Why ONLY Attributing Revenue to Marketing Treatments is a Bad Idea
Sure, at first glance it makes sense. Attributing revenue to all the marketing channels that you spend money on seems to make sense if you are trying to calculate ROI. It will also eliminate the issue of double-counting sales across marketing channels. However, this methodology ignores all of the other important factors that drove a customer’s purchase and only gets you part of the way there. It doesn’t answer the question of: What's the incremental portion of sales that marketing drove and what were the other revenue drivers?
Non-marketing Treatments that Drive a Purchase
Marketing treatments are fairly easy to identify – Catalog, Email, Display Advertising, Affiliates, Search – but what are non-marketing treatments?
Customer driven – This is important. For established brands that have spent millions of dollars on advertising for many years, brand equity may account for a large portion of sales. Customer driven sales can be seen in everything from repeat purchases to trademarked/branded natural search, and direct load to the website. One way to think about it is that if you were to turn off all of your marketing today, you would continue to see a portion of your sales tomorrow, next week, and next month. This is your brand equity and loyal customer base.
Calendar effects – Retailers, for example, are fully aware that the holiday season has a huge effect on sales. Black Friday and Cyber Monday are what analysts benchmark against every year. Marketing clearly has an impact on the success of sales during the holidays, but the holidays themselves – knowing that Santa must deliver gifts on Christmas morning – should also take credit for a portion of the sales.
Store/Trade area – Simply having a store in a convenient, close proximity accounts for a portion of sales. If a customer purchases from your store every Thursday after eating lunch across the street and receives an email from you, is her purchase this Thursday because she received an email from you or because she is a loyal customer and your store is convenient?
Promotional effect – Separate the impact of a promotion from the marketing treatment. The 50% off promotion and the postcard to advertise it are both likely drivers; measure the impact of each portion.
Customer events – Inviting a customer to a VIP event in a store with wine and cheese, resulting in a large purchase at the event – again, the credit is likely shared between the marketing to promote the event, customer loyalty, and the event itself.
Measuring the impact of each revenue driver is complex, but necessary, to fully attribute revenue and to know what’s working.