Jun 04, 2024 Digital BIAS

How Cost Analysis and Attribution Drive Informed Decisions

As an agency that specialises in SaaS and Fintech, understanding the financial implications of marketing and sales activities is essential for sustainable growth. Cost analysis and marketing attribution are two solid methodologies that provide insights into the efficiency and effectiveness of these activities. 

By leveraging these metrics, companies can make informed decisions that optimise resource allocation, enhance profitability, and drive business growth.

In our ARISE™ GTM framework, the Assess stage is where you take the pulse of the business as is so that you can understand how you want to move forward. Given the advanced roles CFOs now play in formulating the business strategy, keeping them informed alongside your CRO is a strong play.

As ARISE™ delivers KPIs for financial performance as well as for your marketing and revenue teams, it’s a great jump-off point for early-stage and mid-market companies.

Cost Analysis

Cost analysis involves a detailed examination of all marketing, sales, and customer success costs. This process helps businesses understand their strategies' financial impact and identify areas for improvement. 

For instance, a comprehensive marketing cost analysis includes direct costs such as advertising expenses, promotional materials, and sales team salaries, as well as indirect costs like administrative expenses and utilities. 

By categorising and analysing these costs, companies can pinpoint inefficiencies, reduce unnecessary expenditures, and improve their overall marketing ROI.

A practical example of cost analysis can be seen in a SaaS company that conducts a detailed breakdown of its marketing expenses. Suppose the company spends $100,000 on an advertising campaign that generates $150,000 in sales. This positive ROI indicates that the campaign is effective. 

Conversely, if another campaign costing $50,000 only generates $40,000 in sales, the company can identify this as an area needing optimisation or reallocation of resources. This granular understanding of costs enables businesses to make strategic decisions that enhance profitability and operational efficiency.

These were simple examples, and I purposely made them simple to make digesting this easier. Depending on the use case, a cost analysis can become much more itemised.

Marketing Attribution

Marketing attribution is the analytical process of determining which marketing activities contribute to sales and conversions. This involves assigning value to different touchpoints in the customer journey, helping businesses understand which channels and campaigns are most effective. 

Various attribution models, such as first-touch, last-touch, and multi-touch attribution, provide different perspectives on how credit is distributed among marketing activities.

For example, a multi-touch attribution model might reveal that a customer interacted with a company's blog post, social media ad, and email campaign before purchasing. By analysing these touchpoints, the company can determine which interactions were most influential in driving the conversion. 

This insight allows marketers to optimise their strategies by investing more in high-performing channels and refining or eliminating less effective ones. 

Integrating Cost Analysis and Attribution

Integrating cost analysis with marketing attribution provides a holistic view of marketing activities' financial and performance aspects. This combined approach enables businesses to track the costs associated with each marketing channel and understand their return on investment (ROI). 

For instance, by analysing the cost per lead (CPL) and the conversion rate of different marketing campaigns, companies can identify which campaigns offer the best value for money and adjust their budgets accordingly.

Moreover, this integration helps in validating the effectiveness of marketing strategies. If a particular campaign has a high cost and conversion rate, it might still be worth the investment. Conversely, a low-cost campaign with poor conversion rates might need re-evaluation or discontinued. 

This data-driven approach ensures that marketing efforts are both cost-effective and impactful, ultimately driving business growth and profitability.

Experiments Using Marketing Attribution

To effectively use cost analysis and attribution in sales and marketing, you can run various experiments to optimise your strategies and improve ROI. Here are some examples:

1. Channel Performance Analysis

  • Objective: Identify which marketing channels are most effective in driving conversions.
  • Experiment: Use multi-touch attribution models to analyse the performance of different channels (e.g., social media, email, paid search). For instance, you can compare the effectiveness of Facebook ads versus Google ads in driving sales.
  • Implementation: Track customer interactions across multiple touchpoints and assign credit to each channel using linear, time-decay, or U-shaped attribution models.
  • Outcome: Determine which channels contribute most to conversions and allocate the budget accordingly.

2. Content Effectiveness Testing

  • Objective: Validate the impact of different types of content on engagement and conversions.
  • Experiment: Conduct A/B tests on various content formats (e.g., blog posts, infographics, videos).
  • Implementation: Create different versions of content and measure engagement metrics such as time on page, shares, and conversion rates.
  • Outcome: Identify which content formats resonate best with your audience and drive higher engagement and conversions.

3. Ad Copy Optimisation

  • Objective: Improve the performance of ad campaigns by testing different ad copies.
  • Experiment: Run A/B tests on different versions of ad copy to see which one performs better.
  • Implementation: Create multiple versions of an ad with varying headlines, descriptions, and calls to action. Measure the click-through rates (CTR) and conversion rates for each version.
  • Outcome: Identify the most effective ad copy that drives higher CTR and conversions and use these insights to optimise future campaigns.

Experiments Using Cost Analysis

1. Pricing Strategy Testing

  • Objective: Determine the optimal price point for a product to maximise revenue.
  • Experiment: Conduct A/B tests with different pricing strategies (e.g., cost-plus pricing, competitive pricing, anchor pricing).
  • Implementation: Offer the same product at different price points to customer segments and measure the impact on sales volume and revenue.
  • Outcome: Identify the price point that maximises revenue without significantly reducing sales volume.

2. Discount Impact Analysis

  • Objective: Understand the effect of discounts on sales and profitability.
  • Experiment: Run experiments offering different discount levels (e.g., 10%, 20%, 30%) to various customer segments.
  • Implementation: Track each discount level's sales volume, average order value, and overall profitability.
  • Outcome: Determine the optimal discount level that boosts sales while maintaining profitability.

3. Bundling Strategy Testing

  • Objective: Evaluate the effectiveness of product bundling in increasing sales.
  • Experiment: Test different bundling strategies (e.g., bundling complementary products, offering bundle discounts).
  • Implementation: Create product bundles and offer them at a discounted price compared to purchasing items individually. Measure the impact on sales and average order value.
  • Outcome: Identify the most effective bundling strategy that increases sales and enhances customer value perception.

By running these experiments, you can leverage cost analysis and attribution to make data-driven decisions, optimise your marketing strategies, and improve your ROI.

In conclusion, cost analysis and marketing attribution are essential tools for SaaS and Fintech companies aiming to optimise their marketing and sales strategies. By understanding the financial implications of their activities and accurately attributing value to different touchpoints, businesses can make informed decisions that enhance efficiency, maximise ROI, and drive sustainable growth.

If you need help with your own attribution and analysis, please use the form in the footer or the link in the menu bar.

 

Published by Digital BIAS June 4, 2024