 30% to the revenue generated from your individual marketing channels, this will significantly increase the chances that the ROI of the overall budget is positive.
Claudiu Murariu is the Lead Analyst at InnerTrends – a Customer Engagement Platform, and author of DataDiary, a weekly newsletter about and for companies that use data in their business decision making process.
This article is part of a series dedicated to the subject of the attribution modeling in marketing. The first article in this series is: Attribution vs. Payment Models in Marketing: What can I do to pay less for a sale?