September 22, 2016

Opposing Metrics

This one comes up all the time.

Let me give you an example. A company increases marketing spend - significantly. This is where things get interesting.

Last Month (Ad Cost = $2,000,000):
  • Catalog Marketing = $5,000,000.
  • Paid Search = $1,000,000.
  • Facebook = $500,000.
  • Email = $1,000,000.
  • Other Online Marketing = $1,000,000.
  • Non-Attributed Online Sales = $4,000,000.
  • Total Volume = $12,500,000.
This Month (Ad Cost = 30% More ... $2,600,000).
  • Catalog Marketing = $6,000,000.
  • Paid Search = $1,200,000.
  • Facebook = $600,000.
  • Email = $1,200,000.
  • Other Online Marketing = $1,200,000.
  • Non-Attributed Online Sales = $3,000,000.
  • Total Volume = $13,200,000.
Your CFO wants you fired. She put together her own math.
  • You Spent $600,000 Incremental Ad Dollars.
  • You Generated $700,000 Incremental Demand.
  • You Lost $320,000.
You analyzed the gain in demand by marketing channel.
  • You Spent $600,000 Incremental Ad Dollars.
  • Marketing Channels Increased By $1,700,000.
  • You Generated $80,000 Profit.
Who is right? The CFO? Or you, the Marketer?

90% of the reading audience will side with the Marketer.

The profit and loss statement, however, cannot be avoided. There's a demand gain of $700,000 and an ad cost gain of $600,000 yielding a loss of $280,000.

The CFO is right.

The Marketer is wrong for the simple reason that the attribution algorithm being used by the marketer mis-attributed online sales to advertising vehicles.

Attribution algorithms are always wrong. Every single one. Wrong.

The profit and loss statement, unless your Finance Team is doing something illegal, cannot lie.

The best Marketers work closely with the Finance Team. The best Marketers pay close attention to the movement of the ad-to-sales ratio. Oh, I get it, this is a metric that became popular in the 1980s ... meanwhile, your favorite attribution vendor says they are using the latest and greatest machine learning algorithms to slice and dice customer intent. The latter sounds sexy. The former is 100% accurate.

Non-Attributed Online Sales happen because customers love your brand ... because they WANT to buy from you. No credible Marketer takes credit for orders that are generated by love of the brand.

The best Marketing professionals know how to deal with opposing metrics. The best Marketers always side with the profit and loss statement.

Thoughts? (kevinh@minethatdata.com)