Marketing activities don’t happen in a vacuum: they move the needle for your company in a multitude of ways. And if you want to move the needle, you need to make better decisions. Both ROI and attribution insights can help with that. But which one is better?
Enter the tug-of-war between ROI and attribution and the start of mixing up terms or using them interchangeably. And they’re definitely not interchangeable. If you don’t understand the difference between ROI and attribution, you run the risk of compromised data, hemorrhaging budgets, and an ineffective strategy. Understanding when to apply ROI and when to implement attribution is necessary for any marketer that wants to create impact.
ROI is the set of measurements that helps you build marketing’s reputation as a leader that drives impact. Attribution is the one of the measurements that helps maintain that reputation.
Let’s talk about how to use both ROI and attribution to best measure your marketing team’s performance.
How Do I Use ROI?
Let’s get the definitions out of the way first: ROI stands for return on investment which is a performance measure used to evaluate the efficiency of an investment. Any time we make a purchase, we can expect a result (positive or not) on our investment. When you start defining that return and creating goals around the anticipated outcome, ROI evolves from a math problem into a strategic mindset.
ROI is a major player in your marketing measurement and insight toolbox, but it’s not the only yardstick. To properly understand business impact, there are a lot of other measurements rolling up to create our picture of ROI. It’s a component of greater marketing measurements, which can vary by organization, but the goal is always to understand which programs deliver the greatest return so you know where to cut and where to invest next.
But hold up – don’t build a suite of marketing measurements to inform your business strategy without reinforcing any weak links first! The foundation of insightful and actionable measurements is real-time investment data that creates a clear picture of how and where resources are being used. Then you can start building on the foundation with tactical result measurements that help marketers make day-to-day decisions on spend. For a full hierarchy of marketing measurements rolling up to ROI, check out our blog The Ultimate Hierarchy of Marketing Measurements.
We said before that marketing activities don’t happen in a vacuum and neither do ROI measurements. Marketers that properly assess ROI are looking at multiple types of ROI measurements. Focusing on only one measurement runs the risk of creating a bias or confirming an existing bias. If you’re trying to understand how to create impact and drive revenue, why would you purposely exclude data that will better inform your decision making? You can’t know where you will drive the most impact unless you’re taking a realistic look at what’s working and what’s not.
Common ROI Problems to Avoid
There are a few pitfalls marketers can fall into on the hunt for ROI. Here are a few common issues to avoid.
1. Looking for the perfect ROI measurements. There is no one magic ROI number or measurement that will tell you how much to spend or the total value of marketing. ROI is about the big picture, stop trying to limit its scope!
2. Losing sight of the other half of the ROI equation: investment. Measuring the cost of all your allocated resources – time, money, and people – is challenging but necessary if you hope to create meaningful metrics.
3. Discounting marketing’s relationship with finance. Aligning with finance is the best way to ensure your investment data is accurate and properly structured. Plus, if you want more budget in the future (a guarantee for any marketer) then you want to be on the same page as finance.
How Do I Use Attribution?
Attribution is the practice of assigning value to each of the events – or touchpoints – that a prospect hits from browsing to buying. The goal is understanding which touchpoints made the greatest impression that ultimately led to the customer conversion. Knowing which marketing channels lead to the most conversions helps you understand where (or where not!) to allocate resources.
Like ROI, there are a few ways to do attribution:
Single-touch attribution assigns 100% of the value to one touchpoint in the customer journey. That touchpoint could be the first click, the point where your buyer became a lead, or the last touchpoint before purchase.
Multi-touch attribution assigns value to all of the touchpoints in the customer journey, but different types of multi-touch attribution give varying degrees of value to the touchpoints.
And just like ROI, before implementing an attribution model, you need to have a strong foundation of investment data. Without a strong foundation, your efforts to measure marketing performance will fail every single time.
Common Attribution Problems to Avoid
Attribution isn’t an out-of-the-box solution. Here are a few common issues to avoid.
1. Not all attribution models are created equally. Single-touch models of attribution reduce the customer journey to one relevant event, which runs the risk of turning into a confirmation bias. It can’t show the long and diverse customer journey, and it’s dangerous to assume the same touchpoint will work for everyone.
2. Marketers pin A LOT of expectations on attribution. It seems like an easy solution, but there’s a reason you still feel lost and confused. Marketers are expecting results attribution can’t deliver! SiriusDecisions recognizes the allure of attribution as an omniscient oracle and warns marketers not to get sucked into the hype.
3. Understand the limits of attribution. The reality is that attribution doesn’t assess results in terms of business goals and fails to account for the impact of multiple variables. It works best for answering specific questions around Demand Generation, so don’t ask it to do something it wasn’t built to support. Understand the limitations, and use it to answer the right kind of questions.
ROI vs Attribution: What Should Marketers Use and When
ROI and attribution are both valuable – but only if they’re being used properly. ROI is part of your measurement toolkit to establish a marketing strategy and benchmark your success throughout the year. ROI looks at the full picture of all the resources you invested to produce impact.
Attribution is a subset of that ROI equation, and measures performance on a granular level by looking at specific sections of the demand generation strategy and its success at converting leads. It’s a means of optimizing after your strategy is already in place. In other words, the usefulness of attribution is not fully realized until your marketing organization is measuring and tracking ROI.
Yes, it’s important to pay attention to the details. But if you’re too focused on little things, you’ll miss the forest for the trees. Attribution is useful for understanding which pieces of content led to the most customer conversions. ROI will tell you if that content is profitable, how much revenue it drove, and if it’s worth investing in again. Knowing this, ask yourself: which process you would use for day-to-day decisions versus planning strategically?
ROI and attribution measurements answer different questions, for different people, at different levels, and at different times. Both are valuable, but they’re not equal and understanding their differences is half the battle. It’s important to make the distinction between ROI and attribution if marketers hope to truly understand the impact that they are making for their organization and build on that impact.