Fractional Revenue Attribution: Precision intelligence for multi-channel marketers

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1 Fractional Revenue Attribution: Precision intelligence for multi-channel marketers

2 Today most customer interactions and sales happen over a broad spectrum of marketing channels. This makes the big picture of a company s revenue stream multi-layered and complex. So how can a company accurately assess its revenue flow? Last click attribution, typically offered by web analytics vendors such as Omniture and Coremetrics, is too superficial to capture this depth. Last click attribution falls short for two reasons: Both the marketing communications and orders placed happen across multiple sales channels (such as web, call center and retail point of sale, POS ), and through multi-channel marketing interactions (such as direct mail, banners, affiliates, catalogs, and SMS). This creates a rich multi-dimensional environment where web analytics provides merely a fraction of the data. The attribution logic offered by most providers is too simplistic. Attribution should be based on multiple factors and should be fractional, utilizing statistical methods for accurate results. The AgilOne marketing platform provides Fractional Revenue Attribution to help companies accurately gauge the effectiveness of every dollar they spend. In this white paper, we discuss the framework and rigor that are necessary to fully and precisely attribute revenue in today s multi-touch/multi-channel marketing landscape. Fractional Attribution: Stages Fractional Revenue Attribution is a powerful analytics tool that helps marketers assess and maximize their spending effectiveness. The AgilOne framework consists of five stages: Pattern: In the first stage, we observe events that have happened along with their underlying factors to understand why the actions have occurred. Predict: From patterns we can predict customer behavior, in particular, propensity to buy, propensity to engage, next best product, and other relevant indicators. Target: This is the action stage. Based on predictions, patterns, and other available data, marketers target specific actions, such as reactivating a lapsed customer or increasing the average order value of active customers. Measure: Fractional Revenue Attribution plays a crucial role here, providing a clear understanding to marketers about the effectiveness of their actions. Optimize: In this last stage optimal actions are determined, based on outcomes and goals. For example, even though reactivating customers might not yield the highest return on investment, it is required to replace lapsed customers. 2

3 Fractional Attribution: Framing the Problem To accurately frame the problem, AgilOne makes customers the focal point not the channel, coupons used, or clicks from a specific source. This is an important distinction between our work and that of others. To define fractional attribution, let s first look at the overall marketing spend equation. We ve classified all marketing investment in a 2x2 matrix based on ability to target and ability to measure. Across these two dimensions, mediums such as TV, radio, and billboards are measured using methods beyond the scope of this discussion, including S-curve analyses and econometric time series correlations. These will be covered in a separate white paper on above-the-line optimization. For our purposes, we ll confine the discussion to marketing efforts where the customer is a known entity. Measurable actions and outcomes fall under two categories we call inbound and outbound. Inbound activities offer broad visibility for communication, but without control over who sees and interacts with these touches, such as keyword advertising, banner ads, and affiliates. However, customers and prospects can be identified once they click or view the ad. Outbound activities let marketers select the list of customers with which they will interact, such as , direct mail, catalog, and SMS. 3

4 Inbound vs. Outbound: Different Attribution Logic Inbound and outbound activities set up different customer interaction universes, where measurement and attribution logic are likewise different. Outbound: Since the marketer pre-selects customers and prospects, there is strong ability to control and attribute based on standard structured testing approaches, such as fractional factorials, Taguchi methods on the high end, or simple A/B tests on the low end. (AgilOne employs high-end methods.) This allows for fractional attribution to a set of orders based on test/control groups and marketing offers. Inbound: For inbound activities, more sophisticated mathematical methods are required to accurately attribute revenue back to specific marketing communications. Since marketers cannot employ a set of constant variables to measure results, they cannot readily identify the complex accumulating factors behind a customer s decision to buy. Pattern recognition logic allows marketers to uncover these patterns and reasons. 4

5 Attribution Types Attribution can be based on type of touch and how revenue is accounted: Single Touch first or last touch Multi-Touch uniform or weighted attribution. Uniform attribution equally distributes revenue across all marketing communications, applying specific business rules. Weighted attribution allocates revenue based on a set of business rules or more complex statistical algorithms. Accounting for Artifacts Attribution requires attentive care, as it always results in artifacts. Note that if a specific marketing effort is increased and attribution always accounts for 100% of revenue, any activity (even if it doesn t create incremental sales) will get sales attributed to it, and by design, steal revenue from all other marketing actions. This degrades overall performance. To prevent undetected inaccuracies, attribution should be viewed in two frameworks: totaling to 100% with and without double counting. That way, new actions that don t produce results are easy to detect. How to Attribute Revenue with Statistical Rigor Fractional attribution requires that multiple factors be taken into account. Our research has identified five sets of variables that determine revenue attribution. 1. Order of events: What order of actions lead to sales transactions? 2. Combined effects: What is the combined effect of specific marketing communications? 3. Frequency: How many marketing touches are needed to make a sale? 4. Time decay: How does the marketing effect decay over time? 5. Effectiveness: What is the relative efficacy of each marketing touch? 5

6 The example below illustrates the difference between current attribution models and fractional attribution for a set of orders placed through multiple marketing channels. Fractional Revenue Attribution provides precise, detailed intelligence so marketers can optimize their spending and impact. About AgilOne AgilOne is a cloud-based predictive intelligence application for marketers. Based on a data-scientist approach to marketing, AgilOne processes the exploding volumes of customer data and recommends what immediate actions to take to increase revenue. AgilOne marketing tools are based on an intelligent platform that makes multi-channel customer data clean and smart. AgilOne has helped hundreds of brands including Bosch, ideeli, Moosejaw, PetCareRx, and Shazam. Based in Mountain View, California, AgilOne is backed by venture capital firms Sequoia Capital and Mayfield Fund. For more information, please visit AgilOne, Inc N Shoreline Blvd. Suite #250 Mountain View, CA