Highly compensated employees (HCEs) are often an individual who has a salary equivalent to the top 20 percent in pay for a company. In addition, an HCE is any person with more than 5 percent ownership of shares in a company. The 5 percent ownership may be split between shares owned by the employee or their immediate family (spouse, parents, grandparents, or children).
A revenue attribution model matches costs to the revenue received. Furthermore, revenue attribution models analyze and convey what worked and what didn't. They are also used to help companies understand where to better allocate their marketing and sales spend with the objective of saving time and money.
Finding the right revenue attribution model setup for HCEs can pose a challenge for many businesses. To help you get started, we've put together a process for correctly setting up a revenue attribution model for HCEs in your company.
This is a Process
Setting up a revenue attribution model for a HCE is a process because several steps must be taken to assign the right revenues for multiple marketing and sales efforts. To illustrate, you have to track the origin of a sales lead and determine if it came from an online ad, social post, or something else.
The HCE may also need to perform due diligence to ask how the prospect heard about your company, whether it was from their direct marketing efforts, a referral, or an ad. Nonetheless, marketing attribution works because it helps companies figure out how to make the most of their resources.
The data and insight gained from revenue attribution can help you decide which campaigns are working and which aren't. As a result, you can then refocus your efforts and resources into the sales campaigns that are driving the most revenue.
An average buyer's journey can span multiple touchpoints from ads to referrals, to social media and more. The route can vary for each lead, which requires each purchase to be treated a little bit differently.
How do you keep track of the effectiveness of the efforts of a HCE? Through revenue attribution and marketing attribution tools. There are five revenue attribution models that are often used:
1. Last Touch: Last Touch refers to the last touchpoint before the sale. This model is a bit off-putting simply because it does not give much credit to any of the previous touchpoints that led up to the sale. At the same time, it is easy to track and configure.
For example, a prospect might see a Facebook ad. After the ad, the prospect might follow a link to your company's social media profiles. Then, the might visit your website, where they download an ebook or whitepaper after providing their contact information. Finally, they click on an email ad and make their purchase. Although, email was the final touch before sale, each touchpoint along the way probably reinforced their decision to buy.
So, the Last Touch model is not the most impactful way to track revenue attribution, but acts as a simplified, easy-to-track method.
2. Linear: Linear marketing attribution models assign equal values to every touchpoint through the sales funnel. For example, if a prospect experienced five touchpoints, each would be assigned a value of 20 percent.
This process results in a more comprehensive model because every touchpoint is assigned a value. However, it does not take into consideration how some touchpoints may have influenced the buying decision more heavily than others.
3. Time-decay: Time-decay models are algorithmic models that assign different values to touchpoints based on proximity to conversion. The touchpoint closest to conversion is given the highest value, and as touchpoints move farther from conversion, their value decreases. As a result, time-decay is the model of choice for most business owners.
4. First Touch: First Touch is the opposite of the Last Touch model. This model places all the value on the first touchpoint. When you ask customers, "how did you find us?" usually, the prospect will state the first touchpoint and won't mention that they also traveled through five other touchpoints.
5. Positional: A potential model focuses on the first and last touch, assigning each 40 percent of the values. Then, it divides 20 percent among the touchpoints in the middle. This falls in line with multi-touchpoint attribution models. Still, it does not place a high enough value on the middle touchpoints, which can skew the results.
There Is No Perfect Revenue Attribution Model
The most difficult step in setting up a revenue attribution model is realizing that there is no perfect model. However, there is an additional that can be customized based on your target audience, business objectives, and marketing campaigns. Yet, this can be quite the complex undertaking–especially when you are dealing with analytics and large data sets.
Initially, you may experience a lot of trial and error, but implementing a revenue attribution model helps your company gain a more insightful understanding of customer purchase influencers, buyer journeys, and shopping habits.
It is also important to know how your HCE contributed to each channel and touchpoint. Let's say you opt for a version of the Time-decay model and add a few customizations. In this situation, it is critical to look at your client's behavior and determine which ones are relevant to your business objectives.
Ultimately, you want to determine how your HCE has worked with the funnel and customer communication to ensure they make a purchase.
Even soft conversions, such as sending newsletters and whitepapers, sharing a presentation, and multiple calls with the client carry value because they ultimately result in a sale. This is when you should look at how the HCE assisted conversions either by communicating directly with clients and accepting the order or guiding them proactively through the sales funnel.
On the opposite end, consider the touchpoints that aren't providing the results you seek and determine how you can repurpose those resources as high-value touchpoints..
Put It All Together
To get started on your revenue attribution model, start by having your HCE ask customers the following questions:
- How did you find our site today?
- Have you visited our site before?
- If the answer is yes, then ask:
- When did you visit last?
- What brought you back to our website today?
The answers to these questions can help you start working on your marketing attribution model. You can also customize the questions so that they are tailored to your marketing campaigns. For your model, you might consider using a time-decay/custom model. You can certainly make a non-arbitrary approximation even when using marketing attribution software in the following steps:
1. Determine the percentage of whether new traffic is HCE directed or if it originated from PPC, social media, direct, organic or other channels. For example, you can compare the percentage of new customers coming through your HCE's efforts versus the company's PPC campaigns.
2. Compare the same percentage for second-time customers. Determine which tactics influenced them to buy the second time around, and how your HCE affected their touchpoints. Compare the percentage that came back through PPC versus organic traffic as well as assisted and direct conversions through your HCE.
3. Use similar steps for repeat customers with two or more purchases. Assign varying credits to each touchpoint, depending on the answers and data you receive to ensure a total of 100 percent.
This is the simplest method for revenue attribution model setup, and it will give you helpful sales forecasting insights that can help improve your overall sales model.
There are many factors that can contribute to sales revenue and the compensation of a HCE. It helps to start with a simple revenue attribution model to ensure your resources are optimized and used efficiently.