MULTICHANNEL ATTRIBUTION

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www.paradysz.com

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COMPANIES WANT TO GROW

their businesses, despite the turbulent economy. To exploit all avenues of growth, marketers have spread their resources across multiple digital and traditional channels. While customers benefit from the increased flexibility and convenience of these channel options, marketing is often overlapping, redundant and unsustainable. INTRODUCTION

The number of available channels for customer interaction has dramatically

increased over the past decade. Digital media have grown to represent a significant share of customer interaction. One forecast has digital advertising accounting for 17 percent of global advertising in 2011. 1_{As a result, marketers have spread their}

resources across multiple digital and traditional channels in order to understand and leverage all avenues, particularly emerging media. While customers benefit from the increased flexibility and convenience of these channel options, marketing is often overlapping, redundant and unsustainable.

A marketing imperative and key success factor is maximizing the impact of limited resources by the most effective allocation of those resources across multiple channels. This enables the allocation of marketing dollars to be optimized and is the basis of a competitive advantage. Good decisions require detailed analyses of how multiple marketing efforts influence one another.

Marketers now need to evaluate their multichannel approach to gain a clear

understanding of the efficacy of each channel. This requires analysis of performance metrics of each of the channels individually. In addition, it is necessary to fully understand and quantify the effects of one channel on another.

Based on our experience with leading multichannel companies, this white paper describes a practical performance-based approach to revealing the unique contribution of each channel and interdependence across channels. The result is a foundation on which allocation decisions can be tested, measured and continuously refined. CHANNEL ATTRIBUTION

Channel attribution is the practice of attributing the performance and costs of multichannel marketing programs to the specific marketing tactics that have contributed to the end result. Examples include attributing a portion of retail sales to a catalog and burdening retail with a portion of the costs of the catalog. The result is a more complete view of the costs and results of each specific marketing program. This holistic view enables data-based decisions to be made regarding the most effective allocation of costs across the media mix.

1 _{GroupM July 2011}

MARKETERS NOW

NEED TO EVALUATE

THEIR MULTICHANNEL

APPROACH TO GAIN A

CLEAR UNDERSTANDING

OF THE EFFICACY OF

EACH CHANNEL.

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ONLINE ATTRIBUTION

The focus of most channel attribution analysis and tools is on disaggregating online marketing (online attribution). The state of the art for online attribution is based on three commonly used techniques:

LAST TOUCH ANALYSIS, wherein the “credit” for the purchase is allocated to the

online customer touch point from which the click-to-purchase occurred.

FIRST TOUCH, wherein the purchase is attributed to the first identifiable click

recorded for the customer, usually confined to a specific campaign or product set to help validate the assumed correlation.

AVERAGE ALLOCATION, in which all recorded touch points for the customer are

allocated an equal share of the credit.

There are several commercially available tools designed to analyze multiple online interactions. Vendors such as ClearSaleing, Atlas and Coremetrics provide tools that help provide an understanding of multiple online touch points and their impact on the overall customer interaction. These tools attempt to build on the three techniques above, which have become inadequate as stand-alone metrics to understand the payoff of various online interactions. The tools leverage correlation analysis, source codes and direct customer inquiry (via online and call center) to reach an allocation of costs and performance.2

MULTI- OR CROSS-CHANNEL ATTRIBUTION

While online attribution provides valuable insight into the efficacy of online efforts, it does little to help the marketer understand the impact of other channels of customer communication. For example, “a little over a year ago, eMarketer reported the results of a survey that showed nearly 70% of U.S. Facebook users were more likely to buy a product or visit a retail outlet based on a positive referral from a Facebook friend. But according to comScore data collected just a few months later, social networks by themselves were credited with just 1% of the purchase activity by U.S. online buyers.” 3

The consensus among leading edge marketers is that the ability to attribute ROI across channels is a necessity for growth. Companies literally cannot afford to sustain their spending levels on multiple channels without deeper insight into their cost effectiveness.

Much less work has been done, however, to broaden the analytical process to include all channels in the marking mix (FIGURE 1). There are several factors for this, including:

e-mail online mobile direct mail catalog retail call center CUSTOMER broadcast media

AWARENESS CONSIDERATION PURCHASE

Customer goes online

or to retail store Customer makes purchase

Customer receives catalog + mobile offer FIGURE 1

COMMONLY

USED

TECHNIQUES

2 _{The Forrester Wave™: Interactive Attribution, Q4 2009} 3 _{MediaPost Online Media Daily, August 2011}

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Unauthorized reproduction or use is strictly prohibited. paradysz.com 3

• The lack of a turn-key suite of applications that can accomplish the analysis. The marketer may not have the in-house expertise to cobble together all of the tools and analytical systems that are required to provide actionable analyses.

The lack of standardized data models and data definitions also presents a barrier to correlating data and analyses across disparate systems.

• In-market testing is usually required, such as saturation or withholding of a catalog in a geo-targeted area. This is difficult to measure and requires long-term planning and coordination across multiple groups within the company. The organization itself may present barriers to testing. For example, product managers who are unwilling to take the risks associated with certain in-market tests.

• Questionable repeatability that lowers confidence in the results. Environmental factors, such as seasonal variation, external economic factors and even weather can impact sales during the test period. This calls into question the impact of the test as a stand-alone factor in measured sales in the geo-targeted area.

• Expense. A full multichannel analytical run is very expensive; as high as $750,000.

A PRACTICAL APPROACH

Notwithstanding these challenges, leading-edge companies have performed multi-channel analyses that are practical, affordable, and yield satisfactory results. There is one common aspect to these approaches: they identify a limited but significant subset of customer interactions and focus the analyses on them. We have identi-fied this “break the problem into bite-sized chunks” method as the most promising approach at this point in the evolution of full multichannel attribution analyses. If the aperture is open too wide, the flood of data and interactions can be so large as to overwhelm analytic capability and yield little or no actionable information. Conversely, a very narrow view will fail to reveal the cross-channel impact that is the goal of multichannel attribution.

The process that narrows the focus to a small but significant set of customer touches typically follows a sequence:

• Map the sales cycle against channels in a simple matrix.

• Determine which customer touch points have the greatest affinity and interaction (e.g., catalog-to-web and retail).

• Collaborate with product marketing and sales to identify the programs and interactions that they are most interested in understanding and improving. • Agree on scope, focus and goals.

• Perform in-market testing.

• Produce a quantitative “heat map” which will provide insights to inform the most effective allocation of marketing resources.

WHEN THE TOPIC OF

MULTI- OR CROSS-CHANNEL

ATTRIBUTION COMES UP,

MANY MARKETERS LEAVE THE

TABLE. THEY BELIEVE IT IS TOO

COMPLICATED, EXPENSIVE AND

UNRELIABLE TO MERIT SERIOUS

CONSIDERATION.

–SUZY SANDBERG

PRESIDENT, PM Digital, sister company of Paradysz

IF THE APERTURE IS OPEN

TOO WIDE, THE FLOOD OF DATA

AND INTERACTIONS CAN BE SO

LARGE THAT IT YIELDS LITTLE OR

NO ACTIONABLE INFORMATION.

CONVERSELY, A VERY NARROW

VIEW WILL FAIL TO REVEAL THE

CROSS-CHANNEL IMPACT

THAT IS THE GOAL.

–ROB STAGNO

PRESIDENT, Paradysz

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The sales cycle can be broken down into steps, from awareness to consideration and purchase. Overlaying the steps of the sales cycle are the channels through which the customer interaction takes place. FIGURE 2 shows a matrix of the channels

and selected steps of the sales cycle.4_{Traditional and emerging channels are used in}

an overlapping way, with each channel targeted at one or more steps in the cycle. A marketing program usually leverages one channel to impact one or two of the sales cycle steps. Performance measurements are confined to these specific objectives—cells in the matrix. These metrics have been developed in isolation from one another and therefore don’t account for the cross-channel impact. They also are biased towards measuring results that are the most likely outcome for that channel, such as a web click-through for an online program (FIGURE 3). For example, a catalog is primarily evaluated in terms of order response rate and average order size. The order data will be captured from the response channel(s) that have the most common affinity for a catalog, such as call center and online. This is different than retail, which is usually measured in sales metrics such as year-over-year same store sales. While the performance metrics of each of these channels individually is well understood, interdependence across channels is not. CHANNEL AFFINITY & INTERACTION

If a company has both a catalog and a retail channel, how do they impact one another? It is likely that the catalog drives retail, perhaps even to a large degree. It is also likely that the retail shopper will make the “purchase decision” while in the store, but then choose to buy online at some later time. In such cases, the catalog metrics will be skewed—not getting credit for the online sales that it drove, and getting credit when it was really just providing fulfillment for a retail sale. Similarly, the retail store ROI will be inaccurate because the demand generation effect of the catalog is not taken into account (FIGURE 4).

awareness consideration purchase call center direct mail email catalog DRTV retail online print insert media SALES CYCLE CHANNELS

FIGURE 2 | CHANNEL MATRIX

This matrix highlights the correlation between the sales cycle and media channels; each channel can be targeted at one or more steps in the sales cycle.

direct mail email retail online

CHANNELS

FIGURE 3 | ANALYTIC SILOS

Oftentimes performance measurements are based on the most likely outcome; isolated from one another, not accounting for cross-channel impact.

inbound call response rates clicks on link revenue

fulfillment revenue click-thru unique visits

STOP STOP STOP STOP CHANNEL-SPECIFIC EVALUATIONS e-mail online mobile direct mail catalog retail call center CUSTOMER broadcast media

AWARENESS CONSIDERATION PURCHASE

Customer goes online

or to retail store Customer makes purchase Customer receives catalog + mobile offer

FIGURE 4

4 _{From Managing Hybrid Marketing Systems by Rowland T.} Moriarty and Ursula Moran Harvard Business Review

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Unauthorized reproduction or use is strictly prohibited. paradysz.com 5

When choosing the focus of the multichannel analysis, care should be taken to choose touch points that are usually related within the sales cycle. A good example is a catalog measured by sales through the channels that the catalog points to, for example, web and telephone. There are many well-known techniques for tracking purchases through call center or web. These include explicitly asking for source codes in call center and web fulfillment, as well as more subtle techniques such as unique product SKUs, vanity phone numbers and URLs. The important point here is not to go too far afield in analytical focus. “Keeping it simple” yields practical information that can be consumed by the organization and acted upon in the short term, in as little as 8-12 weeks.

SCOPE, FOCUS AND GOALS OF THE MULTICHANNEL ANALYSIS

After laying out the channels and sales steps of interest in the matrix, the next step is to focus on those “cells” of the matrix that have been selected for analysis. For example, a retailer that also mails catalogs may believe that the catalogs help drive retail, phone and web fulfillment. The retailer wants to understand how to allocate the costs of the catalogs across these three fulfillment channels. The focus is represented in the channel matrix in FIGURE 5.

This four cell focus is representative of what we believe is a good target for analysis. It represents significant marketing touch points that have a proven affinity for one another and through which a lot of marketing spend and customer fulfillment flows. At the same time, it is sufficiently focused so that the attendant market testing and analytics are practical and affordable.

This focused test design enhances the ability to get buy-in across the organization. Product managers and sales will more readily become interested in the outcome of the analysis, anticipate that the results will help drive more effective marketing and agree that the testing will be confined enough to minimize negative short term impact. IN-MARKET TESTS

The tests may employ various approaches depending on the specific needs of the study. One technique, used for measuring catalog impact on retail, involves geo-targeted saturation or withholding of catalogs for a time period (8-12 weeks is typical) and measuring the impact on retail sales in the targeted area. Special coding of some line items in the catalog or selective removal of products with a well-known sales history can also be effectively used to measure catalog impact on other channels, including online and retail.

In one such set of market tests, a well-known multichannel consumer company was able to determine the distribution of sales from their catalog through three fulfillment channels—call center, online and retail. The result is shown in FIGURE 6.

awareness consideration purchase call center direct mail email catalog DRTV retail online print insert media CHANNELS

FIGURE 5 | FOCUS OF MULTICHANNEL ANALYSIS

The highlighted areas in this matrix will be used for analysis. It represents significant marketing touch points that flow with customer fulfillment.

call center online retail 3% 38% 59%

KEEPING IT SIMPLE YIELDS

PRACTICAL INFORMATION THAT

CAN BE CONSUMED BY THE

ORGANIZATION AND ACTED

UPON IN THE SHORT TERM.

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Results in the catalog allocation analysis case above can then be represented by fill-ing in the data in the heat map, as shown in FIGURE 7.

Armed with this insight into the allocation of fulfillment from the catalog, marketers are now in a position to make data-based decisions on catalog programs, including the share of bud-get that the catalog should consume. While beyond the scope of this white paper, the data presented here can also be used to inform supply chain and distribution decisions. When a well-known national men’s apparel company wanted to evaluate the effec-tiveness of their media mix for new customer acquisition, they employed a similar ap-proach over a prolonged period of time. This illustrates that multichannel analysis can be applied to any combination of steps in the sales cycle channel matrix and is not confined to just sales and fulfillment. FIGURE 8 shows the results of five year analysis of

customer acquisition by media, as also shown in FIGURE 9.

SUMMARY

In this uncertain economy, growth is a competitive imperative. Stagnant companies are simply dying out. Marketers perceive the need to do a better job evaluating their marketing allocation and measuring the efficacy of their programs. Complicated multichannel go-to-market systems present an especially difficult problem set that eludes easy analysis and is not currently well-served by commercially available analytic suites. Successful companies have employed a stepwise approach, which moves from siloed channel metrics towards true cross-channel analysis. The focused approach helps overcome organizational resistance and yields actionable data that allows the marketing and sales teams to react quickly to shifting buyer behavior, which reinforces the value of the multichannel analytic process in a positive self-reinforcing cycle. allocate 3% of catalog costs Fulfillment. 59% retail / 38% online / 3% call center Allocate 59% of catalog costs Allocate 38% of catalog costs consideration purchase call center direct mail email catalog DRTV retail online print insert media SALES CYCLE CHANNELS

FIGURE 7 | QUANTITATIVE RESULTS OF CHANNEL INTERACTION

When the results are applied to the matrix, marketers can make a data-based decision about catalog programs.

awareness consideration purchase call center direct mail email catalog DRTV retail print insert media SALES CYCLE CHANNELS 45% 12% 27% 16%

FIGURE 9 | CUSTOMER ACQUISITION ANALYSIS (YEAR 5)

This matrix shows the above results. This matrix outlines a different method of allocating data across channels vs. across the sales cycle (figure 6).

FIGURE 8 | NEW CUSTOMERS BY CHANNEL

insert media print online direct mail

SUCCESSFUL COMPANIES MOVE FROM SILOED CHANNEL

METRICS TOWARDS TRUE CROSS-CHANNEL ANALYSIS. THE

FOCUSED APPROACH HELPS OVERCOME ORGANIZATIONAL

RESISTANCE AND YIELDS ACTIONABLE DATA AND

BETTER MARKETING.

For more information, please contact Rob Stagno at [email protected] or 212.387.0300

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