June 05, 2010
How To

Improve Revenue Attribution: 5 Insights to Recognize the Impact of Contributing Channels

SUMMARY: As marketers continue to add online channels, they need to know which ones best contribute to sales. Proper attribution is vital to getting the most from your marketing spend.

We spoke with a Marketing VP for a home improvement retailer who believes many marketers are missing the mark on channel attribution. Find out why -- and what you can do to make sure you’re counting the revenue contributions made by all channels.
by Adam T. Sutton, Reporter

Many marketers make a fundamental mistake in their channel attribution process, says Brandon Proctor, VP, Marketing, Build.com. They ignore channels or touches that don’t directly lead to a conversion, but which still contribute to sales.

For example, customers may interact with your marketing in four or five different channels before converting. If the customer purchases, then every one of those channels contributed to the sale, Proctor says.

"The debate for a long time was whether it was the first touch or the last touch that was the most valuable," he says. "We make sure that everything that participated in a sale gets a value."

The team’s model helped them better allocate marketing dollars and dramatically improve performance. They’ve achieved double-digit revenue growth since adopting the model nearly two years ago, and revenue from paid search in particular is up about 30%, Proctor says.

We asked Proctor to explain how his team measures marketing contributions and how they use the information to improve performance. Here are his five insights into why marketers should expand their view of contributing channels:

Insight #1. Shutting off contributing channels can hurt revenue

In a typical online sale, you might see a customer take the following steps:
1. Basic research -- clicked your natural search result
2. Price comparison -- clicked your comparison shopping engine (CSE) result
3. Additional research -- clicked your paid search ad
3. Scouting deals -- searched for a promotion code, found one from an affiliate
4. Completed transaction on your site

Many marketers looking at this process will attribute the sale to their natural search and/or affiliate channel, since the customer found the brand in natural search and converted through an affiliate promotion. This is a mistake, Proctor says, because it doesn't give credit to contributing channels.

Moreover, creating a marketing budget based on such a model is likely to undermine sales drivers.

"What you’re saying is that process took four clicks, and you want to remove two of those items that actually helped to sell," he says. "If you do that, it’s going to dramatically affect your overall revenue."

Insight #2. Equal attribution can reveal top contributors

Procotor’s team uses a model he calls "revenue participation" for channel attribution. If the sale in the above example captured $300, the team would attribute $300 to each channel involved.

This approach helps the team see how much revenue each channel helps generate -- even if a conversion is not ultimately made in the channel.

- Budget based on each channel’s revenue participation

Proctor’s team uses this attribution information to increase or decrease budgets in their marketing channels. Budgeting in this manner helps them make spending decisions based on revenue a channel helped to generate -- not just the number of direct conversions it captured.

"It prioritizes what we should focus on," he says.

Insight #3. Additional spending lifts all channels’ performance

Proctor’s team has gathered their channels’ participation data over time to look for trends, and one thing is very clear: Channel performance is interrelated.

"If I increase a certain channel and want to spend more, it actually [lifts] every single channel, especially with PPC," he says. "Everything follows the same trend. So it shows you that everything touches each other. These trends are eerie in how consistent they are."

Insight #4. Revenue participation model can improve PPC

The team also uses their revenue participation model to determine how to bid on PPC terms. Their keywords are attributed value -- not only when they generate a conversion, but also when they are clicked prior to a conversion.

"Keywords participating in revenue, but not last touch revenue, traditionally have been turned off by marketers, or paused, because they say, ‘It’s not working. It’s bringing in clicks but it’s not bringing in sales,’" Proctor says.

But those assisting or preliminary clicks are contributing to sales, and by counting this revenue the team improved PPC performance in several areas.

For example, they often target and raise bids during certain times of day shown to have historically high conversion rates. By choosing keyword bids based on revenue participation, the team has extended these peak performance periods, sometimes from one hour to as many as three, Proctor says.

Insight #5. Lifting conversions is, of course, vital

Using this model, team does not change their spending in a channel based solely on its number of conversions. However, sales are the ultimate goal.

Optimizing for conversions in each channel is still vital. By optimizing their landing pages and advertising strategy in different channels, the team is able to increase the chance a channel will capture a purchase.

"If you find out that affiliates are the second in the path of four clicks, you’re not going to change the way you market on the affiliates whether it’s the second click or the fourth," Proctor says.

Useful links related to this article

Members Library -- Improve Attribution: 8 Steps to Measure the Impact of Your Marketing Efforts

Members Library -- Analyze PPC Data to Uncover Date-based Performance Trends: 6 Tactics

Members Library -- Attributing Conversions to Assisting Keywords Lowers CPA: 5 Steps to Optimize Bids


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