In the fast-paced realm of DTC marketing, Paid Media reigns supreme. For the last 20 years Paid Media has been the de facto most effective way to drive tangible, measurable, DTC growth. It's an opportunity for strategic investment, aiming to attract new customers, and to re-engage past ones. However, success in this arena demands more than just targeting and creativity. It hinges on a solid grasp of paid media attribution.
When DTC brands start out, they usually have big dreams but limited budgets. There’s an old saying, "where there’s hype, there’s wasted spend." So keeping budget allocation & effective budget deployment in mind, choosing the right mix of Paid Media campaigns becomes an important choice behind growth. 99% of the time, DTC brands looking to start out with Paid Media should exclusively be looking at Google Ads & Meta Ads, or a newer option like TikTok. While there are many other options, these platforms will drive the most bang for your buck. But because we’re talking about paying a premium to drive users to the site, understanding how attribution works is crucial to “success” being backed by real dollars in the bank account.
The pitfalls of attribution on paid media platforms
When first starting out reporting, most DTC brands will report on performance straight from the individual ad platforms. After all, that’s where we’re running ads from, and the numbers are right there in front of you.
So if you look at performance in the Google Ads platform, you’ll say "great, Google drove $2,000 dollars in revenue today", and then you’ll look at Meta Ads, or Klaviyo, or inside literally any other marketing platform and you’ll say "awesome, we drove another $1,600 dollars here today" and lastly you’ll look at Shopify, or the back end of your e-commerce store, and see that you only actually drove $900 in sales today, what gives?
Herein lies the complexity with attribution: all platforms pretend no other platforms exist, so they all pretend they each drove 100% of revenue that they touched, instead of splitting credit.
Navigating attribution challenges in DTC marketing
At the heart of it, attribution is a credit problem. If someone first interacts with a Meta Ad, then days or weeks later searches for a product and clicks on a Google Ad, who should be getting the credit for driving that purchase? How much credit? Now imagine a world with hundreds of other platforms and touchpoints, the issue suddenly becomes less petty and further exacerbated.
Many “successful” DTC brands, doing a high volume of daily sales, have gone under from not understanding this concept, leading to over leveraged marketing spend in all the wrong places. For this reason, before launching your first campaign, make sure that your view of measurement is set up for success.
Prerequisites for a strong foundation in measuring attribution
What you need to address with measurement comes down to two things:
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Making sure in-platform measurement is setup properly
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Establishing your holistic external source of truth
Despite everything we’ve said about the pitfalls of relying on platforms for attribution, we absolutely want in-platform measurement set up properly. Regardless of attribution, this is the data the actual campaigns will have to use and optimize toward. Every platform has its own tracking tags so to simplify, streamline, and future proof this process, we recommend setting up all conversion tags via Google Tag Manager (GTM).
As far as establishing a holistic source of truth goes, there are hundreds of different tools, platforms, & plugins, each promising to be more accurate or have a better feature suite. The reality is that there is a lot of filler noise. For 99% of DTC brands, the best solution will be Google Analytics 4 (GA4).
GA4 is hands-down the most convenient and widely used attribution tool for DTC brands of literally all sizes. GA4 allows you to look at revenue holistically from all the various marketing channels/platforms and splits credit accordingly. The conversation of attribution is a deep one with more caveats, such as various attribution models, but DTC brands can rest assured GA4 can and should be their holistic source of truth for all things paid media performance.
Relying on ROAS when it comes to revenue
For most DTC brands the balance between ROAS (Return on Ad Spend) & revenue is the name of the game, and the north star when it comes to Paid Media success. ROAS is a critical metric as it directly measures the effectiveness of advertising campaigns by evaluating the amount of revenue generated for every dollar spent on advertising.
DTC brands, especially newer or smaller ones, often have limited budgets, therefore ROAS becomes pivotal in ensuring that budget is allocated effectively. By analyzing ROAS, brands can identify which campaigns are generating the best returns and shift resources accordingly to maximize profitability.
By recognizing how much revenue can be attributed to advertising spend, brands can also determine if they have the margin to absorb advertising costs and still maintain profitability. As DTC brands attempt to scale their operations, it allows brands to forecast more accurately and invest with confidence in the campaigns that demonstrate the potential for scalability without compromising profit margins, enabling informed decisions based on actual performance, rather than hunches or assumptions.
Most platforms natively offer ROAS metrics, however just as discussed with in-platform attribution, the return/revenue aspect of ROAS won’t be holistic with in-platform reporting, therefore not wholly accurate or reliable. The recommended, more accurate, solution would be to combine spend metrics from the ad platform and take campaign or channel revenue from GA4 in order to calculate ROAS.
While ROAS plays a critical role, DTC brands that over rely on ROAS as the only metric of success often overlook other crucial aspects of the customer journey, like the role of influencers, or certain Paid Social campaigns whose spend can’t be tracked as easily with ad clicks.
The Hawke Method
At Hawke Media, a brand known for its data driven precision, we don’t solely rely on platform data. We cross-reference it with GA4 & other analytics tools such as Hawke.ai and use multi-touch attribution models to assess each touchpoint's value. We understand that the goal of some campaigns is to drive higher funnel engagement, while with others the intent is purely sales driven.
For our clients, we don’t go beyond platform attribution data to cross-reference it with GA4 and other analytics tools (like Hawke.ai) and use multi-touch attribution models to assess each touchpoint’s value.
Marketing Efficiency Ratio (MER)
Knowing that natural gaps may exist with almost any form of attribution, we might want to look at Paid Media performance through the lens of MER (Marketing Efficiency Ratio). With MER, we can determine the efficacy of all marketing spend in relation to top line revenue, what percentage of revenue to media dollars we’re leveraging, or more importantly, if marketing spend is actually moving the needle on top line revenue growth.
So with MER you want to divide your top line revenue by the sum of spend from all your major marketing platforms.
Marketing Efficiency Ratio = Total Revenue/Total Marketing Spend
For example if revenue in the month was $300,000 and total spend was $50,000, that would give us a ratio of 6:1 for MER.
As far as what’s a good MER, it's going to vary by vertical and your margins, but in general an MER of less than 6:1 can be considered very conservative when it comes to marketing spend deployment, ~4:1 is can be considered healthy, and something closer to 2:1 can be seen as very aggressive, where a large % of revenue is being leveraged as marketing spend to hopefully propel revenue.
Customer Journey Mapping
Lastly, one of the most effective measurement solutions for DTC brands is to understand customer purchase influence directly from customers themselves, via post purchase surveys like Fairing.co. By mapping the entire customer journey, we’re able to gauge campaign effectiveness accurately.
This involves tracking the first touchpoint with the customer (“How did you hear about us?” all the way to the point of purchase (with last touch attribution). This gives an accurate understanding of the number of touchpoints typically needed to influence a sale, and the amount of spend required.
Navigating the world of paid media requires strategy and insight. With a solid understanding of attribution, brands can make informed decisions that drive customer loyalty and revenue growth.
