3 Key Attribution Models Every Company Should Use
Have you ever wondered about the real value of your marketing efforts? What’s the return on investment (ROI) for a campaign, or the cost per acquisition (CPA)?
I've been asked these types of questions hundreds of times. They are crucial for understanding how to sustain a profitable business long-term. However, the answers aren’t always straightforward. The world of marketing attribution is complex and can be a daunting experience, but it doesn’t have to be.
In this article, I want to shed light on three key attribution models that every company can (and should) use to better understand and evaluate their marketing efforts. Let’s dive in.
1. Blended CPA
Blended CPA simplifies the complexity by providing a straightforward look at your marketing investments. It’s calculated by dividing the total marketing cost by the total number of acquisitions. This model is excellent for getting a quick snapshot of what it costs on average to acquire a customer across all your marketing channels. Keep in mind, it includes ALL of your acquisitions, also the ones that come from organic or referral traffic. This means it also accounts for the word-of-mouth and virality aspects of your product or service, which might not be directly linked to your recent marketing efforts.
While it might not give you the granular details of each channel's performance, it's a solid starting point for companies looking to get a general sense of their marketing efficiency. If you are running campaigns across multiple markets, it provides a great view on the maturity of the market and what stage of growth you are currently in (typically, with consistent marketing investment, the Blended CPA tends to decrease as brand awareness, organic traffic, and the effects of returning customers increase).
How to calculate?
bCPA = total marketing cost / total number of acquisitions
When to use?
2. Last-click CPA
The Last-click CPA model is the most straightforward and commonly used: it gives all the credit for a campaign’s success to the last touchpoint before conversion. It’s a favorite because of how simple and clear it is at showing which channels excel at sealing the deal. This model is especially popular in digital businesses and in companies that quickly turn demand into sales.
Although this model may overlook the influence of prior interactions that helped move the customer through the funnel, it’s invaluable for understanding which final interactions are driving conversions.
How to calculate?
Last-click CPA = channel investment / total number of acquisitions driven by the channel
When to use?
3. CPA based on custom attribution model
If you're ready to get more granular with your analytics, developing a custom attribution model could be your next step. This approach lets you assign specific weights to different touchpoints, taking into account their role in your customer’s journey. This includes tracking movements across digital and offline channels, different devices, and various online platforms.
For example, a retail advertiser might find that their offline stores see three times more conversions compared to online, prompting them to develop an attribution model to assess how their website influences store visits. Or, a digital advertiser might notice that while Meta drives plenty of awareness and clicks, it falls short on conversions. In such cases, a specialized attribution model to properly value Meta's traffic would be essential.
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It requires a bit more legwork and a good grasp of your marketing data, but the insights you gain are well worth it for fine-tuning your strategies. The final output could look like this:
How to calculate?
Attributed CPA = investment / total number of acquisitions driven by attributed channels
When to use?
Summary
Honestly, no one has this completely figured out. If anyone claims they do, they’re not telling the whole truth. The closest we can get to understanding the marketing effectiveness is by using a custom attribution model, but even then, it is essentially an educated guess. In current world it's very difficult and pretty much impossible to measure the whole customer journey.
Therefore I always recommend starting with the last-click model and using blended CPA to get a broad view of your market performance. The real insights usually lie somewhere between these models, so try to get a sense of the actual scenario by considering both. Then, if you've got the time and resources, it's wise to work towards identifying the most accurate attributed CPA that reflects your specific business and the data you have available.
And to wrap up, here’s a handy cheat sheet to reference when you're not sure which model to go with:
Performance Marketing Expert | Founder @High Growth Digital | ex-Amazon
7 个月Peter Hutta this is a great value. Agree that no company on earth has completely figure this out. No one has 100% data collection first place, so best model is the most educated guess model ;)