The limitations of attribution models and how to overcome them to get at actual ROI
Surveys are always interesting. Their reliance (typically) on statistical relevance (in this case 600 marketers sample gives a very low margin of error of 3.94%) is what permits robust conclusions and meaningful business intelligence. Yet, caution should be exercised. Just because a reputable firm such as Gartner performs the survey, doesn’t mean we need to accept the findings without probing deeper.
CMOs are very smart people; they know that CEOs and CFOs pay attention to this kind of surveys, and thus use them to support their budget demands. I still haven’t met a CMO who thinks their next budget won’t increase, in anticipation of a self-fulfilling prophecy.
When talking about how marketing budget dollars are actually spent, the focus is currently on more efficient and measurable digital tools. Fewer companies think about traditional media these days. New social media, advergaming, digital influencers, digital distribution channels, internet of things, artificial intelligence, analytics tools and online shopping… these are considered the way to go. So it should surprise no one that ever-more resources are going to what we call technological innovation. Innovation maturity (as cited in the article), however, is an elusive metric which will never be reached. By the time companies can call themselves “mature” in any given media, that media will likely already be obsolete and, surely, will have been replaced by a new one.
Advertising still dominates multichannel budgeting because it is the safe bet. Investing in earned media is problematic; you never know what you’ll get (since its assessment is not robust) and you can’t control the outcome (since the exposure could be positive or negative). Besides, owned media has no credibility in the eyes of an ever-more demanding and well-informed consumer.
So, where do marketers go? They go where they can control the messages, the distribution, establish some sort of reasonable attribution model and precisely measure reach and impact: i.e. advertising (paid media).
Standard attribution models, of course, establish the rules for divvying up credit for sales and conversions among the various touchpoints in conversion paths. The models tend to favor tangible, observed actions over intangible factors that influence the former. Yet, while most marketing professionals would concede the limitations of standard attribution models, their use is still ubiquitous. Why?
In general, the idea prevails that return on intangibles (like influencers and reputation) can’t be measured. This presumed limitation restricts the impact of media and channels. Yet, it’s worth noting that, while the measurability of certain digital tools (like SEO) is the main reason for channel selection, it is still beyond the scope of interest of CEOs and CFOs (due to the lack of a truly robust ROI).
Customer experience is the cumulative result of customers’ interaction with a company throughout the customer journey. Those interactions respond to business objectives like acquisition, cross selling, loyalty, retention, and recovery. Marketing technology and digital business transformation and innovation are some of the tools to plan, manage and monitor those interactions. We should be careful not to confuse the purpose with the tools. CMOs shouldn’t prioritize customer experience over acquisition or retention; instead, they must use customer experience to satisfy acquisition and retention objectives.
A robust and credible way to measure ROI
Since many companies still haven’t found a robust and credible way to measure the actual ROI of their marketing activities, marketers tend to accept less rigorous metrics that have very little meaning outside their organization. The fact is that there is no one-size-fits-all response. Besides being “calculated” by the very same media (thus lacking, at least, an unbiased observation) and based on “secret algorithms” that are the same whether for yogurt or insurance, current attribution models can further be blamed for their lack of an isolation criteria for assessing the actual influence of each touch point in their customers’ decision-making process.
The good news is that measuring ROI from your marketing efforts can be done. The bad news is that you can’t buy it off-the-shelf; truly accurate attribution models must be custom built.
Pablo Turletti, an internationally-recognized expert on marketing and sales efficiency and accountability, as well as a marketing keynote speaker, is the founder and CEO of ROI Marketing Institute (ROIMI), which has offices in Miami, Lucerne, and Madrid. ROI Marketing Institute helps companies around the world improve the efficiency of their marketing investments through precise measurement of the economic return on marketing activities. By directly connecting marketing projects and campaigns to a company’s bottom line, he helps turn them into true business investments. ROIMI provides a broad array of services, including auditing, competency-building, implementation support, consulting and research. Turletti is the author of the books ROI Marketing: The New Performance Standard and Marketing & Sales ROI: What Is It Good For? Learn more about the ROI Marketing Institute at roimarketinginstitute.com, and follow Pablo Turletti at twitter.com/pabloturletti or linkedin.com/in/pabloturletti/.