Optimization is a critical aspect of any system or process, as it helps to ensure that resources are utilized efficiently and effectively. However, there is a danger in over-optimization, where the focus on a specific node or component of the system leads to suboptimal overall performance. This phenomenon is a common problem in various industries, and it can be challenging to identify and rectify.
I spend a number of years managing a manufacturing plant. In this job, I experienced first hand the teachings of W. Edwards Deming. According to Deming, a system is a network of interdependent components that work together to achieve a common goal. Therefore, optimizing one component at the expense of others can be counterproductive.
Over-optimization occurs when a specific node or component of the system is given too much attention at the expense of other nodes. For example, in the manufacturing industry, over-optimizing a single machine or process may lead to a bottleneck that slows down the entire production line. Or in the financial industry, over-optimizing a particular investment strategy may lead to excessive risk-taking and loss of overall portfolio performance.
Surprisingly, this over-optimization can happen in marketing as well. We can hyper focus on cost per lead (CPL) and forget about other important marketing metrics that help to drive a profitable business. One key measure that gets missed is tracking return on ad spend (ROAS) which takes into account the revenue that any lead is generating for our business. However, tracking this metrics can be a little difficult and ad platforms aren’t set up to help your return on ad spend.
Ad Platforms are Anonymous
Digital marketing reporting rarely has the ability to calculate ROAS because ad platforms are anonymous. If you look at google analytics, google ads, or facebook ads, there are no names — you don’t know who clicked on an ad, you just know that someone clicked on it. But that click could have been from a bot that spend zero dollars with you or it could have been from a millionaire home owner that landed you your biggest job ever.
Digital ad platforms like Facebook are walled gardens of data, which give you aggregate glances into campaign performance rather than an individualized view. This problem is only getting worse with Apple and Google phasing out support for third party cookies. There are some tricks to submit revenue numbers back to ad platforms, but in reality we almost never see companies utilizing this ability because it is technically complicated.
The result of anonymous ad data is that you are stuck looking at reports within data silos. In one silo you have marketing data, and in another you have sales data. You might be able to see ad platform reports that show stats like cost per click or cost per lead, but you can’t track those clicks and leads to actual revenue.
Merging Data Silos
So what’s the solution? How do we merge these two data silos so that we can track return on ad spend? While the problem is difficult to solve, with a little work you can get there. It comes down to looking at each of your response channels and defining how to track marketing attribution so that campaign data gets sent to your customer relationship management system (CRM).
Most of us have two primary response channels: phone and website. Let’s break down each of these to see how we can send marketing attribution data to the CRM:
Phone. Many contractor CRM systems have the ability to create a lead from a phone call and automatically assign the campaign through tracking numbers. If you don’t have this setup, you need to talk to your software provider (or find a new CRM). When this works correctly, your sales team should be able to see an incoming call which already has the marketing campaign set. They can then set more contact details and follow up steps.
Website. This is a bit more complicated, but the first step is that every ad you create links to your website with campaign details. You can use this tool from google to easily add what are called UTM params to your link. This way when they get to your website, you can track which ad they came from. Once you have that working properly, you have two next steps:
- Setup your lead forms to grab marketing attribution data. If you have a WordPress website your web developer should be able to setup first party cookie (one that you create on your site) to track the source of the visitor. Or another very simple option is using attributor.io, which sends UTM campaign attributes to your lead form so that this data gets sent to your CRM.
Once your CRM is getting the correct campaign set on leads for all your response channels, it is very simple to run sales reports to see total sales by campaign. When you have this visibility, you will be be able to stop over-optimizing on certain metrics like cost per lead and start to look holistically at what type of revenue each lead created. What you will find is that not all leads are created equal.