Marketing Analytics: Attribution Is Not Incrementality

One of the business side effects of the pandemic is that it has put a very sharp light on Marketing budgets. This is a very good thing under all circumstances, but particularly beneficial in times when most companies are not doing so well financially. There is a sharper focus on Revenue/Profit. From there, it is […]

The post Marketing Analytics: Attribution Is Not Incrementality appeared first on Occam’s Razor by Avinash Kaushik.

One of the business side effects of the pandemic is that it has put a very sharp light on Marketing budgets. This is a very good thing under all circumstances, but particularly beneficial in times when most companies are not doing so well financially.

There is a sharper focus on Revenue/Profit.

From there, it is a hop, skip, and a jump to, hey, am I getting all the credit I should for the Conversions being driven by my marketing tactics? AKA: Attribution!

Right then and there, your VP of Finance steps in with a, hey, how many of these conversions that you are claiming are ones that we would not have gotten anyway? AKA Incrementality!

Two of the holiest of holy grails in Marketing: Attribution, Incrementality.

Analysts have died in their quests to get to those two answers. So much sand, so little water.

Hence, you can imagine how irritated I was when someone said:

Yes, we know the incrementality of Marketing. We are doing attribution analysis.

NO!

You did not just say that.

I’m not so much upset as I’m just disappointed.

Attribution and Incrementality are not the same thing. Chalk and cheese.

Incrementality identifies the Conversions that would not have occurred without various marketing tactics.

Attribution is simply the science (sometimes, wrongly, art) of distributing credit for Conversions.

None of those Conversions might have been incremental. Correction: It is almost always true that a very, very, large percentage of the Conversions driven by your Paid Media efforts are not incremental.

Attribution ≠ Incrementality.

In my newsletter, TMAI Premium, we’ve covered how to solve the immense challenge of identifying the true incrementality delivered by your Marketing budget. (Signup, email me for a link to that newsletter.)

Today, let me unpack the crucial differences between attribution and incrementality to empower you – and your Senior Leaders – to have intelligent discussions about the actual problems you need solved, and justify an investment in additional Analysis Ninjas.

Understanding this difference will also help you ace your job interviews – a lovely bonus. :)

An introduction to multi-channel digital attribution analysis.

When you open a report in any digital analytics tool, like Google Analytics, almost all the reports you look at attribute full credit for the Conversion to the referrer associated with the last session where the conversion occurred.*

(*For the Analytics super nerds, my sisters and brothers: Strictly speaking Google Analytics reports are not last-click conversion, they are last-non-direct-conversion.)

In English, this means if someone clicked on a Paid Search ad on Bing and converted..

attribution_paid_search

…Bing gets all the credit for that conversion in your Analytics reports.

For example, a report like this one…

google_analytics_conversions

This report is not an entirely accurate representation of advertising’s performance because the last-click rarely represents the complete consumer journey.

The customer might have seen, or been forced to see :), other ads preceeding that last touch-point which happened to be Bing in our example.

The act of identifying all the touch-points (impressions and/or clicks) and their influence is what’s known as attribution analysis.

Many analytics tools, including Google Analytics, come built with functionality to help you understand the complete consumer journey and all the touch-points leading up to a conversion.

What Marketers do, in particular the ones whose job descriptions include only paid media, is say ok fine, let us look at all the touch-points that led to conversions.

In a nifty bit of sleight of hand, they create analysis that is reflected in this picture…

attribution_paid_media

This does sucks less.

But. Notice a pattern. They are all paid ads.

Paid Media Marketers (sometimes referred to as Direct Response Team or Performance Marketing) love doing attribution analysis across only paid media channels becuase it allows them to distribute credit only across their work.

This inflates the importance of paid advertising, at the expense of owned and earned tactics – which your company is also investing in.

That of course suits the agenda of your Paid Media Marketers just fine.

But. It is wrong.

Because the complete consumer journey to conversion, in this instance, actually looks like this…

attribution_owned_earned_paid_media

The advertising played a role in driving the conversion. Yes. Absolutely!

So did owned media. Email, was a crucial second to last before conversion.

So did earned media. Organic Search, got the individual to an optimal page on your site.

As you do digital attribution analysis, watch out for Paid Marketers who say they do attribution analysis but only count paid media channels. Work to help them, and your Senior Leaders, understand that this inflates paid marketing’s value well beyond what’s deserved.

The paid media team might resist saying omg but that will require expensive tools and more data and take so much time and it is so painful and omg why do you hate us so much!

Worry not. Every decent web analytics tool now includes built-in attribution analysis across owned, earned, and paid across digital platforms.

It will, literally, take 30 seconds to get going (of which 25 seconds is you booting up your computer).

Is my attribution analysis awesome?

Here’s how you can measure how sophisticated your attribution approach is:

If you are using the full power of the attribution modeling across owned, earned, and paid, you are at an industry-average level of analytics sophistication.​

If you have hooked up the owned, earned, and paid multi-channel attribution analysis results directly to platforms you are buying ads on to ensure smarter bidding, you are at an industry-leading level of analytics sophistication. ​

(In English: Attribution analysis will give proper credit to AdWords instead of an over/under-inflated value. This can be connected to AdWords. AdWords will lower/raise your bids to account for the credit it deserves. Nice.)

Getting to industry-leading level is not just about being able to do the analysis, it is about automating the actions that can be take from the analysis.

Now you understand why attribution is important, how your Paid Marketing team is likely inflating its value, and how to check how sophisticated your approach is… Let’s take a small detour and understand two attribution analysis challenges I want you to be careful about. Then, we’ll get back to Marketing incrementality.

Attribution Challenge #1. Which attribution model rocks?

If last-click and last-non-direct-click are not the best options, which attribution model should you use?

Some people like to use first-click.

First-click attribution is akin to giving my first girlfriend 100% of the credit for me marrying my wife.

Not that smart, right?

You can read about all digital attribution models in this post on the good, bad, and ugly attribution models – it contains pretty pictures!

TL;DR: I recommend not using last-click, first-click, linear, time decay, or position-based, models. If you are a genius, you can use custom attribution modeling. See the post above for all the delicious details, pros and cons.

The one I recommend is data-driven attribution modeling.

Don’t overthink it. (In this instance…) You and I are not as smart as machine learning algorithms that can analyze insane complexity across terabytes of information from millions of customer interactions.

Trust the machines. There are more productive uses of your time.

Attribution Challenge #2. Wait, what about all my offline media?

This is not the complete picture for so many companies…

The real world also exists!
For so many companies, the reality of their marketing efforts looks like this…

attribution_owned_earned_paid_media

The real world also exists, in addition to the digital one!

When you create a full view of your total marketing budget, for most companies the reality of your marketing efforts looks like this…

attribution_digital_offline_media

So what do you do with your Google or Adobe web analytics tool?

Not much.

Sure every company will tell you that you can stand on one feet, curl three left toes, raise your right hand, close only one eye, stand under a shower of arctic-cold water, and fast for 27 days and then do some hard coding to jury rig some sort of signal gathering mechanism with JavaScript hacking and maybe get your offline media into your web analytics tool and maybe you have complete attribution modeling ability.

I just want to observe that their recommended solution is difficult to pull off.

There are other options at your disposal. I refer to this full attribution quest: Marketing Portfolio Attribution Analysis.

Your primary solution will consist of advanced statistical modeling.

These are custom built for each company, there is no off-the-shelf product worth its salt.
Some consulting companies will sell you media-mix modeling solutions, from experience I’ve come to see them with suspicion due to data access issues, stretching math and data beyond a stretching point and so much more.

If you spend so much on marketing that Portfolio Attribution Analysis is worth it for you, you need to hire a small number of brilliant people and empower them.  It is the only way to ensure digital is not being over-credited for the conversions that are rightly being driven by offline channels – or vice versa.

Let’s get back on the, more exciting, incrementality train.

Attribution is not Incrementality.

Now that you are so much smarter with a new level of appreciation of the nuances involved…

Let’s say we got 10 conversions this month (each worth $14 million :)).

When we do attribution analysis, whatever kind you like, what we are essentially doing is taking the credit for those 10 conversions and distributing it across identified marketing activity…

online_offline_attribution_analysis

This is good.

Be proud of yourself and your company peers.

When done right, it helps you identify how to invest your marketing budget across owned, earned, and paid media optimally (the last-wish of every CMO).

But above is not the full picture of reality.

Marketing is not the only thing that drives conversions for your company.

This one is the full picture of reality…

full_picture_attribution

By existing as a company what I mean is that there is a whole bunch of activity that could cause people to buy your company product – that has nothing to do with any kind of Marketing.

I’ve constantly recommended that you buy Patagonia products because it is a company for social good and I love them.

You might have seen me wearing my blue nano puff jacket and thought I looked snazzy in it hence right then and there you decided to buy it.

Perhaps you read a review of Patagonia products by my friend Daniel and you decided to buy it.

(True story) You might have landed in Frankfurt on a really cold day without a jacket – because California is warm! – and you bought the first jacket you bumped into, and it happened to be Patagonia.

Your mom noticed something in your hiking pictures and decided to gift you a gorgeous Mellow Melon Atom Sling.

I could keep going on about all the pathways to purchase that don’t have anything to do with the work of your Marketing team (though the team, and everyone in it, is incredbily awesome!).

The company will sell a whole bunch of products merely by existing.

This is true for your company as well.

The 10 conversions above, that you were crediting only to Marketing, is wrong.

Reality is more like this…

true_full_picture_attribution

Marketing’s Incrementality then is being able to identify how many of the 10 conversions would have happened anyway – even if you did no Marketing.

A whole bunch of Conversions you are attributing to Paid Search or Facebook would have happened any way. Do you know how many?

I’ve done loads of incrementality analyses during my career across different types of companies.

Using the highest percentage incrementality that the data has demonstrated, the answer as to how many of the 10 conversions are incremental would look something like this….

It is measuring what's known as True Incrementality…

incrementality_analysis_results

Typically, if measured accurately, the true incrementality of your Marketing will be in the range of  8% or 22%.

To recap:

Your Paid Search campaign did not entirely drive 10 Conversions.

Expanding the view, your Paid Media did not entirely drive 10 Conversions.

Expanding the view further out, your digital Owned, Earned, and Paid Media did not entirely drive 10 Conversions.

Expanding the even more,  your Online AND Offline Marketing efforts did not entirely drive 10 Conversions.

One last expansion of the view, all your Marketing efforts drove 3 Conversions that you would not have gotten any way.

Marketing’s Incrementality!

Oh, now go back and do attribution analysis to determine how to distribute the credit for those 3 Conversions across your Online and Offline Marketing using my recommendations in the first part of this post.

The very best companies on the planet know the number of outcomes incrementally driven by their Marketing (and other) initiatives.

Bottom line.

1. Whatever you do, never say attribution is incrementality. It’ll hurt my feelings.

2. Do you know what your Marketing’s true incrementality is?

Carpe diem.

As always, it is your turn now.

Please share your critique, reflections, and your lessons from the quest to measure Marketing’s incrementality via comments below. Thank you.

The post Marketing Analytics: Attribution Is Not Incrementality appeared first on Occam's Razor by Avinash Kaushik.