In today's rapidly evolving e-commerce landscape, one of the most pressing challenges for executive leaders is understanding the true impact of their marketing efforts. The questions of where to allocate resources, how to measure success, and which marketing channels are driving growth have become increasingly complex. Two key concepts that have gained prominence in recent years are "attribution" and "incrementality." In this article, we will delve into these critical topics, explore their relevance to e-commerce businesses, and offer insights into how to navigate the changing marketing measurement landscape.
The importance of attribution and incrementality
Before we dive into the details, let's clarify the terms. Attribution is a widely-used term in marketing, but it has become somewhat overloaded and can refer to different things. In its simplest form, attribution is about understanding which marketing channels or touchpoints contribute to a conversion or sale. However, the traditional attribution models, such as last-click attribution, are limited in capturing the full picture of how different marketing efforts interact and drive results.
Incrementality, on the other hand, is a more precise concept. It focuses on understanding the causal relationship between marketing activities and business outcomes. In essence, it answers the question, "If I invest more in this marketing channel, how much additional revenue or profit will I generate?" Incrementality seeks to differentiate between marketing efforts that truly drive growth and those that might have occurred organically or are cannibalizing other marketing efforts.
The evolving landscape of marketing measurement
The e-commerce landscape is witnessing several shifts that make attribution and incrementality more critical than ever. Here are some of the key trends:
- Diverse marketing channels: E-commerce businesses are expanding their presence across various marketing channels, from social media platforms like Facebook to influencer marketing and even offline retail locations. This diversity complicates the task of measuring the impact of each channel effectively.
- Privacy regulations and the end of cookies: Privacy regulations such as GDPR and the gradual deprecation of cookies by browsers like Apple's Safari and Google Chrome are making it more challenging to track user behavior and interactions across the internet. This has a direct impact on attribution and makes it less accurate.
- Economic uncertainty: As economic conditions change, it's no longer feasible to pour unlimited resources into marketing without a clear understanding of the return on investment. Brands are looking for ways to optimize their marketing budgets.
Given these shifts, it's evident why incrementality is increasingly in the spotlight. It provides a path to understand the real impact of marketing activities, regardless of how fragmented the marketing ecosystem becomes.
The 4 pillars of effective marketing measurement
To navigate the intricacies of attribution and incrementality in the e-commerce space, businesses can adopt a strategic approach. We can structure these efforts around what we call the "Four Pillars of Media Measurement":
- Digital tracking: This is often where e-commerce businesses start, using tools like Google Analytics to understand the customer journey. While it offers a good baseline, it becomes less effective as your marketing efforts diversify.
- Experimentation: Building your experimentation muscle is crucial. Run controlled experiments to understand the incremental impact of various marketing strategies. For example, consider using Facebook Lift Tests, which can help you gauge the effectiveness of your Facebook campaigns.
- Statistical modeling: As your marketing complexity grows, you may need to move into statistical modeling, such as marketing mix modeling. These models can provide insights into the synergy between different marketing channels and their incremental impact.
- Surveys: Surveys can provide valuable directional insights. Post-checkout surveys can help understand customers' motivations and the influence of marketing on their purchase decisions. However, surveys have limitations and should be used in conjunction with other measurement methods.
The key is to ensure your marketing team is well-versed in the strengths and limitations of each of these measurement methodologies. With this knowledge, you can effectively triangulate and arrive at a more accurate understanding of your marketing efforts' true impact.
Addressing seasonality and external factors
For e-commerce businesses dealing with seasonality and external factors that add significant variation, testing can be more complex. It's essential to remember that experimentation provides a snapshot in time, which may not account for the unique conditions of your peak sales periods.
Here are some strategies for addressing seasonality:
- Plan tests thoughtfully: Schedule your experiments during non-peak periods to avoid unintentional disruptions in your business during high-demand seasons.
- Use learning from off-peak tests: Apply insights from tests conducted in non-peak times to prepare for peak seasons. While not a perfect match, it can guide your strategy.
- Conduct minimal impact tests: During high-demand periods, consider running tests with minimal impact. Use small control groups to gain insights without risking significant revenue.
Do e-commerce brands need a vendor or in-house expertise?
Whether you should work with a vendor or develop in-house expertise depends on your organization's resources and goals. There are excellent tools and vendors available to assist with marketing measurement. However, it's vital that your marketing team understands the intricacies and limitations of these tools or vendor reports.
It might make sense to have a dedicated marketing science or analytics team within your organization. They can work closely with vendors, ensuring the translation of complex results into actionable insights for your marketing team. The key is to ensure your team has a solid understanding of the methods used and can interpret the results effectively.
Invest and reap the benefits
The changing e-commerce landscape, coupled with privacy regulations and increased diversity in marketing channels, makes attribution and incrementality more critical than ever. As executive leaders of e-commerce businesses, it's crucial to invest in measurement methodologies that help you understand the true impact of your marketing activities. A thoughtful approach to attribution, the four pillars of media measurement, and consideration of seasonality and external factors will guide you toward more effective and efficient marketing strategies in this ever-evolving e-commerce environment.