Marketing attribution is no buzzword. It’s a fundamental building block of achieving ROI. Sometimes seen as more art than science, it’s often given too little attention–or too much.
When sales cycles are short, marketing attribution can be fairly straightforward. The higher the value of the contract, the longer the sales cycle and the more complex the marketing machine, the harder it becomes to know where marketing spend is achieving ROI.
That difficulty can have marketers sticking with tried and true, even as marketing channels saturate and returns shrink while dollars expand. On the other hand, it can lead marketers into ever-more complicated (and sometimes overwrought) efforts to identify the leverage points where dollars spent amplify conversions.
We asked David Skok, a veteran venture investor and the author of the software-as-a-service (SaaS) metrics blog forentrepreneurs.com, how to approach this difficult problem. “Simplifying is better,” he told us. “I think people get carried away looking for perfect accuracy. What is helpful is to get enough data to make reasonably smart business decisions. Where should you spend money on marketing programs that are working, and where should you reallocate money that isn’t working well?”
This is a consideration that affects companies large and small, and a critical component of board-level marketing conversations. Boards of directors don’t want to watch how every marketing dollar is spent. However, for early stage companies chasing product-market fit, attributing the marketing spend that drives the ideal customer can be critical. And for later stage companies facing saturation and climbing new mountains in growth, correct attribution can be part of a strategic look at the marketing spend with fresh eyes.
Hopefully, your board doesn’t want to watch every marketing dollar. What the marketing experts on your board need is a snapshot, showing what is working, what isn’t and where the opportunities lie. A quick and comprehensive view of your marketing data will allow them to apply their experience to setting strategy. This blog post provides a guide for companies thinking about marketing attribution and communicating the detail marketing ROI at the board level.
Most marketing attribution methods you are likely to read about are more or less sophisticated templates. You’ll read about linear attribution, which weights each touch point equally; U-shaped attribution, which applies a barbell shape, putting most weight at the first and last touches; or W-shaped attribution, which is like U-shaped, but allows more sophistication in the middle. Depending on your business, one or the other of these methods may be a better fit. (This blog post from SnapApp has a good overview of all the various methods.)
We asked Mike Volpe, former CMO of HubSpot and an angel investor, how he has guided that decision in the past. “I usually associate last touch with more correlation than causation, honestly,” he said. “If someone clicks on an ad, I don’t think that ad captures what caused them to be ready to buy. They met us at a conference or read something somewhere else. Paid search ends up capturing that final step, especially if you’re advertising on your brand name. If you’re not advertising on your brand name, then it’s probably a little more genuine.”
Many marketing directors acknowledge the best way to obtain accurate information is to apply a much more complicated method called algorithmic attribution, in which weights are assigned and adjusted based on facts gleaned from large data sets. Algorithmic attribution reads the existing data, looking for patterns that show which kinds of interactions and which points in the sales/marketing funnel are correlated with conversions. It allows marketers to assign weights dynamically, according to the available data.
When you’re at the early stages of marketing attribution–whether as a seed-stage startup, or as a mature company entering new markets, trying new products or experimenting with new lead sources–algorithmic attribution is not an option. There isn’t enough data to feed the decision-making engine that goes into balancing the attribution weights in a sophisticated system. Algorithmic attribution solutions are costly and complex, not something to be applied until the requisite data are available and other factors, like product-market fit, have been de-risked so that the expectation of ROI is there.
In those early stages of establishing a sales-marketing funnel, you need a simple way to attribute marketing spend. Your board will want to know what’s working, without getting down into the weeds of a complicated customer journey. First- and last-touch attribution is often the simplest way to begin to make sense of where marketing dollars are delivering ROI.
The ability to visualize data from first- and last-touch attribution will enable you to communicate quickly and clearly with your board about what is working and what isn’t. Their strategic advice will help you build the marketing engine that may lead to a more sophisticated understanding of ROI–or, you may find the simplest solution remains the best way to evaluate your marketing spend.
Marketing Board Meeting Essentials is an InsightSquared ebook that offers tips on communicating with your board using strategic topics and key metrics. It covers in depth the ideas introduced here, and also covers other areas where your board can help craft a winning marketing strategy, including product-based marketing and interpreting macro market data. Download the Marketing Board Meeting Essentials here.