Advanced Thinking on Matchbacks

The myriad offer and order channels used today present multichannel marketers with a growing problem: How to effectively allocate marketing budgets to the promotions and channels that drive demand.

In the past, using one-time matchbacks were a reasonably effective measurement when responders used a single order channel, and one or two channels drove demand. Fast forward to today and responders commonly receive offers through multiple channels and also have many order channels to choose from including mail order, call center, store, and online. Which promotion gets the credit for the order? Or better yet, which combination of promotions drove demand and through which channels?

The answer to these increasingly complex questions lies in the next generation of response allocation, also known as path to purchase. Understanding customers’ path to purchase allows merchants to better understand measure which media is driving demand, make correct circulation and list decisions, and optimize marketing budget allocation, ultimately leading to better, more strategic decision making.

Without knowing which offer channels are driving what percentage of the business, it’s hard to be confident that you have the right strategy in place across catalog, e-mail, and online channels. Additionally, if you are reporting the success of each program separately using separate systems, it’s easy to have overlapping results – with no easy way to understand the true performance of each.

For example, overstating the channel performance for e-mail or online can lead to misguided decisions like lowering circulation or removing drops completely out of the catalog mail plan. If you do some type of post-campaign analysis, it can often be months before results are received. This leaves the data ineffective in making an impact on future marketing decisions.

Also, that type of post-campaign analysis can be laborious and time-consuming, tying up critical resources that could otherwise have been focused on more strategic initiatives. Using a fractional allocation process offers marketers the ability to make quick decisions which affect the very next set of offers and the bottom line.

So what’s needed to implement such a solution? You probably already have the necessary data including: promotion history (mail file), circulation plan, responder file (transaction data), non-mailed source codes (in-store catalogs, etc.), and campaign metrics (order curve), for each of your campaigns. Additionally you need SKU level data for each campaign to support item-level allocation.

The fractional allocation process begins by determining the pool of potential matches. Each open campaign that can be matched to the transaction using source code or promotion history will be considered a potential match. The next step in the process is to evaluate each potential match using a series of channel-specific weighted business rules to determine the overall confidence of the match. If a transaction matches to more than one campaign – channel weight is used to determine the final allocation. The weights given to each offer channel reflect the value of different marketing programs to your business.

For example, e-mail might be weighted at 10%, catalog at 70%, and paid search at 20%. If a transaction matches to one campaign – that campaign is given full credit for the order. But if the transaction matches to more than one campaign – the channel weight is used to calculate the order allocation. Ultimately, channel weights are determined by you based on an historical analysis of your marketing data.

To illustrate, suppose that Company A sent two catalogs to a customer, both with open order curves, and had also sent an e-mail offering a discount on a certain product. Additionally, that e-mail was sent most recently and its order curve is still open. If a customer clicks on the e-mail and purchases the specific product advertised, the e-mail may possibly receive 75% out of 100% of the order, with the most recent catalog receiving 20% and the older catalog receiving 5%. But if that same customer came in through branded search and purchased a product from the first catalog, the weights may be shifted around entirely.

Is fractional allocation right for your business? The answer is yes. Simply, effective marketing spend cannot be done without it. The benefits of fractional allocation are many and include overall media effectiveness, understanding true buying drivers, allocating costs appropriately to customers and customer segments, and developing optimal contact strategies.

Understanding the interrelated nature of offer and order channels is essential to investing appropriately in each element of the marketing mix. With multiple demand drivers out there influencing buying behavior, understanding the real path to purchase is the next step in measuring and optimizing your media effectiveness in today’s rapidly evolving multimedia, multichannel world.

Laura Wojtalik is director of product management and Bob Fetter is senior vice president of data management solutions at Lafayette, CO-based co-op Abacus.

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