Revenue Attribution: What Is It? Why Is It Important?

What Is Revenue Attribution?

Revenue attribution is the activity of assigning revenue to the various marketing activities that drove the sale. For every sale, conversion, or desired action taken by the customer, you want to know which marketing message and channel had the most telling impact.

Also known as marketing attribution, revenue attribution tells you which marketing activity should get the credit for a sale or conversion. It is crucial for setting your marketing budgets and optimizing your sales process.

Revenue attribution allows marketers to see which activities are driving the most sales so they can adjust their budgets accordingly. It answers the why and how your marketing is working.

Why Is Marketing Revenue Attribution Important?

Revenue attribution is crucial because it allows marketers to see how different touchpoints in the customer journey impact revenue. This information can then be used to optimize marketing strategies and campaigns.

The buying process for software-as-a-service (SaaS) products, for example, is complex. It can involve multiple decision-makers, touchpoints, and paths and involves ongoing engagement before a sale can be made.

With so many things to keep track of, it’s tough to know how each of your marketing campaigns affects your bottom line. That’s where using Revenue Attribution comes in.

Instead of focusing on conversions, which deal with a specific action, like filling out a form or clicking a button, revenue attribution tracks all the touch points throughout the customer’s journey.

What are the main benefits of marketing revenue attribution modeling?

Marketing attribution shines a light on your entire customer journey, revealing key information on how your marketing is performing. Here are the main ways you can use that information to make better decisions in your business.

1. Know which marketing channels are working 

Revenue attribution forces you to have a critical look at your buyer’s journey to determine what is working and what needs to be improved. Understanding which of your marketing efforts are the most effective therefore allows you to stay competitive. 

By knowing which campaigns worked you will know where to allocate your time and resources for the best effect. 

Just as you want to know where to spend your marketing dollars you also should be keen to know which marketing activities you should perhaps stop spending money on:

2. Determine which marketing channels no longer work as well as they used to

The marketing landscape is growing ever more dynamic. You can no longer trust that marketing channels that worked well before will continue to. A good example is social media, where new channels are popping up at a rate marketers can barely keep up with.

By critically looking at your historical attribution data, you can draw profit-boosting insights into which marketing channels are trending down. In some cases, it could be that there is a new channel that is stealing people’s attention from digital platforms they used to spend most of their time.

For example, young people are spending more time on Tik Tok, which could explain why your Facebook ads may not be as effective as they used to be. You could decide to allocate less of your budget to Facebook and channel the saved dollars toward influencer marketing on Tik Tok. 

3. Gain a better understanding of customer behavior

It can happen that perhaps your product no longer meets your customers’ needs fully. As a result, sales may not improve, whichever way you tweak your marketing. 

Your revenue attribution data may also show that people simply aren’t engaging with your marketing as actively as they used to. By carefully studying the market, you may realize that because of increasing concerns over Covid safety, your customers now prefer to scan QR codes than physically handle your pamphlets.

By staying up to date with and making better use of emerging technologies you can keep up with changing customer behavior. That also allows you to keep your marketing fresh and drive more ROI from it.

With its benefits so apparent, revenue attribution is becoming increasingly common, with 76% of marketing professionals saying they already use or plan to use it within 12 months.

It can be challenging to know where to allocate your marketing budget. You want to ensure you’re getting the most bang for your buck and reaching the right people. This brings the issue of revenue attribution models into focus:

How Is Marketing Revenue Attribution Measured?

There are several different revenue attribution models that you can use to determine which marketing channels and activities are moving the needle. 

These models or formulas help to eliminate guesswork in your marketing decisions. Some are less sophisticated than others and the choice of which one to use depends on your objectives, the length of your sales cycle, the number of customer touchpoints, and your target channel.

Here are the different revenue attribution models marketers commonly use:

1. First-touch marketing attribution model

This revenue attribution model assigns more value to top-of-the-funnel marketing activities. It focuses on the awareness stage and attributes credit for the eventual sale to the first marketing message a customer interacted with at the start of their journey.

Even though a customer will go on to engage with a remarketing ad, webinar, and email before finally making the decision to buy, it is the informational blog post they read right at the start that gets the credit for the sale.

1. Last-touch marketing attribution

Last-touch marketing revenue attribution formula is the opposite of first-touch marketing attribution. It assigns credit for the sale or conversion to the last marketing message the customer engaged with. 

Again, it does not matter how many other interactions the customer had with your marketing before making the purchase. But in most cases the different marketing channels you use all combine to persuade the customer to make the purchase.

1. Linear multi-touch revenue attribution model

Linear multi-touch revenue attribution seeks to address the limitations of first and last-touch marketing attribution models by giving equal credit to the marketing messages a lead interacted with at every touch point.

Although the linear multi-touch revenue attribution formula is anchored on fairly distributing credit for sales, it is also true that other channels are more effective than others. Depending on which stage of the buyer’s journey they are used on, some channels work harder in getting the lead to take the next step.

It’s for the above reason that other marketers prefer a weighted approach to revenue attribution. 

U-shaped multi-touch marketing attribution, for example, gives more credit to marketing channels used at the top and bottom of the funnel than those employed in the middle. The first and last marketing touch points prior to conversion each get 40 percent of the credit while those in between get the remaining 20 percent. This is also called position-based attribution.

Other marketers believe the job to convert a lead gets harder the closer you get to the sale. To give more credit where they think it is due, they prefer to use the time decay multi-touch marketing attribution model. 

The time decay formula gives more weight to the marketing activity the lead engaged with closer to their conversion. It does not ignore marketing efforts employed at touch points higher up the funnel; it just treats them as less effective. So the very first marketing channel a customer interacted with gets the least credit for the sale.

Unsatisfied with the limitations of all these marketing revenue attribution formulas, some organizations will decide to develop custom models using their own set of rules. This is known as the custom multi-touch marketing attribution model. They rely on their own systems and data to give credit to channels that may not get the same love as the more popular ones despite being just as effective.

Challenges Of Marketing Revenue Attribution Formulas And Their Solutions

Many challenges come with marketing revenue attribution, but there are solutions to these problems. One common challenge is determining how to attribute credit when multiple channels are involved in marketing.

Another marketing attribution challenge is dealing with the fact that some marketing activities take longer to generate results than others.

Thankfully, there are solutions to both of these challenges. You can use a tool like Google Analytics to see which channels are most effective when it comes to multiple marketing channels.

You can also use data from your CRM system to see which activities lead to sales. As for long-term results, you can use a tool like AttributionIQ to track the impact of your marketing over time.

The ultimate goal for every marketer is to increase revenue generation for their companies, but tracking the ROI of individual campaigns has always been a challenge.

The best way to measure the success of your marketing efforts is by tying them back to your profits.

Revenue Attribution Is Crucial For Optimizing Your Marketing Spend 

Attribution of revenue to marketing initiatives and campaigns helps companies understand what worked, what didn’t, and where they may need to shift their marketing dollars.

Revenue attribution, thus, provides significant insights into which marketing campaigns and initiatives are most effective. This allows businesses to allocate their marketing dollars and human resources more efficiently, saving time and money.

As we wrap up, it is crucial to understand that revenue attribution is not a perfect science. There’s no one-size-fits-all answer when it comes to revenue attribution. Sometimes there is not enough data to tell how much a marketing channel has contributed to a sale.

There are also some marketing channels, like social media, whose impact on sales is difficult – if not impossible – to measure. So it’s important to use common sense to determine which marketing revenue attribution formula works best for your business.

The best revenue attribution method for your business will depend on your specific goals and needs. We hope this blog post has given you a better understanding of revenue attribution, the different types of revenue attribution models you can use, and how to choose the right one for your business.

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