Revenue attribution is a challenging topic. Marketers are always looking for ways to demonstrate that their investments are connected to revenue generation. New tools allow marketers to leverage metrics that show how various marketing investments impact the company. Attribution modeling is a data-driven approach to measure the monetary impact on lead conversion, opportunity creation, and revenue generation. Download our Special Issue: Revenue Attribution.
When used correctly, time-decay revenue attribution assigns credit proportionally to each touch-point according to its influence on the customer’s conversion or final purchase decision. The goal of attribution modeling is to determine which touch-points are producing a positive result, in terms of revenue. By extension, this allows marketers to build business plans based on projected revenue impact.
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Bridging the Gap Between Sales and Marketing
I recently spoke with a friend from our previous mutual employer. He’s currently leading the marketing team at a mid-market software company. He agreed to speak with me off the record. Since my only context was the shared experience at our previous company, I was surprised to hear what he had to say.
“Things here are amazing. I’ve never seen better alignment between sales and marketing.” He went on to describe how various sales and marketing team members were friends outside of work. They shared experiences together and cultivated a mutual respect for one another that contributed to success in the workplace. “At our former company, we used to call the salespeople knuckleheads and they would say similar things about us in marketing. Here, mutual respect is one of the keys to our success.”
Achieving that respect hasn’t always been easy. Gaining agreement on an attribution model helped bridge the gap between sales and marketing and create better alignment. For now, they are using a last-touch attribution model. “We review the closed/won data and look back to the last marketing action that led to the conversion of a marketing-qualified lead. Based on that attribution model, marketing is recognized for 40 to 50 percent of the closed/won opportunities.”
“What does sales think of that statistic?” I asked.
“They agree with it. They’re big fans of marketing because they know we are generating quality leads. Salesforce.com is our single source of truth so there’s no debating the data.”
Working in Sync to Advance the Buyer’s Journey
He admitted the shortcomings of the last-touch attribution model. “A more sophisticated model would expose more of the buying process and show where marketing and sales are tightly aligned and working in sync to advance the buyer’s journey. It would give us better insights about where to invest our dollars.”
Last-touch attribution is a very simple method that assigns 100 percent of the credit to the last interaction. In the case of my friend’s company, 60 percent of the attribution is given to the website. That statistic didn’t surprise me given the kind of buyer they serve. However, by using the last-touch attribution model, they are missing out on deeper insights about other touch-points along the buyer’s journey.
Exploring Time-Decay Attribution
Time decay is a sophisticated revenue attribution model that looks at the most recent touch-points to assign credit to appropriate activities. As with last-touch attribution, the time-decay model considers recency. But it looks at the collection of activities in a given period of time, not just the last interaction.
The time-decay attribution model uses an algorithm that gives the most credit (or percentage points) to the interaction that is closest to the conversion. Consequently, it gives less credit to other touchpoints based on the amount of time that has elapsed, or decayed, between the interaction and the conversion. This means that as a prospect progresses through the consideration cycle and becomes a more qualified lead, whatever touch-point results in passing the prospect to sales gets the most credit for the conversion.
A time-decay model isn’t for everyone. Consider the case of a B2B technology hardware company that I investigated. Their sales cycle averages 180 days. Marketing and sales are tightly aligned, coordinating the go-to-market investments each fiscal year. Together they prioritize various marketing tactics that support the annual revenue goal. They use a time-decay attribution model but need to adjust the algorithm to count interactions that stimulate the first contact six months before conversion. Without tuning the model, a standard time-decay approach would reduce the impact of those older touch-points to zero.
On the other hand, a marketing leader inside a B2B software company I talked with has a sales cycle that averages 45 days. She can tightly correlate marketing actions that are attributable to lead and opportunity conversion. A simple, straightforward time-decay algorithm provides the needed insights without customization. “Now we have the ability to optimize,” she says. “We can track what prospects consume along their journey while still giving the most credit to the activity that resulted in a lead conversion.”
Making the Case for an Advanced Attribution Model
My friend closed the conversation by making the case for time-decay attribution. “Using a more sophisticated attribution model is tough but I can see the benefit in doing so,” he said. “Currently we are having great success and sales is very happy with marketing. But we know that’s not always the case.
“As we continue to mature, we’ll need to look at a more advanced method of measuring marketing’s impact. I could see time decay as a way to advance our reporting and keep our relationship with sales on track.”
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