Conversion allocation
Conversion allocation is a growing interest area in online (and offline) marketing. The core question in conversion allocation is this: “How to you assign credit for a conversion to all the different marketing channels and efforts within each marketing channel that influenced a particular customer’s purchase decision?”
This obviously has significant ramifications for calculating the ROI of various marketing channels.
For example, consider a series of emails promoting an upcoming event. The first email generates a 5% Click-through rate (CTR) and leads to 2 website conversions. The second email generates a 6% CTR and 7 website conversions. The third generates an 8% CTR and 12 website conversions. Assuming all three emails were sent to the same list, one might assume that the third email was more effective than the first two since it generate a higher CTR and more conversions.
One might then conclude that rewriting the first two emails to be more similar to the third, would result in a higher CTR and more conversions. But what if the success of the third email was precisely BECAUSE of the first two? Here is another example, consider two search terms generating pay-per-click ads on a major search engine. The first term is a generic “head” term that generates a high number of impressions and clicks, but few conversions. The second term is a specific “long tail” term that generates few impressions and clicks, but has a high conversion rate.
One might conclude that the first term is a waste of marketing dollars since it rarely generates conversions. However, research has shown that searchers often start with simple 1 or 2 word searches when they are early in the buying process and then shift to more specific searches as they get closer to making a purchase decision. What if the high conversion rate for the second term is being influenced by the awareness generated from the clicks on the first term? If we suppose that some of the people who convert also heard a radio spot or saw a billboard for the event, the situation becomes even more clouded.
Most current conversion tracking systems don’t account for this phenomenon which almost certainly leads to inaccurate reporting of the complex causes of conversion. Usually this results in over allocating credit to actions that directly led to a conversion at the expense of items that introduced a potential student to your offerings or influenced their decision.
There are efforts underway to better understand this phenomenon. Until that happens, however, we should take care not to hastily assign all credit for a conversion to just the marketing effort that is most easily measured. Marketing efforts that build awareness, inform potential students, and otherwise influence purchase decisions are important parts of an effective toolkit...even if we can’t directly measure them.
Below are two links to additional information on the subject of conversion allocation:
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