Things to consider for Fractional Revenue Attribution

Mar, 17 2012

Revenue attribution is the hottest topic these days.  Proliferation of online media, requires reshuffling marketing spend across many more spend categories.  Traditional funnel-engineering type work is good, but static, and doesn't address a few key issues.

1) The transient nature of marketing spend effectiveness that comes and goes with changing keywords, banners offers

2) It does not address the problem in a customer-centric manner (in fact orders are placed by customers who clicked on a keyword, or received a catalog)

The new marketing spend effectiveness paradigm involves understanding causality of relationship between marketing and sales at a transactional level using statistical methods to fractionally attribute.  There are five elements at play;

  1. Order of events:  what sequencing (0rder) of actions lead to sales transactions
  2. Combined effects: what is the joint effects of marketing touches
  3. Frequency: how many touches are required to convert a prospect to a buyer
  4. Time decay:  How the effects of marketing->sales decay with time passed
  5. Effectiveness: what is the relative efficacy of each vehicle is different (e.g., banner view is not the same effectiveness as a 52 pg. catalog)

How this problem can be expressed in mathematical terms and the solution is quite sophisticated and i can not get into it since this is our core IP at AgilOne.

Once an attribution could be made, the next issue is how to measure the effects of overspending, which i will get into in the next post.  The inherent problem in fractional attribution is how to make sure that by increasing marketing spend on one vehicle will most likely (and not by causality) reduce the effectiveness of other existing spend elements.