Traffic Management

What is the AIDA Model in Marketing?

The AIDA Model, which stands for Attention, Interest, Desire, and Action model, is an advertising effect model that identifies the stages that an individual goes through during the process of purchasing a product or service. The AIDA model is commonly used in digital marketing, sales strategies, and public relations campaigns.

 

 

The AIDA Model Hierarchy

The steps involved in an AIDA model are:

• Attention: The first step in marketing or advertising is to consider how to attract the attention of consumers.
• Interest: Once the consumer is aware that the product or service exists, the business must work on increasing the potential customer’s interest level.

For example, Disney boosts interest in upcoming tours by announcing stars who will be performing on the tours.

• Desire: After the consumer is interested in the product or service, then the goal is to make consumers desire it, moving their mindset from “I like it” to “I want it.”

For example, if the Disney stars for the upcoming tour communicate to the target audience about how great the show is going to be, the audience is more likely to want to go.

• Action: The ultimate goal is to drive the receiver of the marketing campaign to initiate action and purchase the product or service.

Therefore, the AIDA model says that Awareness leads to Interest, which leads to Desire, and finally, Action.

Let us consider ways to use the AIDA model by looking into each part of the hierarchy.

 

First Step: Attention

Often, the attention part is overlooked by many marketers. It is assumed that the product or service already got the attention of the consumers – which may or may not be the case. In any event, don’t just assume that everyone is already aware of your product. One of the best approaches to attracting consumer attention is what’s called “creative disruption” – breaking existing patterns of behavior through a highly creative message. This can be done in several ways:

• Placing advertisements in unexpected situations or locations. This is often referred to as guerrilla marketing.
• Creating shock in advertisements through provocative imagery.
• An intensely targeted message. This is also referred to as personalization.

Essentially, the goal is to make consumers aware that a product or service exists.

 

Second Step: Interest

Creating interest is generally the hardest part. For example, if the product or service is not inherently interesting, this can be very difficult to achieve. Make sure that advertising information is broken up and easy to read, with interesting subheadings and illustrations. Focus on what is most relevant for your target market in relation to your product or service, and on conveying only the most important message you want to communicate to consumers.

A good example of this is Wendy’s “Where’s the beef?” ad campaign that focused on the fact that Wendy’s hamburgers contained more beef than their competitors’ hamburgers.

 

Third Step: Desire

The second and third steps of the AIDA model go together. As you are hopefully building interest in a product or service, it is important that you help customers realize why they “need” this product or service. Think about how the content in infomercials is presented – they aim to provide interesting information on the product, along with the benefits of buying it – benefits that ideally make consumers want the product more and more. Infomercials do this extremely well by showing the product being used in several creative situations. Convey to the audience the value of the product or service, and why they need it in their life.

 

Fourth Step: Action

The last step of the AIDA model is getting your consumer to initiate action. The advertisement should end with a call to action –  a statement that is designed to get an immediate response from the consumer. For example, Netflix uses persuasive text to convince the consumer to try their free trial. Netflix communicates how convenient their product is and highlights its value, then urges consumers to sign up for a free trial.

Good advertising should elicit a sense of urgency that motivates consumers to take action RIGHT NOW. One commonly used method for achieving this goal is making limited time offers (such as free shipping).

 

New Developments in the AIDA Model

Many criticize the AIDA model for being too simplistic. For example, the AIDA model does not take into consideration different possible points of sale. Marketing will be very different for a customer visiting an online store than it is for a customer looking to purchase a new car at a dealership. Therefore, there are many variations of the AIDA model such as the:

• AIDCAS (Action, Interest, Desire, Confidence, Action, Satisfaction) model
• REAN (Reach, Engage, Activate, and Nurture) model
• NAITDASE (Need, Attention, and Interest; Trust, Design, and Action; Satisfaction and Evaluation) model

Contact us for more details and insights.

What is a Network Effect?

The Network Effect is a phenomenon where present users of a product or service benefit in some way when the product or service is adopted by additional users. This effect is created by many users when value is added to their use of the product. The largest and best-known example of a network effect is the Internet. The Internet, as we know, is a network of networks where people connect to each other.

 

History

Much of the early work done regarding the Network Effect was based on Metcalf’s Law. Metcalf’s Law states that the value of a telecommunication network is proportional to the square of the number of connected users. The modern Network Effect theory was developed based on the research of Joseph Farrell, Michael L, Carl Shapiro, and Garth Saloner in the 1990s. These researchers coined the concept using the telephone as an example.

 

 

Understanding Network Effect

The network effect takes place with every new user’s addition to the old network, thus, increasing the value for all existing users. We can observe in the image below that the network starts off with a small number of users, after which it grows and connects more users in the chain, and attains a stage of critical mass. The speed of this network effect then increases exponentially with co-creation, where the users automatically subscribe for the additional value that they are getting.

 

 

Types

• Direct network effect or same-side network effect arises when users directly benefit from the addition of new users. A direct network effect is directly proportional to the users of the original product. For instance, existing users on the Internet will benefit from the addition of new online users.
• Indirect network effect or cross-side network, on the other hand, arises when users of the original product increase not because of any direct gain but due to the effect of some complementary product that triggers the use of additional products. For instance, existing users on the Internet will benefit from the addition of new users that are created by inexpensive laptops being available on the market.
• A bilateral network effect arises when there is an increase in users of a complementary product and users of that product benefit. For instance, the number of users on the Internet increase because of the increase in smartphone users. The complementary relation of both products boosts the number of users of the internet.
• When a user’s gain is affected by a small group of members rather than the whole set of members, then it is called a local network effect. For example, a user of instant messenger will benefit if his/her friends signed up for the same instant messenger app, but he will not gain anything from an increase in users in general.

 

Economic Consequences of a Network Effect

Sales in the market are significantly affected by the increase in the value of the network due to the addition of new users. When the value of the product obtained is higher than the price of the product, the consumer base is expected to increase. The higher consumer base happens once subscriptions reach a certain level of critical mass. New subscribers are attracted to the product because of the extra value they are getting.

Companies can attract new users to their network in various ways, such as fee waivers, discounted rates, free trials, etc.

 

Examples

Modern stock exchanges experience a network effect. The effect arises due to the volatile nature of stock prices. The forces of supply and demand that determine prices are ever-changing and depend heavily on the number of users. When the demand is low, prices fall, which attracts more investors to invest. As they invest, the rising price of the stock invites even more people. Then comes the downfall when people lose their confidence in the stock and sell it off, bringing prices down. The network effect is working when more people buy a certain stock, as everyone benefits from its rising price.

Contact us for more details and insights.

What is ROAS?

ROAS stands for “Return on Ad Spend,” a very popular financial metric in the world of digital marketing in particular, and a similar alternative metric to ROI, or “Return on Investment.”  ROAS is commonly used in eCommerce businesses to evaluate the effectiveness of a marketing campaign.

It should be noted that having a high return on ad spend does not necessarily mean a company is profitable, as there are many other expenses that have to be deducted before determining a company’s net profit margin. This metric does, however, show the existing correlation between advertising efforts and revenues.

In addition to gauging how generally effective a company’s advertising is in terms of generating sales, ROAS can also be used to compare the cost-effectiveness of one marketing campaign against another. For example, advertising campaign “A” may generate twice as large an increase in sales volume as advertising campaign “B” does, but if campaign “B” costs only one-fifth the price of campaign “A”, then “B” is a more cost-efficient advertising expenditure.

Some advertising efforts can boost total sales without measurably improving profitability, while other efforts may show a significant rise in net profit margin even though sales only rise slightly. This might be due to the fact that campaign “B” primarily helped to increase sales of products with very high profit margins.

 

What is the ROAS Formula?

Below is the Return on Advertising Spend formula:

Revenue Dollars / Advertising Spend Dollars

See an example in Excel here.

 

Example Calculation

An eCommerce company spends $100,000 on a Google AdWords campaign and generates $250,000 of product sales on its website, directly from those ads.

Revenue = $250,000
Advertising = $100,000

= $250,000 / $100,000

ROAS = 2.5

If ROAS > 1, then you are at least covering your marketing expenses with revenue, but are likely losing money after deducting expenses.  In broad, general terms, a ROAS of 3 or more – which means every one dollar spent on advertising generates three dollars in revenue – is considered “good.” What constitutes a desirable ROAS varies significantly according to industry, type of business, size of the business, etc. As with most financial metrics, examining a company’s ROAS is most meaningful when compared with other very similar companies, and with the company’s own financial history. A company that gradually raises its number from 4 to 7 during its first five years in business is apparently getting better and better at producing cost-effective marketing campaigns.

 

Challenges with ROAS

Revenue from ads is not necessarily a good indication of economic benefit because Return on Ad Spend may be considered a vanity metric.  A vanity metric is a figure that managers/owners favor mostly due to ego, and that doesn’t necessarily contribute to long-term business viability.

A better metric to use may be something such as Contribution Margin, which is equal to revenue minus variable costs, e.g., cost of goods sold (COGS) and shipping.  For many eCommerce businesses, cost of goods sold and shipping are major expenses, and may not leave much of a net return. Contact us for more details and insights.

What are marketing attribution models?

Attribution modeling is a framework for analyzing which touchpoints, or marketing channels, receive credit for a conversion. Each attribution model distributes the value of a conversion across each touchpoint differently.

A model comparison tool allows you to analyze how each model distributes the value of a conversion. There are six common attribution models:

• First Interaction
• Last Interaction
• Last Non-Direct Click
• Linear
• Time-Decay
• Position-Based

By analyzing each attribution model, you can get a better idea of the ROI for each marketing channel.

There isn’t necessarily a “best” attribution model. You may choose one as your primary attribution model for reporting and analysis. Different factors, like business goals or buying cycles, can make one model better than another.

Attribution modeling is an analysis tool, and you don’t need to limit yourself to one and stick with it. Compare performance under each model to understand the importance of multiple touchpoints in the customer’s journey.

Let’s look at an example.

Currently, your default reporting is based on a last interaction model (more on each type below.)

You look at your analytics and only see a few leads from organic blog traffic. You’re evaluating if you should keep investing in the blog. How do you prove the value of the blog?

You navigate to Catwing and view your conversions under the first interaction model.

Under a First Interaction model, the conversion value of your organic traffic shoots up! You realize that your blog visitors comeback to your site after clicking a retargeting ad, and then they sign up or purchase.

Under the Last Interaction model, the retargeting ad received all credit for those leads.

By comparing multiple attribution models, it’s easier to understand how two (or more) marketing channels work together to generate conversions, so you can assign a conversion value to each channel.

Attribution models are useful, but they’re also one of the more complicated topics in marketing.

In our complete guide to attribution models, we’ll walk through the primary attribution models and when to use them. Let’s get started on each type of attribution model.

What are the different types of attribution models?

1. Last Interaction Attribution

Last Interaction Attribution is also referred to as “last-click” or “last-touch.”  As the name implies, this model gives 100% of the credit to the last interaction your business had with a lead before they convert.

For example, a visitor finds your website through organic search. A week later they see a Facebook Ad and click the ad. Later that day, they go to your website directly and make a purchase.

The direct traffic, in this instance, gets all of the credit for that purchase. 100% of the value is assigned to that last touchpoint.

This is the default attribution model in most platforms, including Google Analytics. If you are looking at standard conversion reports in Google Analytics, you’re seeing each goal attributed to the last interaction your customer had with your business.

Pros & Cons of Last Interaction Attribution

Last Interaction attribution is the simplest to implement and evaluate.

It is also often the most accurate. Digital marketing today is scattered. People may access from multiple devices, clear cookies, or use multiple browsers. This makes it difficult to track their entire journey.

However, you can always be certain of their last interaction prior to converting.

The downside is that this model ignores everything that happens before the final interaction. Many of the interactions and touchpoints prior to that last-click will be just as important.

This model may be a good fit for you if you have a short buying cycle. If there aren’t many touchpoints prior to converting, only tracking the last one will give you a good idea of your strongest channels.

You will also find this model especially helpful if your sales funnel is wide at the top, but narrow at the bottom.

2. First Interaction Attribution

First Interaction is similar to Last Interaction, in that it gives 100% of the credit to one single click/interaction. First Interaction (also called “First-Click”) gives all of the credit for a conversion to your business’ first interaction with the customer.

For instance, if a customer first finds your business on Pinterest, then Pinterest gets all of the credit for any sale that happens after that interaction.

It doesn’t matter if the customer found you on Pinterest, then clicked a display ad a week later, and then went to your site directly. Pinterest, in this example, gets the full credit.

Pros & Cons of First Interaction Attribution

The main appeal of using First Interaction attribution is how simple and straightforward it is. However, this model ignores the effects of any potentially important marketing channels that occur at a later point, such as retargeting ads.

This model is also helpful if your industry has a short buying cycle. If there is a tendency to convert customers immediately, then their first touchpoint is especially important. Or, if your main business goal is bringing in new top-of-the-funnel customers, First Interaction is a great model for evaluating each channel.

3. Last Non-Direct Click

The Last Non-Direct Click Model is a bit more helpful than a standard last-click model. 100% of the value is still assigned to a single interaction. But, with last non-direct click, it eliminates any “direct” interactions that occur right before the conversion.

Direct Traffic is when anyone goes directly to your site by manually entering your url or clicking a bookmarked link, which means this visitor already knows about your company.

How did they learn about your company? What prompted them to go to your website directly? By eliminating direct traffic in a last-click model, you can better assign value to the marketing channel that led to the conversion.

Pros & Cons of the Last Non-Direct Click Model

As mentioned above, eliminating direct clicks makes this a more insightful model than last interaction. However, it still assigns 100% of the value to one interaction. If your customer had 4 touchpoints prior to that last non-direct click, it’s completely ignored.

4. Linear Attribution

With a Linear attribution model, you split credit for a conversion equally between all the interactions the customer had with your business.

For instance, a customer finds you on Instagram, signs up for your email list and later clicks an email link. The next week they go to your site directly and make a $120 purchase.

There are 3 touchpoints in this situation. Each touchpoint gets equal credit of 33%, or a $40 conversion value attributed to the channel when the purchase was made.

Pros & Cons of Linear Attribution

Linear attribution gives you a more balanced look at your whole marketing strategy than a single-event attribution model does.

However, this means it also assigns equal importance to everything.  Some marketing strategies are more effective than others, and this model will not highlight the most effective strategies.

If you want a nuanced attribution model that’s straightforward and easy to explain to clients, linear attribution might be a good choice for you. It’s also a great way to demonstrate how each channel does have value.

5. Time Decay Attribution

Time Decay attribution is similar to Linear attribution—it spreads out the value across multiple events. But unlike, Linear attribution, the Time Decay model also takes into consideration when each touchpoint occurred.

Interactions that occur closer to the time of purchase have more value attributed to them. The first interaction gets less credit, while the last interaction will get the most.

Pros & Cons of Time Decay Attribution

If relationship-building is a big factor in a business’ success, using Time Decay attribution can be a helpful way to conceptualize that.

Keep in mind that this model minimizes the effect of top-of-the-funnel marketing techniques. You may want to use a Time Decay attribution model when you’re dealing with a particularly long sales cycle, such as for expensive B2B purchases.

6. Position-based Attribution

The Position-based attribution model (also called U-shaped attribution) splits the credit for a sale between a prospect’s first interaction with your brand and the moment they convert to a lead.

40% of the credit is given to each of these points, with the remaining 20% spread out between any other interactions that happened in the middle.

For example, if a prospect first makes contact with your business through a Google search, looks at your Facebook page, and later signs up for your email newsletter, the first and third touches each receives 40% of the credit, and the Facebook visit receives the remaining 20%.

Pros & Cons of Position-Based Attribution

Position-based attribution is a strong model for many business types that have multiple touchpoints prior to a conversion. It gives at least some credit to every interaction. But, it gives a stronger weight to your two most important interactions: the first time a customer found you and the interaction that prompted a conversion.

Bonus: Custom Attribution Models

Do you know a particular weight or valuation you want each touchpoint to have? Do you have a very specific funnel that you want to evaluate?

You can create custom attribution models in Catwing. A custom attribution model lets businesses give a custom amount of weight to whatever touchpoints they think are most important.

Pros & Cons:

A custom attribution model provides the most nuanced look at what’s getting you sales. However, it can be difficult to create, and this type of model requires a lot of data. Businesses that have a long buying cycle and plenty of data on hand are the best candidates for using a custom attribution model.