When consumers shop online, it is likely that savvy marketers will analyse their email and internet searches to see what drove their purchasing behaviour.

Was it an email from a local music store that prompted the purchase of those wireless headphones? Or were they featured in a glossy magazine inside the weekend newspaper?

New research from Monash University questions how advertisers are measuring the effectiveness of advertisements for online shopping purposes. And it says the basis on which they’re doing it is all incorrect.

Professor Peter Danaher, Head of the Department of Marketing at Monash Business School, explains the methodology. “At the moment, if a consumer buys a new toy online, Google can look at the search patterns that person has had over the past few days, or whether they’ve received any emails from a department store such as Kmart,” says Professor Danaher.

“They use a method called ‘last touchpoint attribution’. So, if the consumer last opened an email about toys, the email gets the credit. It they last did a Google search on toys before making the purchase, Google gets the credit.

“The advertising industry has used this method for the past five years because it’s simple and effective. The problem is, this method ignores how long consumers remember an advertisement.”

Previous studies have shown the effectiveness of mail catalogue advertising, but the attribution method ignores this fact.

“This means that businesses are spending up to four times more on email and online advertisements compared to print or television, because they think this is where their market is located. Television and magazine advertisements are far from useless in selling products,” Professor Danaher says.

A new strategy 

Professor Danaher has developed a new “future media allocation” strategy that takes into account advertising costs, budget impacts, and the impressions each advertisement makes on the actual purchase.

“It also takes into account the carry-over effect, or how long the effectiveness of a particular form of advertising may last,” he says.

“Attribution is an inherently descriptive approach capturing how much of a role each medium has played in driving (past) purchases,” he says. “However, this does not mean that attribution should be used for allocating a budget across media to maximize profit.”

For example, if 80 per cent of all purchases of face cream is attributed to emails and 20 per cent to magazines and both forms of advertising cost the same.

It would be wrong to spend four times as much on email face cream ads as magazines – because attribution creates the illusion that the number of times a person has been exposed to the type of ad means it is very effective and should receive more investment.

“What we propose is a more econometrically sound method,” says Professor Danaher, taking into account the cost of a method of advertising when allocating budget to it. The strategy also links the incremental impact of different types of advertising on the actual purchase outcome.

“Even if there is a zero purchase probability effect of a medium, attribution methods that are based on counting the number of exposures prior to making a purchase will attribute a significant portion of the purchase to that medium,” he says.

It gives skewed information to advertisers and favours emails which have the benefits of being cheap and come out at 10 or 12 times the rate of catalogues – a much more expensive form of advertising that is mailed perhaps once a month.

“As advertising becomes more dynamic in an effort to capture those no-fuss consumers, it’s critically important for companies to get their marketing strategies right.”

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