Part of he problem with today’s social media ROI model is it doesn’t properly take into account how to properly attribute incremental traffic, conversion and sales. This is a microcosm of the online marketing landscape at large – many companies do not properly attribute each respective marketing channel with their due credit for driving traffic and ultimately revenue.
Why don’t companies do this? When you ask advertisers they come up with a variety of excuses ranging from simply not having enough time to do the proper analytics to limited internal resources. Commonly, most companies use what is generally referred to as the ‘last-click method’ of value attribution, that is which ever channel was the last channel that drove the customer to convert is the one that is credited for the sale? Unfortunately, this doesn’t provide the entire truth as to the true effectiveness of an advertisers online marketing efforts.
How should companies properly attribute revenue to the marketing channels? Opinions on this are a dime a dozen. I find the most effective way model of revenue attribution to be as follows:
- The last channel that touches the customer should get the most credit for the conversion. Usually, a customer is touched by 3 to 4 marketing channels before they make a purchase.
- After crediting the channel that drove the channel with the conversion with a majority of the credit, the rest of the credit should be evenly distributed across the rest of the channels that touched the customer.
Let’s walk through an example. Let’s say customer x comes through paid search and makes a purchase of $100 on your website. Further, let’s say that customer X saw a retargeting display ad, an email, and an affiliate ad before eventually converting after coming through on the paid search ad. How should this be broken out? I would suggest that $50 of the revenue be attributed to paid search, and the rest of the $50 should be divided up and evenly distributed among the email, affiliate and display channels.
Proper channel attribution is important in any online marketing campaign and will enhance the effective ROI of your overall marketing efforts.