• by Mark Cullinane , Columnist, May 21, 2018

Marketing attribution is not a new topic. Marketers have been trying to understand the path to purchase since the dawn of the advertising industry. Although, in the last 10 years the topic has been more closely followed as capturing data on every customer touch point has become more achievable. Marketers want to fully understand what drove a prospect to take that important step to become a customer of their website/retail store or service. Attribution helps us gain an understanding of which marketing channels are working and which ones are not assisting with conversions. 

For the better part of a decade, our marketing industry has been spending countless time and energy debating the merits of various attribution methodologies. First-touch, last-touch, multi-touch, linear, time decay – everyone seems to have an opinion on which methodology best captures a customer’s journey to conversion.  

Unfortunately, every single one of these popularly discussed methodologies tend to overemphasize the elements that they can measure most directly. Specifically, these attribution methodologies are structurally biased toward definable “conversions.” These models operate on the fundamental premise that fractional, decay or last click, whichever one that influenced a customer, is the ultimate outcome of the marketing process 

Here’s the problem: The last click might represent the end of a conversion, but it represents just the beginning of a customer’s lifetime value (LTV) to a company. Basic attribution models that do not factor lifetime value into their ROAS calculations can lead companies greatly astray as they seek to optimize their media spends. We as marketers live by the 80/20 rule … i.e. 20% of our customers make up 80% of the revenue. This means that only 2 out of 10 customers will end up having high LTV. And you should be optimizing the paid media spend towards those 20% of customers rather than the 80% who will be of little value to the company.   

Consider, for example, that your attribution model of choice indicates a very high conversion rate among people who encounter your brand through Google. It doesn’t matter if you come to that conclusion through last-click or multi-touch attribution. The odds are, this finding would prompt you to funnel more media dollars toward Google to boost your overall number of conversions.

This sounds like a rational approach, but now consider this: What if the lifetime value of customers who convert through Google is exceptionally low? What if nearly every one of those customers is a one-and-done scenario? Meanwhile, there are other channels out there where, despite lower overall conversion rates, the customers stick with the brand for the long haul, ultimately delivering exceptionally high lifetime values. Due to the lower conversion rates, these channels are not receiving as much investment as they likely warrant. 

This scenario is precisely why marketers must take a lifetime value view to attribution. Attribution can’t merely be employed at the campaign level. It must be viewed as a key component of long-term customer relationship monitoring, and the insights from recurring customer activity needs to inform new advertising activity. And the purview of an attribution model should extend well beyond specific campaigns or user actions to encompass the full lifetime relationship between the brand and its customer. 

The value of loyal customers cannot be understated. As most marketers are aware, it costs substantially more to acquire new customers than to sell to recurring customers—at least 5 time as much, in fact. In addition, current customers spend more on average than new customers (up to 67% more). For most companies, the top 15 to 20% of loyal customers end up driving 80% or more of sales. So, doesn’t it make sense to funnel more of your marketing efforts toward attracting the customers who are most likely to join the ranks of your top lifelong spenders?

Ultimately, marketers need to resist the urge to focus on short-term campaign results and instead turn their attribution efforts toward what matters most: attracting, converting and retaining high-value customers. High conversion rates are exciting, and it’s extremely tempting to optimize for conversions alone. But remember: conversions with low lifetime values are not necessarily in the best interest of your brand. They’re merely a recipe for continued high media spends with mediocre results. By shifting focus to attribution informed by lifetime value, you not only increase the efficiency of your media buys, but you also maximize your company’s sales through high value, lifelong customer relationships.