Category posts
Managing advertisement channels

Essays on calculation ROI, unit economics, and traffic attribution models.
Author:
Editorial
Errors in calculating ROI and unit economics. Impact of attribution models and incrementality on the ROI calculation of marketing channels

In a series of essays for GoPractice blog, Zakhar Stashevsky, CMO at Letyshops, will explore how to influence growth through effective channel management. Letyshops is a cashback service that allows users to return part of the money they spend on online shopping.

In the first essay, Zakhar discusses why you pay careful attention to the details of attribution model and incrementality when calculating the unit economics (ROI) of your ad campaigns.

Calculating unit economics is easy when you have perfect tracking and attribution for your ad campaigns. But in the real world, perfect tracking and attribution is virtually impossible.

Without understanding the features of the attribution methods used, the specifics of the channels, and the problem of traffic incrementality, unit economy calculation can lead to one of two errors:

  • The team underestimates the channel and does not take a full advantage of it
  • The team overestimates the channel (this is called incrementality) and loses money

Many teams make these mistakes. We made them ourselves when we were scaling Letyshops. Thanks to this experience, I can now share my thoughts on how to identify and avoid these errors.

Test your product management and data skills with this free Growth Skills Assessment Test.

Learn data-driven product management in Simulator by GoPractice.

Author:
Editorial
Traffic attribution models. Why attribution models need to change along with growth channels, product, business objective and external environment

In collaboration with GoPractice, Letyshops CMO Zakhar Stashevsky continues to discuss product growth through effective advertising channel management.

Table of contents for this series of essays

  1. Errors in calculating ROI and unit economics. Impact of attribution models and incrementality on the ROI calculation of marketing channels. In this column, we discuss why, when calculating the unit economics, it is impossible to ignore the influence of the used attribution models and advertising incrementality.
  2. Traffic attribution models. Why attribution models should change along with growth channels, product, business challenge and external environment [you are here]

In this piece, we discuss how to select attribution models to assess the effectiveness of advertising channels based on the specifics of the product, marketing mix, business objective, and environmental conditions. We will also explain why it is necessary to revise and adapt the attribution model in the event of changes in these factors.

From here on, Zakhar tells the story.

In the previous essay, we discussed how the incorrect calculation of the unit economics and ROI can lead to an underestimation or overestimation of the advertising channel and, as a result, erroneous marketing decisions. Excessive scaling or channel shutdown can lead to direct or indirect financial loss, which leads to missed growth opportunities on the market.

Such errors can happen for a variety of reasons. One of the most common is marketing and analytics teams not paying enough attention to the attribution models based on which they make their decisions. They simply use the default attribution model available in the analytics system, or select a model when they start working with a new channel but don’t change the model as the company evolves and the marketing mix, the length of the product sales cycle, and external factors change.

Test your product management and data skills with this free Growth Skills Assessment Test.

Learn data-driven product management in Simulator by GoPractice.

Traffic attribution models. Why attribution models need to change along with growth channels, product, business objective and external environment
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