Get your head out of your roAS
3 cowboys step into a general store to buy boots.
Cowboy 1
The owner asks, "how'd you hear about our store, pardner?"
He says, "I'm passing through and you're the only store I saw for miles."
Cowboy 2
The owner asks, "Why did you buy boots from our store instead of that one across the street?"
He replies, "Well, you have better prices, and I liked that you said howdy when I walked in."
Cowboy 3
The owner asks, "Why'd you buy these boots?"
He responds, "I saw Joe in the saloon wearing one yesterday and I needed a new one, so I asked him where he got his."
Secondary reasons they bought:
Cowboy 1: Location & Convenience
Cowboy 2: Competitive Win
Cowboy 3: Word of Mouth
Main reason they bought:
They needed boots
While this Wild West example is hundreds of years old, it's still relevant - customers make decisions for their lives that you cannot fully see, measure, or control. These 3 customers could have bought for multiple reasons, but only shared 1 with the owner of the store.
How would you attribute these boot sales, and where does the owner need to put more resources to drive more boot sales?
A sign on the road coming into town?
Signs in town talking about us vs them?
Saloon advertising?
Why Attribution Really Matters To Marketers
Here's how to measure attribution perfectly. It's so simple you'll laugh you never saw this before:
Set up Triple Whale
Set up Northbeam
Set up your pop-up to collect real-time feedback
Set up your post purch...
...you don't.
Advertisers have always assumed that attribution was perfect, but it never was. Instead of focusing on business fundamentals, brands and agencies are clinging to a myth.
The thrill of the chase.
That's why the attribution conversation will never die.
It's more exciting to chase something you think will 'fix everything' than to do the boring stuff (which is often harder). Look at MLM programs, trendy diets, and gym memberships in January. People want results now. They don't want to put in the hard work, no matter the topic.
Successful brands do the boring work that failures avoid. Take it from someone who tried to bootstrap a D2C business with their own cash - if I could go back, I'd be more simplistic in my view as an operator / owner. Trying to do everything all at once puts you in last place, and simplifying your focus on high impact movements allows you to win the race.
You see beginner gains when you first begin lifting weights after taking a long break. Your muscles are shocked, and during the first few weeks, your progress looks great. Eventually, your muscles adapt to your workouts because you've grown stronger. And then, your progress plateaus.
Working out isn't about the direct feedback you get from your effort, it's about the disciplined motion of perseverance when you don't want to, with the confidence and focus that increasing your weight, switching up your routine with slight adjustments, and consistency will keep paying you benefits for your hard work. It's a zoomed out view, with no direct short-term feedback.
This is exactly why marketers chase after attribution, and likely always will. Direct feedback is something we all crave as humans.
Started a good habit? Why haven't I changed after a week?
Launched ads for my brand? Why am I not a millionaire yet?
To be successful as a brand, you have to be disciplined in the boring motions of high impact work, make a solid product, get it into the market, gather quality feedback, iterate quickly, and keep moving without the distraction.
Of course, there's more to this than just "duh, sell stuff".
Growing a legitimate brand is difficult. Anyone who tells you otherwise either hasn't tried to do it, or is a consultant who is trying to sell their service as 'the solution to your growth'. There's no single button to push that will lend you success. Instead, it's 3-5 buttons, and knowing when to stop pushing some, and when to put both hands on a single one.
Even being a part of an agency for many brands in the Health, Wellness, and Supplements space, I know what we provide at Alpha Inbound is just one small piece of the growth puzzle.
The Attribution Shift Problem & The Solution
We have clients that can't shake looking at platform data as a measure of results. They're addicted to what tech is telling them. And that's unhealthy behavior in itself. It's like convicting someone without any proof. Except that someone is the ads in your account that are performing, but you don't know it. You kill them off without any shred of a doubt because it's what you've always done.
Not a high enough ROAS? Kill it.
High ROAS? Scale it, duh.
When you operate on fake data, and you don't actually know what's happening until you pull the curtains back. And behind the curtains are the most fundamental cogs in the wheel of your business, and they tell a big, real story.
Looking at ROAS in platform is like listening to the guy at a party that everyone knows is BSing, but nobody speaks up to tell him to shut up. He's just too entertaining to not listen to and you "wish" his stories were actually true.
I have this conversation weekly. Let's take one of our client's in the supplements space.
Here's what he says is happening:
Facebook ROAS: low
CAC: high
Here's what's actually happening:
MER: really high
CAC: low
Most brands and agencies are so indoctrinated at looking at what the in platform data says, they don't even bother to look elsewhere.
The client mentioned above advertises on 1 channel, does about $500K in annual revenue, and constantly asks us about performance and attribution.
The conversation is quite simple: Where do you think your customers heard about you?
When zooming out, it becomes much more clear how performance is going. Advertising on 1 channel, and yielding an MER of 20% (5x your spend) is impressive.
But you won't see that if you're too busy squinting at the trifles of your effort.
Your advertising health (and business health) can be directly tied back to your P&L. Always. This is a truth that brands must adopt if they want to realize steady growth over time to become a household name.
Path #1 (Blue Pill):
You run ads.
You don't know what's driving sales.
You think every ad should drive sales.
You make decisions based on fake data.
You rinse and repeat because you don't know where else to look.
You only see the micro. You never come up for air.
Path #2 (Red Pill):
You run ads.
You know your customer's problems and those ads align.
You only look at platform metrics that you know without a doubt they are 100% accurate, like: CPC, CPM, CTR, Amount Spent, Hook rate, Retention rate, and more.
You know what you can spend to acquire a customer, what your ad spend budget is, what each site visitor brings in revenue.
You get the macro.
Which sounds like a better model? Of course, Option #2. But you might be operating under #1.
If you can create the same amount of top line revenue with less marketing and advertising, and simultaneously work to lower your COGS and create a lean business (less G&A, and operational excellence), you'll succeed.
Why Are Brands Not Grieving Attribution?
When you consider the lack of shift in the market it's because of 2 things:
1) Brands aren't educated on why a shift needs to happen and want to default to the way things have always been. Brands work with many agencies and even if they don't, having a KPI goal in platform has been default for awhile. This is the brand-side marketer's fault. Their job is to stay at the forefront of where shifts needs to happen internally, whether working with an agency or not.
2) There's not a solid system that exists to execute this. We tell ourselves lies subconsciously when we don't want to do the hard work to find a solution. Sometimes, it's sitting in plain sight.
Here are some much better high-level alternatives you need to start measuring:
MER
Marketing Efficiency Ratio is the efficiency of your marketing in regards to your top-line revenue. If I spend $3 on marketing, and I get $10 in sales, that's a 30% MER. The smaller the percentage, the better. If the percentage is smaller (i.e. 10%) that means I'm only having to spend $1 to achieve the same amount of top line revenue.
This leaves more $ on the table for other things like COGS and Operating Expenses (OpEx).
Of course, selling a product with big gross margins helps your top line, and allows you more wiggle room, but that's the gist.
Marketing & Sales Expenses / Revenue
Contribution Margin
Contribution Margin is another new term. Its like Gross Margin, but also deducting your variable costs on a per order basis.
There's contribution margin before marketing costs, and after.
Regardless, here's a simple example.
If I have $100 in revenue, and I sell a product at 70% margin, that means that I have $70 left over after my COGS. Once I subtract other offsets to that revenue, like payment processing, shipping, and other related expenses tied to a product's variable cost, I'm left with another amount. Let's say those expenses are $20. I'm left with $50.
Let's also say that I spent $15 to acquire that customer that brought in $100 in revenue.
Pre-Marketing Contribution Margin: 50%
$50 / $100
Post-Marketing Contribution Margin: 35%
$35 / $100
Contribution margin is the amount of margin I want to have left on the table to put towards the business itself, or reinvest it back into marketing. Businesses have inevitable Operational Expenses (OpEx) they need to cover outside of variable costs, which is why this is so important.
This very basic calculation on a much larger scale isn't being done internally for businesses, because everyone's busy trying to measure direct feedback from ad efforts, and looking at fake results data.
There are other factors you need to consider instead of just contribution margin (CM) in isolation, like AOV, discounts, and other pieces that make up the whole. You just need to look a little deeper.
How Do You View Attribution?
The tech world is sprinting towards a cookie-less, track-less, attribution-less future, and has been for awhile.
People are getting creative with how to stitch together data from SaaS tools, ecommerce platform data, and everything in between to one day hit perfect attribution.
But, that day will never come.
They can't seem to get their head out of their roAS.
How do you view attribution with your brand?