Have marketers been measuring effectiveness all wrong? Has measuring lead source been all wrong all this time? Should we stop asking our leads where they heard about our offer? Uh oh.
There is a new marketing concept entering marketers’ vernacular called last touch attribution which is supposed to help get a handle on improving the measurement of marketing effectiveness. The fun part of this term is that it is both right and wrong at the same time. It can help marketers make the right decisions or, if applied incorrectly, the wrong decisions. Let’s see how.
Marketers must allocate funds between media channels, choosing the right investments to select one media over another. Those that have the best return should receive more investment; those with lower returns should receive less investment.
The problem that marketers have is how to measure the true effect of each media given complex, dynamic marketing environments. Many marketers often use last touch attribution to apply the entire weight of a specific customer response to one media. However, this approach ignores all prior touches and all concurrent touches by other media. It is also often improperly measured by asking prospects where they heard about the promotion or the brand.
Let’s dig deeper
Last touch attribution refers to how to measure customer response to a specific marketing activity. Here are a few examples illustrating some of the flaws of last touch attribution:
- If, for example, we send out 1,000,000 direct mail pieces and 1.25% of the recipients respond, then the direct attribution from that direct mail piece, ignoring all other touches, is 12,500. But what if this was the third and last in a series of three direct mail pieces that were sent out where the redemption rates were 1.1%, 1.7%, 1.25%, respectively. Did the earlier two drops have any impact on the response rate of the 3rd drop?
- Was there any value in building the brand for those customers that didn’t respond? There were 959,500 prospects that received the direct mail piece but didn’t respond. Will they be more likely to respond in the future when they receive the next ‘touch’?
- In a similar vein, let’s assume there is a monthly newsletter going out to existing customers. Every month based on the newsletter, 1,000 customers purchase something promoted in the newsletter. How do we count the value of all prior touches that the newsletter had on that one, eventual purchase?
- As part of a measurement study, respondents were asked where they heard about a promotion. Was it TV, the magazine ad or an ad they saw on the Internet? Can respondents accurately remember where they saw an ad or will they mi-attribute it to one media over another?
Referring back to cases 1 and 2 above for direct mail managers, their goal is to maximize the response across the campaign. In this case the average response rate was 1.35%. Through better creative concepts (but not more costly offers) if they could raise the response rate to 1.40%, then they would be seen to have increased their marketing effectiveness. (Hopefully this would lead to higher bonuses, as well.)
But what if during the second drop where the response rate was 1.7% there was a TV branding campaign running supporting some of this higher response? Who should get the credit for the increased response? Should the incremental response be attributed solely to TV and the actual response to direct mail be reduced to something less than 1.35%? Or, should the direct mail manager be given all of the credit, because in the end, those prospects responded to his/her direct mail piece?
I contend that both answers are correct. It depends on the business question. If the business question is to increase response to direct mail, then the direct mail manager took advantage of the TV campaign timing to increase overall response. When it comes to the direct mail manager managing the direct mail media, they made the right decision. On the other hand if the business question concerns the optimization of the allocation of media expenditures then the net effects of TV and direct mail must be considered. This will allow the marketing team to properly allocate investment between the two media types. As marketers we need to understand how we can use last touch attribution to make some decisions but not others. Last touch attribution allows marketing media managers to measure and improve the direct results of their marketing. It is not the right method to make allocation decisions across the marketing mix where many other factors may apply.
The Social Media Math
Now let’s take a practical example. This example has to do with a technical blog that is written by a software company’s VP of Engineering and domain expert. When he publishes a post on his blog, downloads of critical whitepapers relating to the blog can be directly attributable to the blog. The referring pages are tracked and downloads are determined and over the next week following the post, the company generates on average 1,000 downloads directly attributable to the blog. The actual number of downloads with the blog as the referring domain varies from 500 to 2,500 per post. Because of the complexity of the channel and the long sales cycle, measuring downloads is a good interim variable to measure success for many marketing activities. All well and good.
But the blog is also picked up by many other blogs, forums and newsletters. Over the following 3 weeks, downloads that are not directly attributable to the original blog are generated and represent, on average, another 2,500 downloads - an amplification factor of about 2.5. Now, many web marketers, using last touch attribution, would assume that each blog post from their VP of Engineering can drive on average 1,000 new downloads. However, the real number of downloads generated by the blog post is 3,500.
Which number is right? Both of them provide good information to help marketers improve their effectiveness. The direct response model is simple to measure and can provide a direct measurement of the effectiveness of the blog. On the one hand, the marketing manager must deliver as many responses as possible from their media activities, including the blog. These indirect effects must also be taken into account in order to improve marketing allocations. Should the marketer invest more in driving direct response from the blog or work with third party sites to drive indirect response and amplification?
With information on the amplification effect and where the increased responses are coming from the marketer can start to target specific third party sites to drive increased response. With the proper measurements and interpretations of those measurements, marketers can now determine whether to invest their time and effort in driving direct or indirect response.
Other Implications of Last Touch Attribution:
- Last touch attribution can help marketing media managers (coupons, direct mail, web marketers and others) determine the direct results from their marketing efforts, ignoring all other concurrent, prior and brand touches. With this information, they can make better decisions to improve results from their direct marketing activities.
- Last touch attribution provides misleading information for the indirect impact of marketing activities. Marketers must be very careful not to use the direct results in complex marketing environments. They may overweight some responses and underweight others leading to misallocations of marketing funds.
- Last touch attribution ignores any brand value generated by touches not responded to. Only with a holistic approach taking into account both the short and long term, direct and indirect value of their marketing activities can marketers make the right decisions as it relates to the measurement of their success with their marketing activities.
- Marketers must properly measure their response in order to make certain that the measured responses actually reflect the media causing the response.
About the author:
Guy Powell has over 20 years experience in senior level sales & marketing in the US and worldwide, both on the client and consulting sides. Through his DemandROMI consulting and training practice he has trained thousands of senior marketers throughout the world representing Trillions of dollars in revenue. Many of the participants also become consulting clients implement and improve their entire marketing culture. Guy has an upcoming book that will help marketers implement a new culture of marketing effectiveness in their organizations. You can sign up for more information at www.Marketing-Calculator.com.