while it's impossible to know everything about a given purchase and channel, there are so many things we do know
I began my journey into data-driven performance marketing in 2001. Prior to that, I was a performance marketer specializing in SEO (I had the hip title of “Search Engine Guru” for Netivation.com, a company out of Post Falls, Idaho), then focused on affiliate marketing and customer retention at TeamOn.com. I settled in for a longer haul managing Coldwater Creek’s affiliate channel, email marketing and paid search campaigns. That’s where I was introduced to data-driven performance marketing and the importance of accountability to numbers.
Data-driven performance marketing taught me that while it’s impossible to know everything about a given purchase and channel, there are so many things we do know. I also learned that gaining sales through a channel might be the first, easiest and cheapest way to measure performance-but it could also present you with the least accurate numbers and insights.
Insights. The holy grail of data-driven performance marketing. When insights are backed by sound data, they can uncover answers to crucial questions. Why are the things that are happening happening? Where should I put more money? Which activities are increasing my cost but not my reach, margin and market share? How do I know I need this campaign, but that another campaign is redundant?
The Search for Incrementality
While at Coldwater Creek I was introduced to the concept of incrementality-the idea that even though a sale was attributed to “X” channel, that doesn’t mean “X” channel was needed, should get credit for that sale or that we should incur that cost going forward to ensure we acquire that customer. We need to identify the tasks that bring new, incremental orders and customers.
So what is incremental? Not too long ago, I wrote a 5-part series on incremental sales. In it, I defined the term this way:
The Business Dictionary has a great definition: “Number of units sold through a sales promotion offer in excess of the estimated number that would have been sold without it.” They pretty much hit the nail on the head there. For the affiliate community, this question often comes from executives. What they mean by it is this (in most cases): “the number of sales I wouldn’t have gotten if it weren’t for my affiliates and their marketing of my company and its products”. In essence, it’s the sales that only happened because I have an affiliate channel and am working with that particular affiliate. Affiliates generated these sales that I would not have gotten any other way, or they contributed to the conversion and without that contribution, the user would have gone elsewhere. In many cases you could argue that 100% of those sales are incremental, but in many other cases, the argument could go about the same way in the opposite direction.
Attribution is an attempt to ``attribute,`` or give credit to the proper channel for the sale and cost of the sale.
While that series is a great read in my opinion (I may be slightly biased), I’m going to update and condense that information for you in this blog post.
There are many discussions going on today regarding attribution and incrementality. I believe the two issues are 100% related. They are related in their “why,” the intended outcome of instituting initiatives in both areas, and the execution of strategies.
Attribution is an attempt to “attribute,” or give credit to the proper channel for the sale and cost of the sale. While at Coldwater Creek, we had an initiative we called “Lumberjack.” The title came from the idea that an order was a tree and we were attempting to “chop” that order into the pieces (channels) that were involved in the sale in an attempt to attribute the revenue properly to the channels and/or campaigns that contributed to that sale happening. It was way of identifying the channels and campaigns that were needed so we could more efficiently deploy our resources to generate more incremental sales.
Ah, see? We’re back to incrementality.
you can't ever truly know which channel was needed in the sales process
“Jamie, you talk about this issue quite a bit.” I’ve been told that by a few people, and they’re right. I sure do, and for good reason. It is super important, not only for efficient use of budgets for my clients, but also for the health, vitality and long-term viability of the affiliate channel as a whole. In 2016, Commission Junction invited me to its annual conference, CJU, to talk about this issue and how it affects the affiliate channel. I was honored to be invited and thoroughly enjoyed my time there. (Read a recap of my presentation; watch it here)
There is one real problem with incremental sales that I have found to be true in each and every one of the 19 years I’ve been doing digital marketing: the answer isn’t knowable.
I know, I know; earlier I said that many things can be known. But you can’t ever truly know which channel was needed in the sales process.
It comes down to intent, the path to purchase and human beings. Sometimes we don’t even know why we do something-why we bought this over that, from this or that store. We can’t always tell you why we bought something, so how can we expect to know which channel was necessary and which touchpoint we can’t get rid of for millions of customers?
Improving your ability to drive and track incremental sales will allow you to be more efficient with crucial resources
We can’t. So, let’s just give up.
Um, no, let’s not do that. While we can’t “know” what is incremental, we sure can do a lot to ensure that we are giving ourselves the greatest chance at driving incremental sales. But before we go there, let’s talk more about why this is important.
What can you get out of the hunt for incrementality?
- Adequate deployment of resources. The inputs into your business are finite. Working hours, staff, budget, creative etc.-all these things are in limited supply. You only have, or have access to, so much of each. If you have no idea where you should be spending these resources, you undoubtedly will be spending them poorly. Improving your ability to drive and track incremental sales will allow you to be more efficient with these crucial resources.
- Lean and mean cost structure. Look, we are always searching for ways to cut costs and drive more success. Incrementality is definitely a way to get there.
- Highest ROI. As an agency, we are always measuring ROI. There are many ways to calculate it, but lower costs with higher return-a goal and usual result of incrementality campaigns-yield higher ROI. And higher ROIs keep everyone happy.
All pretty good things right? Definitely worth the effort.
Definition and Data
Once you’ve decided incrementality is worth the effort – and it is – the next step is defining incremental for your business. (Read my nifty guide to figuring this out, from Part 2.) Here are the main points. It is different for everyone. If you have little data, then you can simply go on the formula of new customer = incremental. It’s basic, but it gets you quite a ways there. Is every new customer incremental? Nope. Is every existing customer non-incremental? Nope. But in a pinch, this will help.
Data is a huge part of this, and I covered it in detail in Part 4. Data will help you form a definition. You have to be realistic. Knowing what data you have available will help you put handles on what your definition could be. Definitely give that article a read.
An area that is often overlooked in this process ... is the concept of decision-maker buy-in
An area that is often overlooked in this process, and in affiliate marketing as a whole, is the concept of decision-maker buy-in. I’m not just talking about getting key decision-makers in the executive suite to understand the value of the channel and the work that goes into showcasing incremental winners. They also need to become champions of the channel, and your attribution and incremental initiatives.
Many of us have had the experience of working within an affiliate channel that was suspect at best, and hated at worst. It happens. I have a long history of managing accounts with skeptical advertisers as well as working in-house with skeptical teams. It can be draining and impact overall performance.
Having the entire company on board is great; however, this hardly happens and is incredibly difficult. But getting the key decision-makers is possible. It comes down to three words: their self-interest. You have to take the time to understand their needs, their obstacles and their goals. Ascertain how your incremental initiative, and the channel as a whole, fits in with their own self-interest. Then, include that as a feature in your campaigns. You’ll soon find that they start pushing things forward for you.
I’ve spoken and written often about technology. In a recent Internet Retailer article, I outlined the technologies available by all the major and secondary networks in our space-how they work, what they offer and how they could benefit an advertiser. I won’t go over them here again, but you can read the entire article here. I also broke the technologies out on our own blog in Part 5 of our incremental series.
Many people want to see how they stack up against competition. We have a new benchmarking tool just for this issue. It helps you identify ways in which you can improve the likelihood you are driving incremental sales. Check it out here.
Incentivizing for Incremental
Don't make it so complicated that your affiliate partners can't do anything on their end to actually target those specific customers
You’ve benchmarked yourself, secured a champion and got the right technology and data. Now, how do you increase your incremental sales?
At the core, it comes down to what your data can tell you. If you can identify new customers at checkout, you may be able to pay higher for new customers. If you batch upload your affiliate sales, you can look at all sorts of demographic data about that order and commission accordingly.
I have two rules to follow when incentivizing for incremental:
- Don’t commission on something you can’t measure and report on.
- Don’t make it so complicated that your affiliate partners can’t do anything on their end to actually target those specific customers.
We’ve had partners that have tried to commission on aspects of an order that they themselves aren’t sure they can track or report. If you can’t track it, you can’t report it-and you shouldn’t be commissioning on it.
This industry is still very much built on trust and relationships. At the end of the day (actually, all throughout the day), you should be focused on that. Go back to the data section and ask yourself what things you can track and report to the networks.
Complication can also kill an attempt to drive more incremental. If you can’t explain it to your spouse so they can understand it quickly, then go back to the drawing board. You see, it’s not just about commissioning on the right sale; it’s about convincing the affiliate base that it can drive those type of sales and make money.
If they can’t understand it, they can’t actually target those type of customers.
I’m really interested to hear what mistakes others have seen or have made themselves. Please add them to the comments below. In the meantime, here is a short list:
- Complicated commission structures
- Commission structures with no basis in reality
- Moving forward with no data
- Moving forward with no buy-in from other departments
- Not identifying a champion in the executive suite
- The wrong technology partner
- Not including affiliate feedback
- Commissioning on something your affiliates can’t influence
These things are truly important. I still remember the meeting, the room it was in and the individual who questioned not only the affiliate channel, but seemingly my value to the company completely when he had data that showed only a small amount of affiliates sales were incremental, according to his definition and data.
I was unprepared. I was devastated. I almost lost my job. I could have got pissed at him. I could have done whatever I could have thought of to make him look ignorant, etc.
I didn’t, though.
At the root, I wanted to know if all the work I had done for almost my entire career was adding any value. Imagine that: you dedicate your career to a discipline and then find out it isn’t worth it at all to anyone. I didn’t want that to happen, so I learned from him and his team. I taught them quite a bit about affiliate marketing, as well.
In the end, the channel sales were way more incremental than they thought. The channel persisted and I was able to prove, through initiatives like the ones above, that it drives true incremental sales that you can only get by participating in this channel.
In fact, every time we do this, we prove to our advertisers that they indeed get customers through the affiliate channel that they would not acquire elsewhere. We do that by facing the data head on.
What do you think? Need help with this? If so, contact us today!