by Jim Lenskold
Good marketers know that successful marketing is dependent upon the effective use of multiple communications and touchpoints to your best prospects. Success is driven from the value of repetition and timing, as well as using the strengths of different tactics to create perceptions and actions that move customers through the buying cycle. Yet quite often when measuring, companies assign credit for a sale back to the last contact that generated the lead or sale, neglecting the benefit and contribution of the multiple touchpoints that were part of that contact.
Ideally, you want your measurements to provide actionable information which means knowing if the investment required to run a specific marketing initiative contributes enough incremental profits to meet financial goals. Do you keep these initiatives, replace them or work to improve them? How can you make them more effective? The answers can only be found if you put the right measurements in place.
Let’s compare a number of measurement approaches ranging from simple, directionally-valid measures to more advanced, statistically-valid measures. The progression from basic to advanced can be summarized as:
The typical approach mentioned above takes the value of a closed sale, traces the sale back to the most recent marketing contact or source of the lead, and credits the sale amount to that marketing initiative. This is obviously not a complete picture of the marketing impact necessary to create the lead or sale, but it certainly is an acceptable approach that can be done with some basic tracking mechanisms in place.
Keep these facts in mind as we consider other measurement approaches:
In the following example, the e-mail campaign would be credited with a $10,000 contribution to sales while the trial download on the website would be credited with $21,000 in sales. Direct mail and the Webinar show no impact for these specific two sales.
The big question that comes up is how to account for other touchpoints. The two approaches that follow are ones I’ve seen used by numerous companies to help account for this. Both take the analysis further than the single source approach but run into similar limitations.
In this approach, a touchpoint that is associated with a sale receives the full amount of the sale in its total contribution. For the $10,000 sale that was touched by a Webinar and an e-mail campaign, each of those tactics will be credited $10,000 in sales contribution. For a $21,000 sale touched by direct mail, an e-mail campaign, and a trial download, each would get a $21,000 sales contribution credit. The sales contribution by marketing tactic would be as follows:
E-mail Campaign $31,000
Direct Mail $21,000
Trial Download $21,000
Clearly this approach overstates the total sales contribution. The idea behind the approach is to look at relative value across the tactics. Those tactics that influence more sales, such as the e-mail campaign show higher value. And those that influence more valuable sales, such as the direct mail campaign compared to the Webinar, show higher value.
An ROI analysis that compares the profit from these sales to the cost would be meaningless here based on over-counting total sales. The benefit of this approach is giving more credit to those touchpoints that may have an impact leading into the response tactic and sale. The risk is that there is no cause-and-effect relationship and those tactics reaching many prospects (such as direct mail and e-mail above) may not be having any incremental influence.
The next step that marketers will take in pursuit of their goal to reflect the impact of multiple touchpoints is to take the total value of a sale and divide it evenly across all of the touchpoints made during the marketing and sales cycle. Now the $10,000 sale touched by a Webinar and e-mail campaign will result in a credit to each of those tactics of just $5,000. The $21,000 sale touched by direct mail, e-mail, and a trial download, would add $7,000 of sales contribution credit to each. The relative value remains consistent as the sales contribution by marketing tactic drops to:
E-mail Campaign $12,000
Direct Mail $7,000
Trial Download $7,000
This is certainly a step better than full credit to all touchpoints since the financial values are more in line with reality, making an ROI analysis possible. However, the same flaw exists where a marketing tactic that can reach high potential buyers but has absolutely no impact will show up as making a sales contribution. It is possible that the e-mail campaign is redundant and adds no value when following a direct mail initiative, yet it gets just as much credit for influencing that sale.
Moving out of the tracking approach and into analytics, one methodology that can be useful in this process is a correlation analysis. In effect, the allocation of sales revenue to all touchpoints works like a manual version of the correlation analysis to show higher value for touchpoints associated with high value sales. By looking across many prospects and the touchpoint patterns leading to sales, the statistical technique of a correlation analysis provides more conclusive results as to which touchpoints correlate with sales contribution. This still does not show a cause and effect relationship but is a great first analysis to concentrate your efforts on those marketing initiatives that are most likely to be effective.
When dealing with an environment that has many touchpoints, your measurements should be set up consistent with the decisions you are trying to assess. If you want to measure the contribution of a specific tactic, or determine if a change or additional investment drives additional impact, then the ideal approach is to run a market test. Testing your marketing initiative in the form desired against “business-as-usual” marketing as your control group will give you a measure of the incremental impact.
The addition of your marketing initiative may be generating more response as a follow-up to other touchpoints, improving the conversion rates in the sales pipeline, attracting higher value prospects, or having an overall lift across all other marketing and sales activities. A well designed market test will capture the net impact on leads and sales conversions, eliminating all other external influences and eliminating the question of incremental contribution.
Market testing is not limited to isolating a single marketing tactic. Integrate campaigns with multiple touchpoints that are designed to effectively motivate each stage of the buying cycle can be tested against current practices or alternative integrated campaigns. In addition, this approach to testing tactical decisions can also be applied at a strategic level. And where market tests are challenging, there are forms of pre-post trend analyses that can be used as the measurement methodology.
The improved measurement methodologies make marketing decisions more effective. This can also be part of the cultural shift as you work to move from the mindset of “competing for credit” to “collaborating for credit” both within marketing, and between marketing and sales.