Media Planning & Buying

3 Steps for Using Attribution to Maximize ROI

August 8, 2012

Attribution is one of digital marketing’s biggest buzzwords and has become the focal point of many advertisers’ daily lives. Yet, the definition of attribution, including how it should be utilized and the problems it addresses, varies widely. According to a recent Google Analytics and Econsultancy study, 72 percent of client-side marketers say that attribution leads to better ROI, but a lack of understanding of the topic is hindering widespread adoption. More than 40 percent of survey respondents say a barrier to attribution is being unsure of how to choose the appropriate model or weigh potential advantages.

In this article, I break down attribution — one of the most misunderstood terms in our industry — and explain how it can be used to help you get the highest ROI from your cross-channel marketing budgets.

In its simplest terms, attribution is the practice of valuing media’s influence on the customer’s journey to conversion. How does display advertising play a role in the customer journey? Does social media have an impact on influencing people to consider and eventually buy from your company? Getting to an answer for these questions starts with proper attribution.

More specifically, attribution is the process of assigning varying degrees of credit to different media based on their role in conversion. Consumers are usually exposed to multiple instances of marketing; attribution attempts to value each of these exposures based on their contribution to the marketer’s end goal.Despite advances in attribution measurement, many marketers today still give all of the credit to the last media clicked before a customer converts. Under this “last click” model, if a customer arrived at a website from a search for “Brand X” and completed a purchase, search would get all of the credit. But what if this customer saw a display ad that influenced his or her decision to perform the branded search in the first place? Last-click attribution doesn’t capture this detail; granting credit to the “last click” is usually not an effective means of measuring your media and optimizing ROI.

Breaking down the myth of attribution

Before we go any further, it’s important to distill a key myth about attribution: Attribution, that is the practice of granting different levels of credit to your media, will impact your revenue. Attribution alone will not impact revenue. It is an interim step to tell you what’s working and what’s not, but it won’t change how much money you make. To improve revenue and ROI, you must use what you learn from attribution to change the way you allocate your marketing budget. Let’s view an example to explore this concept further. This interactive chart shows the interplay of different types of media for a sample marketer and presents a simplified version of attribution. You can control two things on this chart:

  • The budget split, which governs how budget is allocated to channels. This is what determines how much revenue you generate.
  • The attribution settings, which govern how credit is assigned to channels. This is what can help you make more informed budgeting decisions over the long term.

In our simple example, say you are a media manager with a budget of $1,000 that you must split between search and display. In the absence of information regarding these channels’ respective roles in the purchase path, you split your budget 50:50. At 50:50, you would make $4,250 in revenue.

Move the attribution settings with the slider, and you’ll see that this has no impact on the total amount of revenue you earn. You can change the ROI that is associated with each channel — but you cannot change the overall performance. This is because attribution does not affect your performance or revenue; it simply affects your bookkeeping.

Bookkeeping is critical, but it’s only one step. It’s important to understand how attribution should fit into your measurement and budgeting process.

Making attribution work for you

The ultimate goal for any advertiser is to optimize spend across media to achieve maximum ROI. Attribution, deployed properly, can help you get there. Here are three steps for using attribution to optimize your marketing ROI:

Calculate channel budgets that will lead to maximum revenue. Contrary to popular belief, the first step in implementing an attribution model correctly isn’t figuring out how much credit to give each channel. Based on an analysis of your last quarter of data, the first step is actually making an informed estimate of how much budget should be devoted to each channel in your media mix. Without this step, you’re likely attributing based on poorly allocated budgets — which won’t help you figure out how much budget to allocate in the future to achieve peak ROI. Using a simple simulation technique, you can develop a model that will show what your performance would have been over the past quarter with different budget allocations.

I’ve already created a simple model in the interactive chart. Move the budget slider, and you’ll see that this marketer would have generated the most revenue: $4,700 — if it had allocated 20 percent of its budget to display and 80 percent to search.

Of course, budgeting based on historical performance is only a first step to proper, ongoing budget allocation. In an ideal world, performance would not change once you set your budgets; you could perform this historical analysis, set the budgets that result in peak revenue, and be done. But in the real world, marketing performance — and therefore how much budget you need across channels to achieve the best ROI — shifts regularly based on factors like seasonality. This is why attribution is so critical — it gives you a way to intelligently adapt your budgets over time as performance fluctuates.

Identify an attribution model that has your channels performing at the same ROI. Attribution is like the conductor of an orchestra — it is what ensures that each channel is playing its part and working with other channels to give you the best possible performance. For example, attribution might reveal that, for every $1 million you spend on display, a quarter of people exposed to that display will perform a search and then convert. Attribution can help you figure out how much search budget you need to capture those queries and how much display you should allocate to continue driving those searches. It’s a balancing act.

To figure out your attribution model, you should again look at your last quarter of data. Your attribution model should result in all of your channels having the same ROI. This balances economic costs on all your resources and keeps your media managers focused on maximizing revenues by hitting the same peak ROI as a team (not just looking at independent targets for their channel).

Going back to our example, a 50:50 attribution setting gives display an ROI of $6.00 and paid search an ROI of $4.38. The problem with these settings is that if you are the media manager, you will be tempted to move more money into display because it has a better ROI relative to search. However, if you do that, you will change your budget allocations and move away from the revenue peak — thus generating less revenue overall.

Assigning 24 percent credit to display and 76 percent credit to paid search exactly balances both channels’ ROI at $4.70. This is the correct attribution setting for this simplified model. If your ROI figures do not balance where you receive the most revenue, you might be tempted to move budget to the higher ROI media — yet you could jeopardize the performance of your other channels in the process, thus bringing down the whole orchestra.

The right attribution settings keep your teams, your budgets, and your media mix working together to give you the best possible return.

Rinse and repeat. Do this every quarter. Now that you have an attribution model in place and budgets properly allocated, sit back and relax — until the next quarter rolls around. You’ll notice that your peak ROI and revenues may fluctuate, but you should be in a better place than you were before you had the model.

Of course, the frequency with which you revisit budgeting decisions depends on your business model and financial controls. Retailers tend to make micro-adjustments each month and full model refreshes each quarter. Repeat steps two and three to reassess your channel budgets and make adjustments to your attribution model, if necessary. A key part of this refresh process is teasing out trends in the marketplace from normal seasonality. Generally, you want to look at same period year over year to understand seasonality and use that information to assign the right proportion of your budget to the coming quarter. More recent data, such as the quarter just ended, indicates that market trends are more indicative of the level of spend you should be thinking about. Once you have a spend level based on current trends and a proportion based on current season, you can use attribution for the allocation across channels.

Now that the myths have been busted, remember that attribution is an important practice in identifying the key moments of influence in the consumer’s journey to that ultimate point-of-purchase. Assigning attribution with 20:20 hindsight is an important first step to informing how you should deploy budget for peak cross-channel ROI.

Without this, it’s impossible to make the most informed choices about how your media dollars should be allocated. But tracking the performance of your attribution and budget allocation strategy requires a continuous test-and-learn process. With these steps and a proper understanding of attribution, you’ll be well on your way to a more optimized media mix.

This article was originally published in iMedia Connection.