Online Marketing’s Downward Spiral: How to Avoid the Pitfalls of Lower ROI and Volume

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Unfortunately, the standard installation of most commercial analytics packages only makes this problem worse. Generally, these packages allocate every purchase to “the last click.” That means, in calculating the ROI of your marketing programs, every dollar of revenue you generate gets assigned to the click immediately before the user purchased — but we already know they may click through several times during their buying process and that each step is important!

Using “last click in” tracking just assures that many important bricks in the road are undervalued. Thus begins the downward spiral of online marketing — as important components get undervalued and removed, the overall campaign begins to perform worse. Then your revenue drops, which causes you to cut your budget or raise the acceptable ROI threshold, which leads to further cutting of undervalued marketing pieces. I have seen this happen in a few common cases.

First, advertising campaigns as a whole get undervalued for sites that sell products with reasonable consideration times. Users discover the site through an ad, think about purchasing, and return days later to complete the transaction by typing in the site’s URL or using a bookmark. Last click in tracking gives zero credit to the initial ad, and all the credit to the direct navigation. Another common case arises when a user clicks on a product ad to arrive at your site, leaves to comparison shop, and then returns through a search ad on your brand because she remembers your site had the lowest price. Last click in tracking overvalues brand keywords in this case and undervalues everything else.

HOW TO SCALE, NOT SPIRAL

Every marketer want to scale traffic from their online marketing efforts — if you can increase your ROI and spend at the same time, your profits will continuously go up. If your campaign is spiraling, though, the opposite will occur. Both ROI and volume (traffic, spend, revenue, profits) will go down.

The easiest way to prevent this downward spiral is to keep track of what led to a purchase for each of the customer’s previous visits. Once you understand what variables influence purchase decisions you can identify which campaigns need to be throttled back or cancelled. And, you’re making these decisions with the confidence you are not removing signposts leading the customer to a purchase decisions.

As you measure and track each of these steps, you can fine tune your marketing budget, improve your ROI, and continually scale your business. If tracking and allocating across every click is too difficult, try allocating half of the transactions to the first click in and half to the last — it won’t be perfect, but the technique will reduce the risk of entering the downward spiral.

If you outsource your marketing to several different firms, you may be encouraging the downward spiral. Last click in tracking is especially prevalent as a way to solve “ties” between traffic sources — your affiliate vendor and your search vendor, for instance. In these cases, make sure you or at least one of the vendors can track every purchase, and can allocate each purchase to a campaign so that you understand how last click in reporting might be skewing your vendor’s results.

With a good analytical foundation and some very simple reports, you should be able to scale your marketing budget and avoid the downward spiral of lower ROI and decreasing volume.

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