Guest Post: Why Marketing Attribution Has Failed in the Boardroom
By Trevor Testwuide, CEO and Co-Founder at Measured, helping brands grow by measuring incremental media contribution to desired performance results.
At our company, which measures incremental media contribution, many of our direct-to-consumer and retail-brand clients were connected to us by private equity or venture capital investors in search of an effective way for marketers to communicate performance to financial stakeholders.
It's a common tale: In an effort to prove their worth, marketers scramble to produce performance reports using complex measurement and attribution models, while investors just want a straightforward and credible understanding of how marketing spend ties to company financials.
For the past decade, multitouch attribution promised to deliver a way for marketers to speak the language of finance. Many people, myself included, invested a great deal into building systems to calculate what percentage of a sale could be attributed to each marketing touchpoint, only to fail at earning the necessary trust in the boardroom.
In my experience, finance professionals tend to go through a somewhat predictable thought process when being presented with performance data, and marketers should focus on answering these questions when making their case.
1. Do I trust the information being presented?
Multitouch attribution never got past this first question. For myriad reasons, multitouch attribution has struggled to live up to its promises. It can be expensive and difficult to implement. And, perhaps most importantly, I don't believe it fully earned the trust of finance or marketing. Multitouch attribution was built on top of an idealistic design for data collection requiring user-level event and identity tracking across all platforms. This dream resulted in a herculean effort of data collection, mapping and reconciliation that never landed. Further, scientists applying the complex statistical modeling did so with no transparency.
Why would any investor, let alone marketer, trust that? Frustrated voices of marketers and many heated boardroom discussions led me to the conclusion that multitouch attribution was the wrong approach in the first place. Rather than attempting the messy task of attributing a percentage of sales to a marketing touchpoint, I recommend figuring out how each marketing tactic incrementally contributes to revenue. In my experience running a company that specializes in incrementality measurement, I've found that is a language that speaks to finance.
2. How did each media tactic truly contribute to the business?
Recent privacy legislation and the crackdown on cookies and third-party data collection have finally pushed marketers to look for a better option than multi-touch attribution. As a result, I've seen that scientific methods like random control testing and experimentation have been gaining traction as methods to understand the media’s incremental contribution. For example, Facebook reported, "Industry leaders such as Netflix, Airbnb, eBay and Booking.com say they've seen success using incrementality measurement in today's rapidly changing advertising landscape."
Incrementality measurement uses statistically sound experiments to reveal the impact of each marketing channel or tactic on desired business outcomes. The results enable marketers to demonstrate in a very clear way how money invested in paid media resulted in an increase in profit.
3. How far can I push my best-performing media?
The natural follow-up questions to proven return on investment are whether you will get the same results by investing more money and when the law of diminishing returns will kick in. The beauty of incrementality testing is that different scenarios can be tested to determine at what point increasing spend would be wasting money.
I've seen many brands run a series of experiments to learn they are significantly oversaturating a particular channel or campaign. It makes sense to keep adding money to an effort that keeps paying out, but knowing when it is financially beneficial to pull back and spend it elsewhere is the key to growth.
4. Can we grow profitably through paid media?
This is the critical question and understandably the most difficult to answer. Yes, through incrementality testing and scenario planning marketers can identify proper budget allocation across multiple channels and tactics, optimized for incremental net profit. What makes this effort exponentially more complicated is that nothing is static. Platforms change, regulations change and markets change, and if 2020 has shown us anything, it is that the whole world can change due to a single event.
Data from a point in time one month ago cannot provide actionable insight for tomorrow if consumer behaviors are shifting day-to-day. Marketers need accurate, consistently updated data to be agile and make profitable decisions. Experiments need to be designed in a way they can be continuously redeployed for current, ongoing insight, not just for the quarterly boardroom meeting.
Finding Success With Incrementality Measurement
For executives and investors who want to help marketers gain trust with stakeholders, it's important to tell them exactly what you need and align on a clear learning agenda. Rather than resign to the fact that marketing will always be somewhat of an enigma, push back on the bloated reports with metrics pointing different directions and ask for a clear delineation of how marketing investments impact business outcomes.
For marketers who may have been burned before and are wary of trusting yet another method of media measurement, returning to a clear and transparent methodology, rooted in science, will be a welcome transition. The reports publishers deliver, based on data from the platforms they own, contain the most accurate performance tracking available. Start there, then build incrementality testing on top of first-party IDs from the platforms to uncover more valuable and trusted insights for reporting and optimizing results.
If finance and marketing can agree on a methodology and currency for a demonstration of trusted media performance, brands will have a clear path forward for growth through paid media.