July 19, 2009

Proven And Influenced Advertising Channels

There are two types of advertising channels in the Multichannel Forensics framework.
  1. Proven Channels
  2. Influenced Channels
The proven channel is what we enjoyed back in the 1980s and early 1990s. We mailed a catalog. Then the customer ordered from us, and was kind enough to provide us with a key code, allowing us to track with accuracy the proven channel that drove the order.

Oh, those were heady times.

These days, everybody is obsessed with fractionally allocating orders based on the advertising channels that they perceive to be driving orders. First touch? Last touch? Allocation across touches.

Of course, all of the allocation rules are bogus. We don't really know, do we? Especially if we don't do mail/holdout groups, and you really cannot do mail/holdout groups for paid search (though you can do some innovative spend/no-spend strategies).

So why the obsession with first touch, last touch, and fractional allocation? The end result is clouded with fiction, anyway.

There's another way to approach this challenge. Instead of investing all of our efforts on the art of allocation, why not categorize orders based on proven and influenced sources, then track how customers evolve over time --- allowing us to reduce catalog or e-mail marketing expense in the future?

Let's say that you have three advertising channels that resulted in an order:
  1. Catalog received on June 1.
  2. E-Mail received on June 3.
  3. Order on June 5, using Pay-Per-Click.
One could label pay-per-click as the "proven" source. One could also label catalog and e-mail marketing as "influenced" sources --- in theory, these advertising channels influenced the order.

Here's the marketing analytics secret for you --- shhhhhh, don't tell anybody!
  • When catalogs and/or e-mails move from "proven" to "influenced" advertising sources, you don't have to send as many of these to the customers using them as "influenced sources" in the future --- once customers move away from these advertising channels as their primary reason for purchasing, they become less likely to use them in the future.
Fractional allocation or first touch or last touch cannot provide you with this marketing analytics secret --- all of these forms of allocation just allow you to make guesses about what happened in the past. We need to know how to market to individual customers in the future.

This is where Multichannel Forensics, and micro-channels in particular, make a big difference.